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What's Next for Microsoft?  Its Internet Plans Could Be Good News for Consumers

by Louis Columbus

             Today you can buy everything from cars to carrots on the Internet, and if Microsoft continues with test marketing it is involved in today, you will also be able to lease Office online in the coming year.

Much has been written about the long-standing battle for the desktop between Sun Microsystems and Microsoft, but an entirely new level of competition between these companies is now underway.  The gold rush of the 90s and beyond–the Internet–has both companies jockeying for position in the office applications marketplace.  Sun served up the first challenge with its free StarOffice, even giving away source code to developers.  Microsoft, not wanting to lose customers to Sun Microsystems, and not wanting Sun to take away any of its market share in the office suites marketplace, is planning to lease Office over the Internet.

What does this mean for you and me?  First, prices for Microsoft Office, when leased in components or smaller segments over the Internet will be much more affordable.  The good news is that you will be able to get Microsoft PowerPoint, for example, whenever you need it, just as long as you are willing to lease it.  With all the extra hard-disk space from not having to load Office, you'll have more room for applications specific to your field of interest, be it graphics design or nonlinear video editing.

Driving this change is Microsoft's realization that more and more of its competitors are actively testing the Internet today as an avenue for selling software, including Oracle,Symantec, Sun Microsystems and others. Called the Application Service Provider channel or ASP channel, this approach of having companies lease applications over the Internet is one of the hottest trends: the Internet is being leveraged as a distribution outlet. The small installed base of individuals and companies using the ASP approach for leasing software is projected to grow at more than 200% annually through 2003 according to The Yankee Group.

 Microsoft has many approaches to launching new products and services, varying from bringing Jay Leno to Redmond for a major event like Windows95 to the quiet, grass roots marketing of Windows NT.  With Office Online, Microsoft is choosing to work with a group of companies that have done application hosting before.  They are in effect subcontractors for Microsoft, handling the application hosting aspects of getting Office Online up and running.  This group of subcontractors is known for getting applications available on the Internet in record time.  Today the beta testing is working out pretty well with a formal launch expected around May.

Around the end of every September, there are rumblings from Redmond about changes in how Microsoft does business.  That's because typically they have some good news to share with the investment community and don't want to appear to be getting complacent.  While the executives at Microsoft are obsessed with finding everything wrong with their company as those problem areas are very often how they grow, the Internet has given them plenty to think about and plan for.  The old paradigms for Microsoft do not work on the Internet.  Realizing that enabling applications require an entirely different set of solutions to some big challenges, Microsoft is creating an entire suite of applications called the Windows interNet Architecture (DNA) 2000.  With any Microsoft initiative there are literally dozens of applications included, and the intent of DNA 2000 is to package Microsoft's Internet business protocol, XML, into a market standard for transactions over the Internet; e-business, in other words.

  Applications supporting the XML standard include Windows NT Server, SNA Server, Site Server Commerce Edition, Microsoft SQL Server and Visual Studio.  Microsoft will be adding Windows2000 Server, in addition to support for protocols that streamline how applications communicate over the Internet.  BizTalk Framework is also included in the Windows DNA 2000 product suite. XML is the e-commerce protocol that Microsoft hopes to be the language of transactions for the future.  Microsoft's future focus on services is forcing it to reevaluate product strategies and steer more toward Internet-enabled applications.

 The BizTalk initiative includes plans for streamlining the tasks of distributing product catalogs, inventory information and purchase orders that often reside on systems running a variety of operating systems.  Clearly Microsoft realizes that the Internet is more and more the operating system of choice for users.

 E-Commerce Partnerships Coming to a Browser Near You

 What does this new product focus mean for you?  What are the benefits that will be available quickly and then trickling out over time for the typical user?  What about the adoption of XML relative to Java? Will the typical Web user ever see it?  Given Microsoft's new focus on streamlining applications for use over the Internet, expect to see more and more Web-friendly applications soon from Redmond.  XML is the basis for streamlining the performance of these applications.  XML is like an e-business shorthand language that will take personalized shopping to a level not seen before.  Consumers will also see many more retailers online, and also faster fulfillment times from many different sites, including 1-800-flowers,,, Best Buy Online, Eddie Bauer and Dell.

