Microsoft's web strategy challenge

Microsoft hopes to drive users to Windows 2000

By BBC News Online's Kevin Anderson in Washington

Microsoft finds itself in the position of playing catch up as company founder Bill Gates unveils his Next Generation Windows Services (NGWS) initiative.

The company has an unique position: Because of the size and the breadth of its product line-up, few other smaller companies can compete, analysts say.

Despite this advantage, Microsoft will find it very difficult to execute its strategy to move its products onto the internet.

Analysts say that the company may be too late to market with its net-centred strategy. The ongoing battle with the US Justice Department over the company's business practices is another hurdle.

Regardless, Microsoft hopes that NGWS will be a success, the best strategy to transfer Microsoft's dominance of the personal computer market to internet-based computer use.

A web-based world

Microsoft realises that it must move into this area if it does not want to be pushed to the sidelines by so-called Application Service Providers (ASPs).

Microsoft will face its traditional competitors in the ASP market

ASPs provide software and services over networks, including intranets, wide-area networks or the internet. They provide the use of software applications "on tap", and as networked computers and internet-enabled devices proliferate, they will grab an ever larger share of the software market.

Microsoft is aware of the threat. A company spokesman said: "Bill [Gates] is betting the future of the company on this system. We think we've got it right but things move so fast it's basically a gamble."

Playing catch-up

But Microsoft has been outflanked by other companies in developing web-based software and services.

"You could argue that they (Microsoft) are 12 to 24 months late in this process," said Rob Enderle, vice president of Giga Information Group.

This will be Microsoft's first move as a supplier to big ASPs, he said.

Several companies and Microsoft competitors including Oracle, Sybase, Hewlett-Packard and Sun Microsystems have moved aggressively into this area, and IBM with its WebSphere web application server product has offered a comprehensive strategy and solution for some time, Mr Enderle added.

One-stop shopping

But Microsoft can offer something that only a handful of large players can.

NGWS will be tightly integrated with Windows 2000

Few other software companies can match the size and breadth of the Microsoft's offerings, Mr Enderle said.

To simplify the implementation of web-based services, "people buy solutions that deal with as few vendors as possible," he said.

And Microsoft hopes to integrate its wide range of software, middleware and operating systems on the web. The company wants to become a one-stop shop for web-centred applications.

But Microsoft does not enjoy the same dominance in key parts of the ASP market, the server operating systems or web server software, as it does in the market for operating systems for personal computers, said Dan Kusnetzky, vice president for system software research with IT consultancy IDC.

"They have an uphill sales job," Mr Kusnetzky said.

Building market share

With its Next Generation Windows Services, Microsoft will continue to integrate internet capabilities in all of its products , in just the same way as it integrates its products with each other.

Back in 1997, Microsoft began a process where its Office business suite persuaded users to select Windows as their desktop operating system, Mr Kusnetzky said.

Microsoft began adding features to Word, Excel and PowerPoint that would only work if customers were using Microsoft's Internet Information Services, he said.

Microsoft hopes to use NGWS to drive people to use its server software Windows 2000.

Legal scrutiny

The announcement could heighten scrutiny by Judge Jackson

But it is just such integration that could lead to further anti-trust investigations by the US Justice Department.

"That is going to be another serious challenge with this announcement," Mr Kusnetzky said. Microsoft's operating systems and its software will be linked together more tightly than in any previous generation.

Mr Enderle said it will be hard for Microsoft to make NGWS not look like exactly the kind of market behaviour that resulted in the present effort to break up the company.

And "our position is that until they are out from underneath government scrutiny, it will extremely doubtful that they will be able to execute," he said.