THE NET'S NEXT ERA: Microsoft's Great Web Offensive
NOVEMBER 14, 2001
Undaunted by the dot-com downturn, Gates & Co. isn't hedging its bets on .Net. The goal: Dominate cyberspace as Windows does PCs
When Microsoft announced its new software platform, called .Net, in June, 2000, the response was lukewarm. Cynical reporters and software developers wondered whether hulking, old-school Microsoft could create new consumer and business software that would achieve the company's goal of dominating the free-spirited Internet.
In a column entitled, "Microsoft's .Net: Visionary or Vaporware?" Salon.com's Scott Rosenberg summed up what everyone was thinking: "Here they go again.... This is the classic language of vaporware: Software products that do not yet exist but that companies feel compelled to announce in an effort to cow competitors and wow investors." Adds Jamie Lewis, CEO of the Burton Group, a research firm that recently published a report entitled Deciphering Microsoft .Net: "When [.Net] was announced, it certainly appeared to be 'market-techture' -- lots of slides without much real architecture."
Nearly 18 months later, the doubters are fewer -- or at least, less vocal. Microsoft is one of the few big players on the Web that has weathered the dot-com meltdown well. The company has already delivered the first product in its ambitious strategy -- Windows XP, the new operating system for PCs, which launched on Oct. 25.
QUESTIONED COMMITMENT. With .Net as its roadmap, Microsoft is moving full-steam ahead with its plan to convert tens of millions of computer users to a subscription model, with Microsoft storing information and providing application software over the Internet -- also managing the lion's share of each customer's online commercial transactions. With dot-com competitors of every variety falling by the wayside, the much-ridiculed .Net initiative could put Microsoft in the Internet's catbird seat.
You can't blame anyone for questioning Microsoft's commitment to a concept as sweeping as .Net -- even when that strategy is mandated by Chairman Bill Gates. The risk involved in leaving behind the PC-centric world to embrace a new paradigm where every future Microsoft product would depend on the Net seemed wildly extreme.
Even the software king's employees appeared skeptical of its commitment, judging by how they voted with their feet: Through the summer of 2000, Microsoft, like other traditional tech companies, continued to lose key thinkers to dot-com startups at a furious pace. So numerous were the defections that Microsoft's sworn oath to "bet the company" on the Web began to seem suspiciously like a desperate and belated effort to catch the Internet wave.
BUILDING BLOCKS. Whatever its initial motivation, Microsoft seems to be following through. "The paradigm shift" -- in which corporate customers would move an ever-increasing volume of business functions to the Web -- "was going to happen with or without Microsoft," says Matt Rosoff, an analyst at Seattle-based research firm Directions on Microsoft. "That's why they jumped in." And how: It's impossible to figure out the budget for .Net because it amounts to a realignment of the entire business of the Colossus of Redmond.
Microsoft's aim, as it was with Windows, is to define the basic activities that companies and consumers want to engage in on the Internet, then package those functions into components, says Mark Specker, an analyst with Soundview Technology Group in San Francisco. With Windows, the building blocks were word processing and spreadsheets. For .Net, the elements will include instant messaging via the Net, user authentication, improved security for popular applications such as e-mail and personal calendars, and commercial transactions for consumers.
"Businesses will typically gravitate to more prepackaged, functional blocks to do the things they want to do and move away from custom consulting projects," says Specker. "That has been the case in the big tech cycles, from mainframes to DOS" -- Microsoft's original operating system, the software that controls the basic functions of a computer. And if corporate tech chieftains are reluctant to bite? "Software is three parts tech and two parts marketing," Specker adds. And no marketer can outspend a determined Microsoft.
MICROSOFT 2.0? The first set of these iconic building blocks is already appearing for consumers. On Oct. 15, just before XP's debut, the company launched the latest version of its consumer Web service, MSN 7, which CEO Steve Ballmer called "the pillar on which we are building the next version of Microsoft." It includes functions such as .Net Alerts, a service that allows consumers to sign up for updates from their favorite Web sites. So that you don't have to check traffic news before heading out the door from work, .Net Alerts will send rush-hour reports directly to your e-mail, mobile phone, or handheld.
The idea is to make something that's useful more so, says Lisa Gurry, an MSN product manager: "The whole industry has gained a lot of knowledge from the dot-com bust. We benefited from watching different models and then supplementing that learning with Microsoft's big R&D budget to figure out what people want now -- and five years from now." .Net Alerts are a modest first step. But Specker thinks it's a step in the right direction. "Microsoft is a pile-'em-high, sell-'em-cheap company," he says. "They are right to be betting on the next set of basic functionality that will predominate."
Creating those basic building blocks means roping in software developers and end-users simultaneously. For developers, Microsoft will provide a set of tools, based on open standards such as eXtensible Markup Language (XML) and Simple Object Access Protocol (SOAP), with which programmers can build new applications that will work with Microsoft products. Those apps, which could include anything from a shopping "bot" that scours the Net for the cheapest prices to fancy scheduling software, would in turn be sold to corporate customers or visitors to MSN or the sites of other Microsoft partners.
WOOING CONSUMERS. In essence, the idea is to create a Web equivalent of AOL's proprietary service -- one in which a customer who has signed up can move seamlessly from Web browsing to online shopping and banking. On AOL, that navigation is transparent, but on the Web it can be clunky because each step requires entering a user name and password as well as other personal information, such as a credit-card number.
Microsoft won't totally control the code, as it now does with Windows. But the company hopes that as developers start using the platform -- which is already available -- the must-have services they'll design will become extensions of .Net. In theory, anyway, that will make .Net as irreplaceable for computer users as Windows is today, opening multiple new revenue opportunities for Microsoft and cementing its leadership role in the software business.
Still, creating a platform for something as uninhibited as the Internet won't be as easy as designing software for PCs. In fact, .Net's goals are so ambitious that some analysts wonder whether even Microsoft -- with its $35 billion cash reserve -- can pull it off. To link PCs with wireless devices and businesses with consumers -- and provide everyone with a single password that works across all platforms -- Microsoft will need to work with many different companies whose software must be altered to work with the coming .Net standard.
FIGHT TO THE FINISH? Microsoft also must win the hearts and minds of consumers. To do this, the software giant will need to pay much more attention to security -- an issue that has plagued it over the years and earned the animosity of programmers and consumers alike. Last summer, the CodeRed worm took advantage of flaws in the out-of-the-box Microsoft NT and 2000 Web server software to hijack home PCs and corporate networks. The worm also defaced Web pages and created a significant spike in bogus data traffic that slowed down the entire Internet.
In short, .Net is a good idea. But can it be done? That, more than the level of Microsoft's commitment, is what's really still up in the air. Even so, analysts overwhelmingly believe that Microsoft has the determination and cash to make .Net a reality. "As much as we like to pick on big companies, it's the big companies that have the resources, wherewithal, and clout to make something of this scale happen," says Burton Group's Lewis.
For proof, just look back over Microsoft's history. It took the company years and billions of dollars to successfully foster the migration of the world's computer users from DOS to Windows 95. Microsoft has now bet its future on .Net. Dot-com meltdown or not, it isn't likely to spare any effort in its bid to make sure that initiative succeeds.
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By Jane Black in New York
Copyright 2000-2001, by The McGraw-Hill Companies Inc. All rights reserved.
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