Solution Providers Prepare For Windows Server 2003 EOS As Clock Ticks

Solution providers rode this year's wave of Windows XP support termination to sales growth of as much as 40 percent.

With an even larger wave -- the end of support for Windows Server 2003 -- set to crest in nine months, MSPs and VARs have already begun rolling out educational, marketing and deployment programs to fully capitalize on the transition.

"It opens up a lot of opportunity for Microsoft, for our partners and for our customers," said David Mayer, practice director of Microsoft Solutions for Insight Enterprises, No. 14 on the CRN SP 500.

[Related: Sales Soar For VARs As Businesses Seek Windows XP Upgrades]

Solution providers will have the ability to sell hardware, server licenses and services associated with the upgrade, Microsoft Senior Partner Technology Strategist Woody Walton told attendees at the Synnex National Conference earlier this month.

Mayer expects customers will need to purchase 25 percent net new servers, representing a major hardware resale opportunity. Most organizations will likely also look to have software maintenance and upgrade programs bundled to their new servers, Mayer said.

The lion's share of the margins, though, will come from services, Mayer said, particularly at large companies that need help installing and migrating to thousands of new servers.

The total cost of upgrading from Server 2003 to Server 2008 or Server 2012 should run roughly $1,500 per server, which includes professional services, Mayer said.

"Organizations probably don't have 10 people sitting around waiting to do this job tomorrow," he said.

A server upgrade is longer and more complex than upgrading a PC environment, according to Kevin Murai, president and CEO of Fremont, Calif.-based Synnex.

Eric Mills, a U.S. OEM server marketing manager for Redmond, Wash.-based Microsoft, said during a September SHI webinar that Server 2003 lacks a direct upgrade and therefore requires migrating the server and applications to a new physical or virtual machine to keep them running.

Depending on how much information a company keeps on its servers, Mills said this could take anywhere from a few days to 300 to 400 days.

"It's not a simple upgrade," Mills said. "A lot of people underestimate the time it takes."

Businesses will benefit from the upgrade in the long run, Mills said. High operating costs associated with Server 2003 means that an upgrade should pay for itself within six months, he said.

In addition, a standard edition Server 2003 can use just four gigabytes of random-access memory (RAM), Mills said. That figure, along with central processing unit capacity, has been increased sixteen fold in Microsoft's latest server offerings.

"The operating system was written for a time that's gone," Walton said.

NEXT: Risks, Options For Businesses With Server 2003

Nearly 24 million -- or 39 percent -- of installed Windows servers worldwide are running Windows Server 2003, according to Mayer. Some 9.5 million of those can be found in North America, Mayer said.

About eight million servers globally are located in workplaces with 500 or fewer employees, about half of which have already been virtualized, Walton said.

The demand for new servers should be particularly pronounced in the K-12 vertical since school districts tend to use hardware or infrastructure for seven years before upgrading, according to David Lloyd, a Charlotte, N.C.-based director for solution provider Tiber Creek Consulting. All 112 school districts Lloyd works with have some Server 2003 in their portfolio.

Once support for Windows Server 2003 ends, Mills said critical updates will no longer be made available for the server. Server 2003 has averaged about three such updates per month for the past decade. In addition, Microsoft will only diagnose -- rather than fix -- Server 2003 problems once support expires, Walton said.

Many clients in the healthcare and public sector verticals have stayed with Windows Server 2003 due to niche-written applications for that specific server, Mayer said. But the interconnected design of servers means that once support expires for Server 2003, even sensitive data on other servers could be exposed through lateral movement.

Medical or dental offices that continue to use Server 2003 would be out of compliance with HIPAA, Walton said, while other businesses would likely fail regulatory audits.

Outdated servers would also constitute a lack of payment card industry (PCI) compliance, Walton said, meaning that Visa or MasterCard might no longer do business with the company.