 If you order a computer online from Dell for example, you'll find that the turn-around time on the order will be faster, as XML speeds the fulfillment aspects of your order.  How about sending flowers on Valentine's Day online?  XML provides the opportunity for the entire chain of suppliers (sometimes called the supply chain) to have the latest market data to drive the availability of roses.  For consumers, the ability to trust the Internet to be responsive to orders and ship when a Web site says they will is one of the key goals Microsoft has in creating and promoting XML.

 Fast Forward

Jump forward 24 months and consider what the world of applications on the Internet will look like.  First, Microsoft will be selling applications online, as it is making clear today.  Microsoft's small-business portal will eventually sell Microsoft applications, and within the two-year time horizon, it's reasonable to assume you will be able to lease either components or entire applications comprising Microsoft Office online.  First, you'll be able to purchase or lease Office from in addition to many other sites that today are being planned, tested and implemented to handle Office Online sales. Companies to watch who are partnering with Microsoft to create sites capable of leasing Office Online include Interliant, Corio, Verio, Futurelink, among several others.

Within two years you can also expect to see entire series of  ``slimmed down" versions of Microsoft applications, starting with the flagship Office.  When Microsoft senior executives, including Steve Ballmer, mention that their business model is going to be entirely service-focused by 2003, you can also expect to see such connection-centered applications as Microsoft Outlook become much smaller than the 10MB of space it takes up today. Instead of selling and supporting bulky applications, taking hundreds of megabytes of space, Microsoft wants to be on a browser near you.

 As Sun continues to drive Java adoption and the promotion of Java-based applications, Microsoft has its share of challenges ahead.  You can expect to see Microsoft quickly become very much of a services company, leveraging the Office installed base.  There will also be changes to its operating systems to allow for individual IP addresses, or network addresses, with customizable features.  Imagine the IP address for your cable modem with a profile that defines you as interested in the latest news on Hawaiian coffee, for example.  With the personalized shopping XML will provide, you can get the latest availability of your favorite blend from any point in the coffee distribution channel.  It will be possible to see instantly the latest news on subjects of interest. You will also know the best prices on the Internet for products and services you're interested in.  The combination of slimmer clients from Microsoft including XML and customized IP addresses will lead to more efficient access to areas of the Internet you are interested in.

It is one of the biggest challenges for any company to face: adapting to a rapid rate of change while reinventing its core business. Clearly Microsoft is setting the stage for a transition eventually to a product set that is thin-client based and less focused on individual applications and more focused on Internet-based ones.  The good news is that memory for running new applications will no longer be a constraint, as applications become thinner and thinner.  The unknowns about the shift now underway from Microsoft are the service levels to be expected both from its portal and the many other sites the ASP vendors mentioned above will host.  Microsoft is realizing the only constant is rapid change.  Being able to get away from large, bloated applications and their high prices is the immediate benefit to you, and the long-term benefit is being able to get the latest software, anywhere, anytime via the Web.


Louis Columbus is director, market research for and regularly writes on Internet and technology topics.  He has 10 books published and more than three dozen articles.  His latest book is Administrator's Guide to Electronic Commerce with H.W. Sams Publishing Company.

Key Terms

 ASP = Application Service Provider.  A company that hosts applications and delivers them via the Internet to customers who lease them.

 BizTalk = A series of industry plans and programs for promoting the adoption of XML.

 Office Online = Microsoft's test program for leasing Office over the Internet.

 Extensible Markup Language (XML)= The universal format for data on the Web.XML allows developers to easily describe and deliver rich, structured data from any application in a standard, consistent way. XML does not replace HTML; rather, it is a complementary format.

 Java = Programming language that allows delivery of graphics over the Internet via browser.  Popularized by Sun Microsystems, it is now a market standard.

 IP Address = The address of a computer on a network.  The IP address is written as a set of four numbers, three to a set.  For example would be an IP address.

 For more information about this subject:

 ·        ASP industry portal for information–very comprehensive

·        Association dedicated to tracking the ASP industry

·        U.K.-based newsletter that tracks the latest news in the ASP marketplace)

·         Web site for International Data Corporation, one of the leading companies for market research in the computer industry

·        A research company that focuses on the small business marketplace

·        Article on the direction Marc Andersson is taking with his latest company,

·        Interesting article on the ASP marketplace

·        Industry site dedicated to the BizTalk strategic imitative

·        Microsoft Developer Services Network Web pages dedicated to the XML marketplace.

·        Workshop pages on the Microsoft Developer Services Network



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