Point-Counterpoint: How Microsoft's Bear Paw will Affect Citrix

Just in case you haven't heard about it yet, “Bear Paw” is the codename for Microsoft's next major update to Terminal Server. Ever since the rumors of Bear Paw began, people immediately began to think that Citrix was doomed and that Microsoft was planning to use Bear Paw to take over Citrix's business.

Just in case you haven't heard about it yet, “Bear Paw” is the codename for Microsoft's next major update to Terminal Server. Ever since the rumors of Bear Paw began, people immediately began to think that Citrix was doomed and that Microsoft was planning to use Bear Paw to take over Citrix's business. After giving this some serious thought, I've started to think that Bear Paw might not be the immediate blow to Citrix that some people are suggesting. After publishing this article, I received a critical response from a reader and I've published that person's response as the counterpoint to my original article.

Point: Citrix Shouldn't Worry about Microsoft "Bear Paw"
By Brian Madden

I personally feel that the notion of Bear Paw displacing Citrix MetaFrame is a bit over dramatized. So what if Bear Paw adds some previously “Citrix-only” features to native Terminal Services? Think about it. Citrix has added value to Microsoft Terminal Server ever since 1998. In the MetaFrame products of that era, a big part of Citrix's added value was their ICA protocol. At the time, ICA had several advantages over RDP, including the fact that it was much smaller, it supported higher resolution and colors, more virtual channels, and more types of client devices.

In the subsequent five years, Microsoft's RDP protocol has caught up with ICA (although not everyone agrees with me on this). RDP 5.2, included in Microsoft Windows Server 2003, offers printer mapping, LPT and COM port redirection, shadowing, local/remote clipboard integration, full color and resolution support, and server-to-client audio mapping. It consumes far less bandwidth than it used to, in some cases actually being “thinner” than ICA . Additionally, Microsoft has created RDP clients for all 32-bit Windows and Mac platforms, and third-party RDP clients are widely available for DOS, UNIX, Linux, and Java platforms.

Just because Citrix's ICA bread-and-butter of 1998 has been met by Microsoft several years later doesn't mean that there's no purpose for Citrix in 2003. Like Microsoft, Citrix has also done quite a bit of modification to MetaFrame in the past five years.

In 2003, many people choose Citrix MetaFrame over plain old Terminal Services for MetaFrame's application publishing, load-balancing, web client interface, management, and secure gateway capabilities. Most of these capabilities were not part of Citrix's 1998 products.

To that end, it appears that Microsoft's “Bearpaw” update to Terminal Server will add some capabilities only currently found in third-party tools, such as application publishing and seamless windows. Does this mean that there will no longer be a case for MetaFrame? Of course not.

Just as Citrix didn't stand still between 1998 and 2003, they're not going to stand still moving forward. Even if Microsoft updates Terminal Services with some features that previously required MetaFrame, Citrix's next version of MetaFrame (currently in beta and called Citrix MetaFrame Presentation Server 3.0) will add even more features, including impressive enterprise scalability and management tools, the ability to stream audio and video to ICA clients, “follow me” roaming sessions, and client microphone support.

The bottom line is that by the time Microsoft releases their Bear Paw technology (which is not expected before Windows 2003 Service Pack 2), Citrix's newest version of MetaFrame (due out 1H04) will be widely adopted and well positioned.

Citrix focuses on the enterprise space (500+ desktops), and the “enterprise” version (XPe) of their MetaFrame Presentation Server accounts for the vast majority of all MetaFrame Presentation Server sales.

Most likely, a Bear Paw enhancement to Terminal Services from Microsoft will further erode Citrix's market share in the small and medium business spaces (5-499 desktops) since those customers tend to have fewer servers and less complexity and they don't benefit as much from many of MetaFrame's enterprise capabilities. However, Citrix shouldn't be too worried about Bear Paw kicking them out of the enterprise space for now.

This is not to say that Citrix won't ever have to worry about Microsoft. Since MetaFrame Presentation Server provides access to “traditional” 32-bit applications, technology will eventually evolve to the point where those applications are no longer relevant. Citrix will need to find a new flagship product, and it's not going to be Secure Access Manager, Password Manager, or Conferencing Manager. However, time is on their side to a certain degree since no one has really figured out how the application components of Microsoft's .NET vision will fit together.

Counterpoint: Microsoft is Closing in on Citrix
By (Name Withheld, In response to the first article)

For a company that had 100% market share in a $600M market, Citrix did stand still between 1998 and 2003. That is a fact. The gap between Hydra (Terminal Server 4.0) and MetaFrame 1.0 was huge. The gap between 2003 and MetaFrame XP is still there but much smaller. Add to that 3rd party tools now available (they were not back in 1997/1998) and you reduce the gap even further. This means one simple thing: Microsoft on its own is taking market share from Citrix on the small/medium business arena AND other companies like New Moon are taking market share on the enterprise market. Simple as that. Citrix simply waited way too long to start moving, to start enhancing and inovating. They were just digging on their gold mine until they realized there was something wrong. No one spends $14M in a marketing campaign when you are growing your revenue and your market share. If they are doing that they now realized they lost and they lost a LOT of the market share they initially had (which was an aberration, a single company in the high tech business with no competitor in a $600M market. Name another company in the same position if you can).

Also they do not realize that the small and medium business market may be as big (if not bigger) as the market they are focusing on, the corporate one.

If they were smart, they would do exactly the opposite and bring MetaFrame to the masses, killing all other companies. If MetaFrame was licensed at US$ 79 per license, why bother with New Moon, Jetro and so on? I guarantee you they would sell probably 10 times the amount of licenses they currently sell if they reduce the price to this level.

I may be wrong but I see tough times ahead for Citrix... At one point the enterprise market will be saturated with their own Citrix products and revenue will come only from subscription. This will not be enough to keep them alive.

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This message was originally posted by Agreed with you end user on April 8, 2004
Sooner or later features will blur and costs will be the bigger issue. Citrix really would do themselves a favor by dropping costs now and killing off competition. But competition also has the potential for innovation. Most of it has been done by Citrix to date (except for printing) but unless they drop pricing or keep innovating the shine on their product will dull.
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