Server 2003 migration slower than we expected - Insight

Global reseller admits customers not moving off 12-year-old operating system as quickly as it thought they would

One of the world's largest IT suppliers had admitted its customers are not migrating off Windows Server 2003 as quickly as it had expected.

Microsoft will withdraw support for the 12-year-old operating system on 14 July but global reseller Insight Enterprises admitted on its Q1 conference call that many of its clients are yet to upgrade, despite the obvious security implications.

Estimates suggest that as of January, there were 400,000 boxes running Windows Server 2003 in the UK alone, with some predicting the total opportunity for the channel around migration will be worth $100bn (£66bn).

"There are a lot of clients that really are not addressing that issue yet," Insight chief executive Ken Lamneck said on a Q1 conference call, a transcript of which can be found here.

"It is going to have a life certainly beyond June... and I think it's going to take one security glitch to occur and it will get a lot of attention."

Lamneck added that migration is "not occurring as fast as we all thought it would", meaning the migration-related bump in sales of server and storage equipment Insight is already beginning to enjoy will last well into the second half.

For its part, Microsoft has warned there are "significant security risks" to staying with Server 2003 beyond the 14 June end-of-life date.

Insight said it increased its focus on selling datacentre solutions in a first-quarter period in which global sales hit $1.22bn – flat in dollar terms on an annual comparison but up six per cent in local currencies. Sales of client devices were down as the XP effect witnessed last year wore off.

Consolidated earnings from operations fell three per cent to $20.3m in its Q1 ending 31 March.

In EMEA, Insight said it encountered "strong demand" for server and storage solutions and "modest growth" in client devices as sales from the region rose six per cent in constant currency (a fall of nine per cent in dollar terms) to $354.8m. Earnings from operations in the region fell 11 per cent in dollar terms to $1.7m.

In an earnings statement, Lamneck said Insight's focus is shifting from PCs to servers this year.

"With the expiration of Windows Server 2003 maintenance support in July of this year combined with the substantial completion of the recent desktop refresh cycles, we believe CIOs will now focus on datacentre and other infrastructure projects in 2015," he said.

"Given our strong technical and engineering skills and deep services capabilities, we believe we are well positioned to participate in this shift in demand for the balance of the year."