Microsoft Nets It Out

I spent three days at Microsoft last week and I scarcely know where to start in summing up what I saw and heard and what I think it might mean.

Microsoft was at its most cordial and candid – which is very nice – and which, of course, leaves the Machiavellian side of me wondering if that caused me to miss something.

The Main Event Was A Status Report On .NET

The reason for heading out to Redmond, together with a 100 or so other analysts and press folks, was to get an update on .NET.  The consensus of most of the analysts was that it was a very nice briefing, but not very much new was said.  Ah, but between the lines . . .

Perhaps the most interesting part of the event was hearing Bill Gates “confess” that .NET was tougher and taking longer – from both a development and an industry acceptance perspective – than Microsoft had initially expected.  He even showed us a report card on which he gave himself some B’s and C’s, together with a few A’s.

Gates went on to define .NET as software to connect information, people, systems and devices.  In other words, everything.

He refers to waves of .NET.  The Tools Wave is finished now and we are entering the second phase in which we emphasize breaking down barriers.

This will be all about identification and security as well as how data is stored.  Microsoft expects it to take three or four years to be completed.

The real bottom line, I believe, is that Microsoft is struggling to on the one hand try to move Visual Basic programmers over to Visual Studio .NET and, on the other hand, to speak to the Linux/Unix/Java community and try to get some conversion/migration activity going.  The first is obviously going better than the second.

Microsoft now wants to appeal to “the Enterprise” and it understands that this will mean supporting lots of platforms, on an ongoing basis, that will not be Microsoft operating systems, infrastructure software, or applications.  Microsoft refers to these as “heterogeneous systems.”

(Apparently the older term, legacy systems, has now fallen into disfavor, which is just as well, given that some of these systems aren’t old at all.)

The problem is, Microsoft has always been lacking strength in some of the elements Enterprise customers prize.  For example:

	Enterprise customers like the idea of being able to have an Account Executive who has a relationship with their Senior Management and helps them with their IT strategy and planning, is a source of information and resources, and is in charge of problem resolution.  Microsoft has done a bit more of this over time, but we still hear tales from large customers about problem situations where enterprise vendors would have applied major resources and Microsoft’s reaction was “support will handle this as soon as they have an answer.”
	Enterprise customers often require substantial services (consulting, outsourcing, systems integration) as part of their relationship with major vendors.  They may prefer vendors who can provide such services as part of an overall solution.
	Enterprise customers have very unrealistic expectations about support.  They expect miracles – and they often get them.  Moreover, they expect any product they buy to be supported until they decide they’re no longer interested in using it.  Enterprise software companies struggle with this problem, but they manage it.  Microsoft creates policies and customers will have to live with them.  We still have customers complaining about what Microsoft did to OS/2.  (If Microsoft had understood this issue they could have predicted the pushback they got on the Office licensing issue.)
	Enterprise customers expect things to work – flawlessly –or they expect vendors to fix them and be visibly sorry.  Microsoft has a well-earned reputation for sending out buggy software and has managed to turn this into a beta process in which the world participates in helping Microsoft identify and eliminate bugs.  ISVs, VARs, and consultants have built a tidy business around fixing Microsoft security problems for customers – imagine another 25 year old company admitting that it had to take time off to retrain its staff in how to write secure code?

We believe Microsoft really does intend to focus on the Enterprise, we’re just not sure how Enterprises are going to react.  Right now, most enterprises are in “hold the line” mode, spending their budgets very carefully and being very risk-adverse.  That could be good for Microsoft (if their solutions are perceived to be more cost effective) or bad for Microsoft (if their solutions are perceived to be riskier).  Add to the mix the Linux card (which means Microsoft might NOT be the low cost solution) and predicting outcomes gets harder.

No wonder Microsoft needs to convince analysts, customers, and developers that .NET is the best path to Web Services and Web Services are the future.  We suspect the real answer is much more complicated.

1. The rush to standards means that operating systems are less important.  The development platform may no longer be the operating system you run, but rather a set of standards you choose to embrace (or your selected set of software chooses to embrace on your behalf).
   
   Microsoft has definitely figured out that standards are important and has become a major figure in the Web Services standards activities.  We spoke to Steve Van Roekel who represents Microsoft at many of the standards activities, who says Microsoft got involved in the standards activities because of the experience of the Internet.  But Microsoft sees Standards as a way for Microsoft-differentiated Web Services to interface with applications and Web Services running on other operating systems.  In other words, Standards only go so far.
   
