Analysts: .NET Is Both Offensive and Defensive Move

• 11/08/2000

Analysts speaking at GartnerGroup's recent Symposium/ITxpo inOrlando, Fla., applaud this move, but note that unlike moves made by theMicrosoft of the 1990s, the impact on the industry may not be as great.Instead, .NET may be a survival tactic for the embattled software maker.

From a technical perspective, .NET represents an effort byMicrosoft to keep its architecture at the center of the IT universe. While itmay appear otherwise, .NET should not be construed as an effort to move thefocus of software management away from client desktops and out to the network,says Mark Driver, analyst at GartnerGroup. Rather, .NET encompasses Microsoft'svision of the Internet based on XML and SOAP. ".NET remains very PC- andWindows-focused, although it will support newer devices such as PDAs and cellphones," Driver says. "It does not mean Microsoft is moving its focustoward centralized computing."

Nevertheless, Driver believes .NET exhibits a greater willingnesson the part of Microsoft, "to coexist and better interoperate withindustry standards." In particular, he predicts that .NET will share thespotlight with Java, which "Microsoft has failed to stifle." Whilethe two technologies will dominate 75percent of the application developmentmarket over the next few years, "neither platform will dominate thesemarkets," he predicts. Most likely, large global enterprises will requireJava to transport code across a variety of platforms, while smaller companieswill be consolidating operations on Microsoft platforms.

In defense of Microsoft, Driver claims Java vendors areperpetuating a myth that Microsoft solutions cannot scale beyond workgroup anddepartmental solutions. "This is false," he says, noting that manylarge and visible enterprise rollouts are built on Microsoft software, such asDell.com and Nasdaq.com. He advises, however, that Microsoft server solutionsbe carefully tuned for large e-business operations.

Another GartnerGroup analyst, David Smith, warns that"Microsoft's IT industry influence has been waning." Redmond'sinfluence peaked in the late 1990s, and is now being overcome by Internettechnology and antitrust actions, Smith says. "However, with its WindowsDNA strategy that has evolved into what is now touted as .NET, Microsoftappears to be well-positioned to deal with market forces effectively." Hepredicts Microsoft is more likely to follow through on this initiative, versusother initiatives in the past that it failed to deliver on, such as DigitalNervous System and ActiveX technologies.

What will .NET look like, and what role will it serve inMicrosoft? The software giant has been murky about details regarding how .NETwill be productized, or how it will fit with Windows. This may be because .NETcould be a vehicle for launching a new Microsoft applications company is forcedto breakup, says Tom Bittman, vice president and analyst at GartnerGroup."The specifics of .NET -- how it's packaged and so forth -- is reallydependent on .DOJ," he says. If a breakup happens, it's likely thatMicrosoft would be split into an operating system company -- a "WindowsInc. -- and an applications and middleware supplier. The Microsoft applicationscompany would be the dominant company, with about $28 billion in annual sales,compared with annual revenue of $19 billion for Windows Inc.

If the company is forced to split, the Microsoft applicationscompany could take .NET as its underlying platform. "Is .NET an operatingsystem or something that layers on top of the operating system?" Bittmanasks. "Microsoft says it’s both." The .NET vision, "becomes thevision to create a Microsoft platform that is independent of the operatingsystems; and moves the business model to back-end services," Bittman says."If Microsoft is not split, the .NET vision will continue to focus on theWindows operating system as the primary client platform.”

Whether through the current Microsoft or through a separatedoperating systems company, higher prices for the operating system -- both atthe client and server levels -- are in the cards.

"Microsoft has already started raising prices quietly forenterprises," Smith says. "Microsoft's sales force has begun using aninternal Q&A document on licensing issues to pressure enterprises to considerpurchasing OS upgrade protection for all workstations. Without upgradeprotection, enterprises are not permitted to re-image workstations. SteveBallmer, president and CEO of Microsoft, denies that Redmond has raised pricesacross the board, but did acknowledge that the company has, "balanced andchanged around our licensing terms" (seearticle on page 1).

Microsoft began imposing "reimaging" fees forOEM-purchased PCs: this meant that companies that paid for the OEM version ofWindows had to pay again for a Microsoft-issued license on the same machine.Large companies pushed back, causing Microsoft to back away from this policy.Smaller to medium-sized businesses still need to pay this reimaging fee,Bittman points out. "That means 70 percent to 80 percent of volumecustomers are currently not in compliance."

Bittman warns that Microsoft's install base has been slowing downits rate of upgrades. Therefore, the software giant is seeking new revenuesources. This is being reflected in the new licensing strategies. He noted thatWindows 2000 Server licenses are running 15 percent to 24 percent higher thanWindows NT 4.0 Server licenses.

[Infobox]

Microsoft Strategic Initiative Report Card

OLE ……………………… B-

ActiveX ………………….. C-

ZAW …………. Inconclusive

DNA …………. Inconclusive

Digital Nervous System …. F

IAYF …………………….. B

.NET ……. To be determined

Source: GartnerGroup

Index:
GartnerGroup, Stamford, Conn., www.gartner.com

MicrosoftCorp., Redmond, Wash., www.microsoft.com