Many Challenges to Overcome

Microsoft Corp. is sitting atop of the mountain. The company can proudly look back at a 10-year run that has been successful beyond the most optimistic predictions of a decade ago. Anybody who used Windows 3.0 knew Microsoft's development efforts had a long, long way to go. Yet, through the relentless efforts of the persevering group of people that it employs, Microsoft overcame Windows' dubious start and now fields some very credible products.

But can the future be as dazzling as the past 10 years have been? Maybe, but it won't materialize without some more brilliant marketing moves and, of course, some brilliant products.

Today, Microsoft faces a laundry list of challenges, including IBM/Lotus, Novell and Linux. But there are other factors assaulting Microsoft as well, including threats to its technology presented by application server technology, Java and other browser-centric technologies. Then there is the wild card: user satisfaction -- or dissatisfaction as the case may be.

IBM was quick to jump on the e-commerce/e-business bandwagon. The company started renaming its products to reflect this focus two years ago. IBM followed through with true e-business services that have positioned the company as one of the leaders in that space. Its acquisition of Lotus rescued that company from the prospects of an untimely death by giving Lotus a huge customer base to tap and lots of motivation to port its products to IBM's midrange-class AS/400 and Unix machines. The rescue was mutual: Those computers were woefully lacking in their ability to put a groupware solution on the table that could compete effectively with Exchange Server.

Novell Inc. has been written off for dead many times, but it still is a billion-dollar company with a large and highly loyal customer base. One analyst recently commented that users should not equate the uphill battle that NetWare faces with a gloomy future for Novell. In fact, Novell could well emerge as the directory services vendor of choice for heterogeneous environments. As long as Microsoft continues to focus on Microsoft environments and leaves the non-Microsoft environment to somebody else, that market is up for grabs.

Linux presents a much stickier issue for Microsoft. Sure, Microsoft intends to compete hard with Linux. Much hay is being made over the benchmark wars going on between Linux and NT. Regardless of which system proves to be faster or scales better, the bigger problem for Microsoft is that many users are looking to Linux simply because they dislike Microsoft. Even if it wins the benchmark battle, Microsoft may lose the public relations war. Microsoft executives recognize this. Jim Allchin, senior vice president of Microsoft's business and enterprise division, recently addressed the interest in Linux, conceding, "I do believe some of it is related to Microsoft's image." That's a big problem for Redmond.

Here's another problem: Microsoft wants to continue to own the desktop, but what happens if Linux begins to pick up steam as a desktop alternative to Windows 9x? Should Microsoft pretend Linux doesn't exist and compete with it on an operating system level, or should it scramble to port Office to Linux so it can retain the applications revenue stream, regardless of loses to operating system sales? A tough question with no good answers. I'll bet the subject is causing at least a few ulcers in Redmond.

The closest parallel to this situation would be Microsoft’s relationship with Apple’s Macintosh. The Mac has been supported by Office for a long time; granted, at times the releases were a partial or a full release behind the Windows versions.

Then again, the Macintosh operating system never threatened Microsoft’s operating systems on Intel hardware. Dragging Macintosh versions of Office along had another benefit: If Apple stays alive and competing, by definition Microsoft wasn't a monopoly.

Finally, there's been much industry talk suggesting that Microsoft plans to integrate Office with BackOffice. The move has the potential to force users into buying NT Server and BackOffice whenever you buy Office on the desktop. If this happens, Microsoft will nail its customers down and make changing either the server or the desktop a painful process.

Let's hope Microsoft has another brilliant 10 years. But only if the company can do so by treating its customers like the valued source of its wealth that they are -- not by corralling users into product choices and licensing terms that are crafted for Microsoft's sole benefit.