Why does Microsoft continue to lose web server market share?

Revised: 27 June 2001, 22:45 EDT William Cox

Why does Microsoft continue to lose web server market share?

Summary

The June 2000 Netcraft web server survey is out. The trend noted in January 2000 remains consistent.

The Apache Software Foundation gained two full percentage points, to 62.53%, while its major competitors, Microsoft and iPlanet, lost 0.69 to 20.38% and 0.49 to 7.00%, respectively. Over the long term, Netscape appears to have stabilized between 7% and 8%, while Microsoft steadily loses and Apache steadily gains. Microsoft does expand the number of sites it serves, but still loses in terms of market share. The deployment of Windows 2000 Server does not seem to have had a positive effect on Microsoft's market share.

What is causing this trend? Is it price? Is it the features? Is it support?
Or is it the business practices of the vendors?

It's not the features, which are roughly comparable among all current web server versions, nor of speed, since neither Microsoft IIS nor Apache ranks as the leading speed demon. That title is held, depending on the benchmarks, by Zeus, boa, and thttpd. And web server reliability is hard to separate from that of the underlying operating system.

Is it the operating system? IIS is only available for Windows NT Server, but the market share numbers for Microsoft include their Personal Web Server, which can run on Windows 9x as well as NT. Apache is available for well nigh every operating system under the sun, though some, like Tenon Intersystems' WebTen product for the Mac OS, are commercial. Is IIS's limited operating system support restricting its adoption? Netcraft also collects operating system statistics for the sites that it evaluates; however, it does not make those results public. Some assumptions can be made about platform deployment based on how many operating systems the web server can run on, and Netcraft does some math for us there. Of the servers on the Net, a few can only run on NT. These few hold 20.99% share, down from 23.84% in January. Since Apache can run everywhere, we cannot assume a particular operating system's dominance from the 65.05% market share of Apache and derivatives. It appears that approximately 75% of the market prefer a portable web server, one that is available for multiple operating systems.

Web servers are a commodity product, based on well-defined standards set by the Internet Engineering Task Force (IETF). As such, they do not tend to be revenue generating. Note, for example, Netscape's peak in March 1996 and rapid decline following the initial release of the $0 IIS that February, as the majority of Windows NT deployments switched to the lower cost option. It remains in use by almost half of the 15% or so of sites which prefer to pay for a web server.

On the face of it, it's not an issue of price. Apache is free, as is Microsoft Internet Information Server (IIS). To obtain a current version of either server you need to download it.

Download Apache
Download Internet Information Server

Apache 1.3.12 weighs in at 3MB. But in order to download IIS you need to download the whole of the Windows NT 4 Option Pack, which is 87MB, or purchase the CD. But, in order to download the NT Option Pack, you need to use Microsoft Internet Explorer 4.01 or later, on a Microsoft operating system. To merely visit http://www.microsoft.com/iis/ with Netscape causes a CPU spike on NT.

Microsoft attempts to use IIS to generate revenue by tying the product tightly to its operating system and to other Microsoft products, such as Microsoft Visual Studio and FrontPage. In order to deploy IIS, one also has to deploy Microsoft Management Console, Microsoft Internet Explorer 4.01 SP2 or later, Microsoft Transaction Server, Microsoft Windows NT and Windows NT Service Pack 3, at the least, though more products are installed if the default configuration is accepted. Except for Windows NT, none of the aforementioned returns any revenue directly to Microsoft. IIS exists to add value to NT, and to help move that product.

Assuming, then, that all other things are equal, that someone installing a web server has sufficient bandwidth, that they have little to no trouble reading documentation, and that they have Intel-compatible hardware, the marginal cost to deploy IIS was $890 for a Windows NT Server license. With the release of Windows 2000 Server and IIS 5, and the subsequent discounting of Windows NT Server and IIS 4, the marginal costs have changed. Depending on which version of the operating system is used the marginal cost to deploy IIS will range from $670 to $800 for a Windows 2000 Server license, plus incidental, non-neglible costs associated with deploying a new operating system in an existing infrastructure. (More information on Windows 2000 pricing can be found here.) Meanwhile, the marginal cost to deploy Apache remains essentially zero.

Let's assume then that someone installing the web server already owns a Windows NT Server license. In that case, the marginal cost will equal the bandwidth, disk storage, and the time consumed for the download, installation and configuration of the NT Option Pack, Internet Explorer, and Service Pack 3 or later, plus at least 3 reboots. The entire process from start to finish takes approximately six to eight hours. Assuming the average salary for a system administrator in the Northeastern United States, the marginal cost is $390 to $520 -- significantly more if you hire a consultant ;-) . Apache takes all of 3 minutes to download and install -- 19 if you're downloading over a 56K modem connection -- and no reboot.

These costs become more apparent over time, so while Microsoft was able to capture market share from Netscape, which charges approximately $1500 per license, they have not been able to overtake the Apache Software Foundation, and have even seen their share of Windows NT Server deployments drop with the availability of the port of Apache to NT in the Summer of 1998. (Netcraft's graph shows IIS deployments beginning to level off around this time.) Nor have they been able to leverage the popularity of FrontPage as a site development tool because both commercial servers and Apache (with mod_frontpage as of October 1997) support the FrontPage Web Server Extensions.

(For an interesting take on the early history of IIS, see Tim O'Reilly's article, "How the Web was almost won," at Salon.com.)

In order for Microsoft to see a reversal of fortune, a number of things need to occur:

first, Windows 2000 needs to be compelling in itself, enough so as to overcome resistance to the costs of deployment;
secondly, IIS 5 needs to be have a compelling set of features that are not readily duplicated, perhaps leveraging features in Microsoft Office and Internet Explorer;
and thirdly, non-Microsoft software, particularly that with a lower marginal cost, will need to run poorly at best on Windows 2000.

While this will enable Microsoft to regain market share in the web server space, these tactics will be limited by the adoption of Microsoft Office, Internet Explorer, and the various Microsoft operating systems -- and by the United States Department of Justice. Or, Microsoft could make IIS available on other operating systems. In order to prevent a significant loss of income, a price would need to be set, at which point it is even more likely that Apache and other web servers with a lower marginal cost would gain market share, and IIS would sink to levels similar to that of Netscape.

In conclusion, Microsoft's web server products will continue to lose market share because of the marginal costs of deployment. In order to reverse this course, Microsoft will either need to change how it behaves in the marketplace, or be allowed to continue its monopolistic practices, but neither is very likely.