Guest editorial by Nicholas Petreley, editor in chief of IDG's NC World at www.ncworldmag.comBy now, you've probably heard all about the agreement between Citrix and Microsoft and the fact that it gave a much-needed boost to Citrix stock. Despite the celebration, very little has changed. Microsoft is still building a multi-user version of Windows NT Server that will eventually compete with what we now know as Citrix WinFrame. It is simply paying Citrix to do most of the work.
Demonstrating its superb tactical skills, Microsoft has created a situation in which it can reap the benefits of the technology Citrix develops in Windows NT 4.0 and 5.0 without giving Citrix an iota of market leverage in return. That's because Citrix is only providing Microsoft with the multi-user plumbing. The server support for remote Intelligent Console Architecture thin clients - the added value that Citrix currently provides for a multi-user version of Windows NT - will be sold separately by Citrix in the form of a plug-in. Citrix trumpets this arrangement as a way of protecting its crown jewels. But the truth is, by making Citrix's added value a plug-in, Microsoft can eventually blow Citrix out of the market with its own remote technology.
In fact, the only reason Microsoft is giving Citrix this job is because it is in a panic to rescue itself from the throes of network computing. It does not have the talent to develop a multi-user version of Windows NT quickly, so it's buying the technology.
The two so-called partners describe the deal as a $US75 million licensing agreement. But in effect, Microsoft is outsourcing the multi-user NT project to Citrix for $US175 million, with $US100 million delivered in deferred payments called "royalties". This isn't exactly chump change, but the crucial point is this: Microsoft isn't renting the technology, it is buying it; Microsoft will own it lock, stock, and barrel. Citrix will be back out on the street looking for a job.
To sweeten the deal, Microsoft agreed not to compete with Citrix for the non-Windows client market for two and a half years. During that time, Citrix is sure to be the premier provider of Windows remote application client technology for network computers. After that, it's every company for itself.
Citrix still has two chances to prosper after the deadline expires. Some would call them slim to none, but I think it's more like good to none.
On the "good" side, Citrix will do well if network computers invade the market quickly and bite into PC market share more than NetPCs or Windows terminals do. If this happens, Citrix will have gained a big piece of the market that Microsoft has agreed not to touch. Even if Microsoft plans ahead and has a competitive product ready the day after the agreement expires, it will have lost significant mind-share by then and will have to play catch-up.
On the other hand, if the NetPC or Windows terminal does well, Microsoft will be able to displace Citrix from the NC market easily. That's the "none".
There is one more option, though. Citrix has a licence to sell any product it builds on top of the source code for Windows NT 3.51. Technically, there's nothing preventing Citrix from taking that code base and building its own version of Windows NT 5.0. In other words, Citrix could do to Microsoft what Microsoft has done to so many of its partners: use the competition's own technology to clobber them.
Stability vs speed
By the time the licence to the 3.51 code expires, Citrix could have rewritten the NT guts to be free of Microsoft code (and perhaps make it even more stable, lean, and efficient). It shouldn't be much of a challenge. Citrix has the talent. Microsoft, on the other hand, sacrificed stability for speed in NT 4.0 and is continuing to build on that code base. And ISVs should leap at the chance to choose a Citrix-based NT clone over the original because Citrix doesn't offer its own application.
Well, it won't happen. Ask anyone who has dealt with high-ranking executives at Citrix. The Citrix people love Microsoft. Microsoft could gouge their spleens out with a butter knife, and they would beg for more. I don't quite understand it, but I guess it's more honest than all those former partners who act surprised when Microsoft squashes them.
Enjoying being used and then tossed in the gutter is a refreshing attitude.