Windows continues battle against IBM's OS/2

It may have lost the desktop war against Microsoft's Windows operating system, but users and analysts stand by the claim that IBM's OS/2 operating system has survived as a small and sturdy option for running critical servers and computing devices, most notably automated banking machines. But as Microsoft prepares to release Windows XP, and market it broadly as the platform for the next generation of computing, the aging OS/2 faces extinction.

Created in 1987 through a partnership between Microsoft and IBM as a successor to DOS, OS/2 has since found itself an underdog to Windows. On the desktop, OS/2 became virtually extinct when Microsoft abandoned the technology for its own Windows platform. Microsoft used deep-pocketed marketing campaigns and strong-arm tactics, which got it into trouble with antitrust regulators, and wound up with a monopoly that reduced OS/2 desktop use to hobbyists, analysts say.

On the back-end, OS/2 had found its niche. The software is a little-heralded staple for running computer systems at banks, airlines and some government offices. The financial services industry, for one, has embraced the operating system for many of its computing systems. Due to its reputation for stability and high up-time, it became the preferred platform for devices such as automated teller machines (ATMs).

Now, just as Windows displaced OS/2 on the desktop in the mid-1990s, Microsoft's dominant operating system is knocking OS/2 from its remaining perch.

"The self-service banking industry is one of the last bastions for OS/2," said Sharon Dickie, marketing group manager for software and services at NCR Corp., a leading supplier of automated bank machines and point-of-sale computing devices. "It has served the industry well, but in the last few years it's just not keeping up with our needs."

NCR announced last week that it plans to replace its remaining line of bank machines running OS/2 with a new system based on Windows XP, Microsoft's latest desktop operating system set for wide release Oct. 25.

"While it has served its purpose for basic transactions, OS/2 is fairly limited," Dickie said. "The Windows environment offers quite a lot more for us."

Perhaps more crucial to the extinction of OS/2 is IBM's move away from the operating system. The company has not issued a major release of the operating system since 1996, said Pete Grubbs, senior editor of OS/2 e-Zine, an online publication focusing on the operating system. In the meantime, IBM has said that it is instead focusing on "middleware," which makes up the majority of IBM's $13 billion software business and includes its DB2 software and WebSphere database software.

The automated bank machine, a market that has featured OS/2 for more than 10 years, is no longer just a simple computing device that customers use to make basic banking transactions, Dickie said. Banks want to use the self-service devices for much more complex services such as customer resource management and direct marketing. Similarly, NCR says banking customers want more "visual stimulation" when using the machines -- everything from movie trailers to images of transaction receipts, even Internet access via an automatic bank machine screen.

Based on the advances in the Windows code base, that operating system will enable NCR to create a new line of bank machines that can fulfill all those industry needs, Dickey said. NCR has been replacing OS/2 with Windows NT for three to four years now.

Similarly, many of the largest banks in the world have also begun migrating internal computing system from OS/2 to Windows, according to Charles Jefferson, a systems engineer who has done consulting work for Bank of America Corp., Wells Fargo & Co. and most recently Washington Mutual Inc. All of those banks have either finished switching legacy computer networks running on OS/2 to Windows-based client and server machines or are in the process of doing so, he said.

"All of those were deeply embedded in OS/2," said Jefferson, a consultant with San Francisco-based TRSS Consulting. "Now, all the top executives and CEOs want Windows machines just because that's what they see in the industry."

Unfortunately, such a migration dismays computer engineers like Jefferson. In many cases, he says, even 7-year-old servers and PCs running OS/2 outperform Windows systems that are much larger.

"OS/2 is an operating system that was clearly superior to Windows in many ways -- as a stand-alone operating system for servers and embedded systems inside of communications-focused systems," said Dan Kusnetzky, an analyst with International Data Corp. (IDC), who has followed the development of OS/2 and Windows. "A good example is an ATM because it needs to be absolutely reliable."

Despite its stability, IBM proprietary operating system has been clearly out-marketed on every front in its fight against Windows, especially on the desktop, Kusnetzky said. When Microsoft released Windows 3.1, and later with the release of Windows 95, OS/2 was outflanked as few of the most important applications and developer environments were built to run on OS/2. Windows, meanwhile, won broad industry support with heavy marketing and a growing pool of developers familiar with it.

"We did make a push with OS/2 in the fight for the desktop for a relatively short period of time," said Joe Stunkard, a spokesman for IBM's software division. "In 1994, when IBM introduced OS/2 Version 3, it made a push at the desktop market, but it didn't win -- the numbers speak for themselves."

By 1999, shipments of OS/2 declined so much that IDC stopped publishing revenue statistics on the operating system, instead grouping it in the "other" category, Kusnetzky said. That year, there were fewer than 100,000 shipments of OS/2 for the desktop worldwide, and only about 25,000 server shipments, according to IDC. In comparison, 98 million desktop operating system units were shipped in 1999.

Microsoft, meanwhile, has gone on to control more than 90 percent of the world's desktop operating systems with Windows.

"OS/2 is now an operating system that people are in the process of porting away from," Kusnetzky said. "I think that OS/2 has largely been declared a casualty, or better yet a footnote in the history of computing."

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