Solution providers that failed to fully anticipate the activity from XP upgrades are determined not to repeat the same mistake, Murai said, and are therefore preparing well in advance. That latest upgrade represents not only an opportunity for server purchases, Murai said, but also the chance to capitalize on a plethora of related products and services.

Businesses with Server 2003 have the option of either going to Microsoft's most modern server -- Windows Server 2012 R2 -- or transitioning to an Infrastructure- and Software-as-a-Service model with Microsoft Azure and Office 365.

Mills touted the benefits of Server 2012 to IT administrators, citing an essentials dashboard that covers 90 percent of what an administrator needs to do, as well as a new server manager that facilitates the management of multiple physical or virtual servers from a single screen.

The latest server can also move virtual machines between servers without any shared storage, Mills said, as well as automatically reduce waste storage through data deduplication and storage tiering.

Server 2012 R2 also runs applications six times faster than Server 2003, Mayer said, with twice the data center capacity and 70 percent more computing capacity.

Though Server 2012 definitely gives end users more firepower, Mayer said it would often require the purchase of new hardware.

NEXT: What Are Solution Providers Doing To Prepare?

Alternatively, businesses can move to the cloud with Microsoft Azure, which Walton said uses Microsoft data centers all over the world to host infrastructure and platforms for businesses of all sizes.

Azure has doubled its compute over the past six months, Walton said, and is used today by 57 percent of Fortune 500 companies. Businesses will likely find Azure cheaper than Server 2012, Walton said, by avoiding the heating, cooling and consumption costs associated with an on-premise server.

Through Azure, Microsoft's virtual machines backup hardware, appliances and data into the cloud, Walton said. Azure can support everything from SMB demands for disaster recovery and business continuity, Walton said, to prominent websites such as the Nobel Peace Prize and NBC's streaming of the Olympics during periods of peak demand.

By lowering capital expenditures, Azure can free up money for end users to spend on high-end IT products and services, Thomas Hansen, Microsoft vice president of worldwide SMB, told solution providers during the Synnex National Conference.

Azure additionally eliminates physical boundaries for solution providers, Hansen said, allowing them to serve customers globally rather than just in a specific market.

Azure can be bought by end users directly in the open market in increments of $100. Walton acknowledged Microsoft needs to do more to directly facilitate a channel sales model for Azure.

In the interim, Walton said Microsoft is offering solution providers a 12 percent rebate on Azure sales in the SMB market, as well as a 10 percent subsidy to end users for purchases made until the end of November.

Solution providers have found a mixed bag in what end users are choosing.

Roughly 60 percent of West Lawn, Penn.-based Omega System's customers have opted for a hosted server over an on-premise option, according to company owner Bill Kiritsis.

Conversely, Tiber Creek found that teachers and administrators have stuck with on-premise applications out of fear that internet outages could stifle their access to necessary classroom materials. For this reason, Lloyd said the K-12 vertical has been one of the last to put data in the cloud.

Murai expects Server 2003 refresh business to ramp up as 2015 begins. But some solution providers are already starting to prepare.

Tempe, Ariz.-based Insight has spent several months coming up with Server 2003 offerings and packages as part of a full deployment plan, Mayer said, and should have a large go-to-market campaign hitting streets soon.

The solution provider has refined its transition strategy through beta testing on a couple dozen customers, Mayer said.

Servum in Mason, Ohio, has been carrying out Server 2003 upgrades for the past year, with momentum picking up recently, said company president Raju Venkatasen.

The upgrades have been an intensive process, Venkatasen said, with most customers needing new hardware and going directly from Server 2003 to Server 2012.

Omega Systems has primarily been educating its customers on their upgrade options without giving a specific recommendation, according to Kiritsis.

With lots of Omega customers -- typically ranging between 30 and 500 users -- still running Server 2003, Kiritsis expects the upgrade activity to be a very big economic boost.

Ultimately, Lloyd said businesses and school districts alike will benefit from newer technology less prone to viruses.

"There's nothing like putting a gun to their head to do it," he said.

PUBLISHED OCT. 15, 2014