Tuesday, August 08, 2006

Apple's Leopard Attacks Part 1: Microsoft Exchange Server

Update Roughly Drafted has started publishing articles on this very topic. Of course Roughly Drafted has a lot more history on the topic of groupware and email servers in general.
Apple Takes On Exchange Server
Apple's Open Calendar Server vs Microsoft Exchange
MacDailyNews has has picked up on Roughly Drafted's articles and I posted a comment on the article saying I originally talked about this back in August 06.

Original Post
Leopard Server was not demoed in the WWDC 06 Keynote in any capacity, but the preview site and subsequent reports (see the References section at the bottom), makes something very clear. Apple is about to attack Microsoft at it's linchpin server product, the one enterprises get shackled to first: Exchange Server.

Microsoft's Server Playbook
Microsoft Exchange Server (4.x-2003) is a Trojan Horse, it gets other MS server products in the enterprise. This plan become obvious once Exchange 2000 was released. In one of the most stunning instances I can remember of tying two software markets together, Active Directoy in Windows 2000 Server was required. Exchange 200x will not function without it. Why is this is insidious? Look at the cost for a medium sized company from the MS Exchange Server site and theWindows Server 2003 R2 pricing site:
ProductNumber of UsersCost
Microsoft Exchange Server Standard EditionN/A$699
Microsoft Exchange Server user CAL50$67
Microsoft Exchange Server device CAL50$67
Windows Server 2003 R2 Standard Edition5$999
Windows Server 2003, Client Access License 20-pack x 220$799
Organizations can acquire the licenses listed above at lower prices through volume licensing, but that is exactly the point. The list prices are so high (I haven't even added in hardware and possibly consulting costs), organizations feel like they are getting a bargain if they sign for volume licensing, they are getting a "deal". Once an organization signs on for volume licensing, they hardly ever switch away from MS, the opposite happens, they add more products (e.g. SharePoint Portal Server, SQL Server). The entire machine is too costly to replace, you have the Exchange Server admins, the experts just to understand all the licensing and audit them, the backup specialists, the AD specialists, I am sure I am missing someone. Volume licensing is the same reason MS with their partners have been pushing rental music (wrongly called subscriptions): they automatically get paid every day/month/year whether they deliver you something new or not. The revenue is guaranteed. Customer aquisition costs are high, if you can't cut that costs out of every sale, it's nearly like printing money. Make no mistake, figuring out the licensing and pricing if any organization thinks they might be interested in MS products is a full time job, there are so many possible permutations, and the wording so ambigious at times, you are never perfectly sure you have only the licenses you need and nothing more. Often you are penalized if you guess wrong, because features and capabilities are walled off from use unless you get the higher priced version, and there is no incremental upgrade costs if you aren't on volume licensing. Look again at the table above, MS is getting organizations that sign onto Exchange for 2 CALs per user, 1 for AD and 1 for Exchange, and for additional CALs if you use your SmartPhone/Blackberry/Outlook Web Access terminal to get your mail.

Apple Attacks
Before OS X, Apple did not have an OS capable of being a true server operating system (i.e. no preemtive multitasking). This point is important because gaining traction with a server OS takes years. It took MS 8 years before Windows NT, rechristened as Windows 2000, really took off (it helped that Windows 2000 was also the best version of the product at the time). But what was the appeal of Windows NT vs. Solaris/Digital Unix/AIX? NT used cheaper commodity (Intel) hardware, undercut the pricing models of the big Unix servers, met the needs of the bottom end of the market first (small and medium businesses), specialists were cheaper, and yes NT was easier to use in a lot of cases for people that grew up on Windows. Now look at the moves Apple is making with Xserve and Leopard Server. Apple has moved to Intel hardware. An Xserve with Leopard Server starts at $2499. That includes Mac OS X Leopard Server for UNLIMITED users (retail is $999 for the upgrade) and includes a number of servers built-in (Mail, Calendaring, Directory, DB, Teams) which MS charges seperate CALs (AD, Exchange) and seperate servers (Exchange, AD, SQL Server, SharePoint) for very low pricing. In Leopard Server, Apple looks to be targetting the bottom end of the server market first with the new Server Assistant and Server Preferences. No administrators required, just plug in your Xserve, run through the Server Assistant, and you are ready to use. You have to wonder how realistice "No administrators" is, but that is a huge chunk of cost if Apple can reduce the number of servers operators to near zero. What about backup? Imagine if Time Machine is built-into Leopard Server? Who needs to manage backup when its always running and the bits are just there if you go looking for them, as long as you have enough disk space. Notice I mentioned Server Assistant and System Preferences. If anyone can focus on a hard problem and come up with an easier way to convey the same ideas as others, it's Apple. Take a look at Time Machine for an example. If you have ever seen the MS Exchange Management Console? Be afraid, be very afraid. This is very telling, listed on the iCal Server preview page:
Networks with an existing directory service — such as Active Directory — can deploy Leopard Server for local hosting of all calendar and collaboration data while continuing to use the existing directory for user log-in and authentication.

How can Apple offer all of this at such low pricing?
Create a disruptive union of open source and closed sourced development models. Apple has been on this path for years, using the parts of various open source project that best met its technical and licensing needs. Apple announced the most recent and obvious commitement they have ever made, Mac OS Forge, including there iCal Server that is going to be in Leopard. How is this cheaper? Open source has a near chronic inability to put the finishing touch on any project (exceptions exists, e.g. Firefox), but that's one of Apple's core strengths, meticulous attention to detail which distills a problem down to its essential parts, and bubbling that to the surface. Add to the fact that iCal Server has been open sourced.

Worms in the Apple
Will Apple have problems executing this plan? You bet. Enterprises are steadfast that they need multiple hardware sources to use with their monopoly software, with Apple you are stuck with the hardware and OS, but not that Apple is Intel, if OS X Server doesn't work out, you could always install Windows anyway. But that's not the rub, its that if Apple makes the hardware prices really undesirable, you can't move your software elsewhere. Another issue will be getting the data out of Exchange. MS and Lotus have both spent millions writing conversion tools, sometimes even for different versions of their own products. If Apple doesn't have a way of getting data out of Exchange, their market is only the companies that don't have a solution already, not very appetizing. Apple needs to start pounding he pavement to once Leopard Server is out the door to get people to convert if it wants to sell Xserves. But they really don't have to sell a lot, take a couple percent of the Collaboration Server market, and it would be tremendously disruptive. Finally, since the server is open source, you will get people that build iCal Server on Linux and deploy for free. But the geek's that do that aren't the market Apple is targeting, so I don't think this is a huge worry either.

Apple is being very aggresive, they want a piece of the enterprise. If this wasn't clear before, it certainly is now. Exciting times indeed.

References Some people have started to put this together, it's there in bits and pieces, so instead of linking it all above, here are my sources so far for this info: http://weblog.infoworld.com/enterprisemac/archives/2006/08/wwdc_2006_repor.html http://www.macworld.com/news/2006/08/08/caldav/index.php?lsrc=mwrss http://lists.apple.com/archives/darwin-dev/2006/Aug/msg00067.html http://www.apple.com/server/macosx/collaborationservices.html http://www.eweek.com/article2/0,1759,2001617,00.asp?kc=EWRSS03119TX1K0000594