   

2. This isn’t unusual.  It’s a common corollary, the usual way of standards that they provide the least common denominator, and every interesting vendor of hardware and software then differentiates on top of the standards, adding functions, but making it hard to move from his products to other “standard” products.  But this may be less acceptable to customers this time.
   
   

3. Microsoft will be competing, in Web Services, in a market where they do not have a monopoly position (as they do in desktop operating systems with Windows and in office productivity suites with Microsoft Office).  Historically, monopolists do least well when they move from a market where they have had a successful monopoly to a market where they believe they can extend or continue their favored position.  (One need only think of IBM’s situation in moving from electric typewriters to electronic typewriters or from mainframe computers to smaller computer systems to see how this works.)  Generally, this is because they bring pricing and other marketing practices that have been successful in the past with them to the new market.

Of course, Microsoft surprised the information industry in the mid-nineties by recognizing the critical importance of the Internet, reinventing itself, and continuing to be one of the most important players in its market.  But it did that by CHANGING its pricing and marketing models.  We wonder if they will choose to do that here.

.NET Isn’t The Whole Story

Of course, Microsoft had much more to share than the .NET story.

Microsoft is continuing to work on advanced operating systems, with much longer timeframes now, than in the past.  In a future issue, we’ll try to take you through just what these new operating systems might mean and how likely they are to be appearing as currently described.

Microsoft is also working on new generations of Back Office servers and on new kinds of user devices, aimed at both the workplace and at the home.  Mobile is a strong theme, in both cases.  We tried out the tablet device Microsoft will be offering (with hardware partners) later this year, which is a PC which can support both handwritten and keyboarded input.  Having been involved heavily in the last round of handwriting recognition devices, I can on the one hand recognize that this one is better – at both what it’s trying to do and how well it recognizes – and at the same time be fairly certain that its price point precludes its widespread acceptance.  (But I’d like to have one – as long as I don’t have to use it standing up and trying to hold it in my hand – it’s way too big and heavy for that.)

The new home devices seem simply silly to me – but then I don’t represent Middle America, so they may not be designed to appeal to me.

1. I can’t imagine why I’d want a PC as the middle of my family room media center – I’m fairly certain that a set-top box and a digital TV are going to be what takes over here, based on cost, utility, usage patterns (family rooms are shared areas), and who sells what to whom.
   
   

2. The parasitic flat panel screen that lets you mirror a PC screen from a distance – at the cost of a PC – doesn’t make any sense at all to me.  Why not just figure out how to make a bigger screen PDA?  What we need in the home is foolproof, wireless LAN’s that don’t require a Ph.D.  to install them.  Then users will figure out what they want for devices and the market will sort things out.  Doing the devices first is putting the cart ahead of the horse.

Applications Software

I spent a substantial part of my time in Redmond meeting with individual groups of Microsoft application software folks, talking about specific products like Office, FrontPage, Publisher, .NET Speech, and the new CRM product.  Microsoft’s strength in applications is due to its persistence in continuously looking at its products and their users, with an eye to making incremental improvements – and occasional big breakthroughs.

Most of these are mature products, so incremental improvements are mainly what you see, but there are notable exceptions.

I was particularly interested in the planned enhancements in future versions of Office (one is due out in Beta version perhaps later this year, for availability in mid-2003).  The next version will make use of SharePoint for additional group function, integration with back-end Microsoft servers like BizTalk, and build XML into the product.  A Web Services tool kit for Office Version 2 will make it easier to access Web Services from Office (which won’t be a Web Service itself – this was a surprise to me).

Future Office developments focus in four key areas:  XML in all areas of the Office family, collaboration, especially for documents and meetings, support for authoring and note-taking, including non-linear notes (such as the graphics and handwriting support in the Tablet product), and additional support in Outlook, including a new look to the interface.

Microsoft will continue to be a very competitive player in the applications software arena.

We had hoped to give you a report on what happened with the licensing as of July 31, but we’re still waiting to hear from Microsoft on that issue.  We also have a call scheduled for further explanation of the offer Corel is making to Microsoft corporate customers to move over and try WordPerfect, if they decided not to go with the licensing arrangement.  Next week, we hope, we’ll be able to give you more details.  

(back to top)