Microsoft Pushes ASPs on Windows 2000

Microsoft Corp. doesn’t want to chance missing out on the application service provider (ASP) wave that is revolutionizing traditional application deployment and hosting models. The software giant is positioning Windows 2000 as a robust and scalable ASP platform, but do Microsoft and its operating system have what it takes to dominate the ASP space?

When Microsoft (www.microsoft.com) chose to incorporate the multiuser technology that today enables Windows NT Server 4.0, Terminal Server Edition, into its vanilla Windows 2000 Server and Advanced Server products, the company was tacitly acknowledging the importance of the ASP paradigm vis-à-vis its strategic goals.

In fact, the software giant’s pre-Windows-2000 media blitz was characterized in large part by dot-com start-ups that Microsoft showcased as early adopters of ASP solutions running on the operating system.

One Windows 2000 early adopter is Public Host (www.publichost.com), which offers Web-hosting services. According to Public Host CEO Dave Williams, his company chose to implement an ASP solution based on Windows 2000 for several reasons.

"Rather than develop on NT 4.0, which was going to be replaced shortly by Windows 2000, we opted to develop on early beta versions of 2000," Williams explains, noting that his company leveraged Microsoft’s Internet Information Server platform, Windows 2000’s LDAP services, and the forthcoming Windows DNA architecture.

Public Host’s bet is that a groundswell of industry and developer support will accompany the Windows 2000 launch and make the platform a stellar one for hosting applications and services.

Windows 2000 Advanced Server offers a revamped suite of high-availability services, including an improved implementation of Microsoft Cluster Services (MSCS) and a new TCP/IP network load-balancing feature. The high-availability features should play well in the ASP market, where fault tolerance and application availability are of paramount importance: Every moment of ASP downtime can result in lost revenue, service level agreement violations, aggravated customers, or potential legal difficulties.

In addition to Public Host, Microsoft also promoted the ASP hosting fortunes of Data Return Corp. (www.datareturn.com), Personable.com (www.personable.com), Supermarkets.com (www.supermarkets.com), and others.

The message, says Rob Enderle, senior analyst at Giga Information Group (www.gigaweb.com), is a clear one: If you’re an ASP, Microsoft wants your business.

Despite the potential benefits, the ASP model presents a series of possible problems for Microsoft. First and foremost, Enderle says, the software giant hasn’t figured out how to adapt its lucrative client-licensing pricing model to the dynamics of the ASP world. And by Enderle’s account, it’s on the issues of client licensing and pricing that Microsoft may be forced to take a hit in its pocketbook.

"The difficulty that Microsoft is facing here isn’t so much one of technology, but a problem of pricing. This is a significant issue for them because it would tend to cannibalize their existing products," Enderle says. "They really haven’t been able to tie back in a reliable form the use of the ASP to a billing system that would allow a charge-back for a simple service. Even if they did so, this would cause them to take a substantial chunk out of the lucrative licensing schemes that they now enjoy."

But as the ASP model continues to gain mindshare, Enderle expects Microsoft must accept short-term revenue loss in exchange for long-term prosperity.

"If they don’t do this, they probably will become a much smaller company than if they did. They’re going to take the revenue hit, there’s no question about that," he says.