thoughts about nscp--the street.com
It is truly a huge undertaking, and ultra risky. Just a few small mistakes or rebuffs, and Netscape could just as easily ostracize the entire developer community it wishes to embrace.
By Jordan Serlin
Special to TheStreet.com
2/1/98 12:15 AM ET
In recent days, Netscape (NSCP:Nasdaq) has made a number of high-profile moves that some see as extremely bold, and others view as totally inconsequential.
The single aspect of Netscape's recent PR salvo that has raised the most eyebrows is the announcement that its Communicator 5.0 software source code would be made publicly available to all. Source code is the complete and unabridged software operating instructions for any given application or suite. By releasing the source, Netscape is empowering anyone to make additions or modifications to any or every actual instruction component of the software.
With the source, developers can customize the software to their needs, add new features or even develop an entirely new software application loosely or intimately based on Netscape's Communicator 5.0.
The move is extremely radical because source code traditionally has been the most closely guarded secret of any software company. Many have asked, "How could releasing the source code possibly raise revenue and share price for this ailing company?"
Eric Hahn, executive VP and chief technical officer for Netscape, in an interview gave the following reasons for providing anyone access to the Communicator source code.
"Netscape feels that we can accomplish many of our technical and product superiority objectives with the help of the goodwill of all the developers currently on the Net. There is at least a 10-to-1 programmer advantage on the Internet versus even a very large vendor's development staff, like Microsoft.
"Our biggest motivation is to ensure product superiority by having Internet users and developers, who know what they want and need, help to build our next product. This is an aggressive growth move designed to increase our client market share, which will in turn generate revenues in our two primary businesses. It directly correlates to our ad revenues, and it has a direct relationship to the viability of our enterprise server suites.
"Our browser strategy is ubiquity, popularity and market share. We intend to defend that through aggressive actions like this. Netscape believes that a healthy, diverse browser base, that's not dominated by Microsoft, is key to increasing our enterprise software and Web site revenue streams. We would fiercely object to any portrayal of this move as anything defensive."
The idea here is that developers who want to create something with the source code may then go back to Netscape to have their concepts developed into a final, branded product. Using the huge global development community to help build Communicator 5.0 actually makes a lot of sense. Netscape will be able to reduce its work force by 15% without killing itself. On the surface, it does sound like a good method to gain competitive advantage while enticing more users and developers into the money-generating Netscape enterprise-server fold.
Craig Beilinson, product manager for Microsoft's (MSFT:Nasdaq) Internet Explorer, says this in response: "When it comes to the source code issue, it's encouraging that really for the first time both vendors now are really thinking about what is the right thing to do for developers. I think this is really more about providing developers a great platform for writing software.
"Obviously, developers are going to choose the technologies that give them the richest and most expansive development environment. While we're both looking at these same potential customers, our two companies are coming at it from two different perspectives. Netscape is simply positing their source code, while we have invested in creating Internet Explorer with a very component or modular-type architecture. We view this system as a much higher level of developer support than having to sift through literally hundreds of thousands, if not millions, of lines of Netscape source code for specific items."
More good points here as well. Microsoft appears to have a concrete and ongoing browser development strategy. However, Microsoft staffers will undoubtedly pore over each line of the Netscape source code they can get their hands on.
Netscape's strategy, however, relies on working with a large volume of independent developers. One issue this raises is Netscape's ability to handle the centralized management of its plan. With diminished staff in the near term, will Netscape be able to deal with the communications load? Keep in mind, there are more independent Web developers globally than the entire combined staff of Microsoft AND Netscape. It is truly a huge undertaking, and ultra risky. Just a few small mistakes or rebuffs, and Netscape could just as easily ostracize the entire developer community it wishes to embrace.
Now with both sides offering free browser technology to consumers, both Netscape and Microsoft agree that product innovation will be the key in attracting new users. However, the major conduit to these consumers is via the PC manufacturer. Although the software may be free to download, the PC makers have invested time and a considerable amount of capital to deliver computers with a single, specific Internet browser preloaded. Microsoft's Internet Explorer currently owns this highly visible area.
Not only does Netscape have to convince these box makers that the new Communicator 5.0 offerings are totally innovative and add value, but that all incorporated independent enhancements can be fully supported and tested. Netscape must also justify the retooling costs PC makers would endure to include Communicator 5.0. They must prove, beyond a doubt, that the public wants Netscape's software.
It is truly a daunting task, and one that won't even begin to help Netscape's bottom line until the third or fourth quarter of 1998.
Microsoft's Beilinson said that Netscape's new initiative will not change or affect his company's Internet browser marketing strategy. However, he also conceded that Netscape has a good opportunity, using its proposed development program, to establish strongholds in certain undefined niche markets.
Netscape's Hahn claims that independent developers are already knocking at the door to get in on the action, and that PC manufacturers are keeping an eagle eye on the blossoming situation.
Netscape's plan could eventually provide the corporate and profit reconstitution that savvy investors crave. And it could lead to a myriad of totally new "for sale" Internet products, including next generation Network Computer interfaces, Web-enabled home appliance software applications and mobile peripheral Internet programs. Netscape must simply keep a handle on what these independent developers come up with, and be focused enough to productize and market the end results.
Netscape probably will not recapture its past browser market dominance. However, this initiative does set the stage for Netscape to develop and exploit entirely new markets and profit areas, at a fraction of today's development costs |
