Most think the Justice Dept.'s antitrust case against Microsoft Corp. is the software giant's biggest challenge. After all, the government wants to snap Microsoft in two. But to Chairman William H. Gates III, there's an even bigger problem looming: irrelevancy. Microsoft is still the king of the PC software world. But as the Internet's reach becomes more pervasive with each passing day, the importance of PC software shrinks, along with Microsoft's stature.
Gates will have none of that. On June 1, he will take the wraps off a grand plan for transforming the way people use the Net--and elevate Microsoft's Web presence in the process. The initiative goes by the code name of Next Generation Windows Services (NGWS), a geeky phrase that belies its importance. Microsoft executives characterize it as the company's most crucial endeavor since it launched its Web thrust in 1995. And, should it catch on, it would no doubt make the Web more central to the way people do business and handle their own information.
At its heart is a scheme that will allow unrelated Web sites to tie their activities together, making the user's experience faster and easier. Today, tasks on the Net are broken into multiple steps. To purchase a stock, you might check the latest news stories on a company on Yahoo!, log on to a separate banking site to see if you have enough cash, then jump on yet another site to execute the trade. Microsoft's plan will let you hook those steps together: When you buy a stock, your online brokerage automatically connects to your online bank and can transfer funds with a single click. Think of it as hyperlinks on steroids. It's a notion that has Microsoft CEO Steven A. Ballmer jazzed: "I see an opportunity to take a leadership role in the Internet."
AMBITIOUS GAMBIT. That opportunity prompted Gates to turn his CEO duties over to Ballmer in January. At the time, he took on the title of chief software architect and has spent much of the last five months refining NGWS. To Gates, the initiative is an extension of the PC strategy that put Microsoft on the map two decades ago. "It's an Internet operating system that preserves the ability to use the power of your personal computer.," he says.
But will Next Generation Windows Services be as popular as Microsoft's PC operating system? Some analysts say odds are against such an ambitious gambit. For starters, Microsoft must woo Web site operators and software developers, some of whom are skeptical, others downright hostile. They're wary that any Internet plan by Microsoft will give the software titan too much control, and that the scheme will ultimately line only Microsoft's pockets. Says Tim Bray, a computer consultant in Vancouver, B.C., who helped write one of the Internet standards used in NGWS: "People have a fear of putting Microsoft in a position where they are a gatekeeper for new technologies."
Poppycock, says Microsoft. Execs are mum on the technical underpinnings of their plan until the June 1 unveiling. And, they decline to spell out just how it ties in with their Windows software monopoly. Some insiders say that's because Microsoft is still scrambling to put the finishing touches on how Next Generation Windows Services will work, including potential partnerships and a spiffier name.
Microsoft's brass, however, insists it won't be proprietary. They say it will run on any operating system software, including rivals Unix and Linux, and it relies on open Internet standards and specifications. The two most crucial: Extensible Markup Language and the Simple Object Access Protocol. Strip away the nerdy names, and the two standards let developers turn their programs into little pieces of Lego software. Snap one block that tracks book prices to another that tracks availability and pretty soon you've got the ability to scan the Web for the best deal on the latest Tom Robbins novel. And because these are Web standards, anyone can use them without paying Microsoft a dime.
So what's in it for Microsoft? Its lips are sealed until June 1 on new products that will create revenue streams. They say that NGWS will help catapult Microsoft from a maker of shrinkwrap programs into one that sells services via the Web. For a glimpse into what this could mean, consider Passport, a Web service Microsoft launched in October. This lets Netizens store credit card and shipping information on the Passport Web site. When users shop at an e-tailer that uses Passport (there are some 200 today), their billing and shipping information is automatically transferred. Passport is free to consumers, but Microsoft plans to charge e-tailers once it's established.
TURNKEY TOOLS. Microsoft expects to rake in the dough in other ways, too. Because NGWS is based on Web standards, companies can cobble together their own technology to make it work. But Microsoft likely will sell turnkey developer tools and server software for companies that want to get up and running fast. "We obviously have a time-to-market advantage," says Charles Fitzgerald, a director of business development at Microsoft. "But that doesn't preclude anyone else from leveraging the standards."
So far, Microsoft seems to be playing nice. One Web startup it's working with is FlyteComm Corp., a Fort Lauderdale (Fla.) company that tracks airline flight information in real time. With the new standards, FlyteComm can sell its service to other Web sites. What's unusual is that FlyteComm's business runs on computer servers made by Microsoft archrival Sun Microsystems. "In order to gain acceptance of the standard, they have to show neutrality," says FlyteComm Vice-President Jeffrey Reis. "If they start saying it's going to work better if you use Windows, they're going to get hammered."
Even if developers do jump on the NGWS bandwagon, Microsoft's rivals aren't standing still. Indeed, many already have laid foundations for their own Web services strategy. Sun's Jini technology, for example, enables every device connected to a network to communicate with other devices to complete Web tasks quickly. And Hewlett-Packard Co. has e-speak, which is a similar technology that makes it easier to create Web services. "Our goal is to allow businesspeople to go from idea to operating service in two hours or less," says e-speak general manager Rajiv Gupta.
Microsoft also runs the risk of further inflaming federal trustbusters. A federal judge has ruled that Microsoft used its Windows monopoly to stifle innovation. Unfolding such a bold strategy as NGWS could raise the hackles of regulators. "It has the potential of waving a red flag in front of the DOJ bull," says analyst Dwight Davis of Summit Strategies. And if Microsoft is broken up, there's a good chance that NGWS will never see the light of day.
Already, competitors are pulling out the daggers. "It's a brazen attempt to force people to use their products and their technology to create a bottleneck around the Internet," says an exec from an Internet rival. Even within Microsoft, some call it "marketitecture," suggesting that NGWS is just new marketing wrapped around existing products. All the more reason for the company's new chief software architect to keep his laser focus.