Breaking Down The Walls Between Programs

On Oct. 19, Microsoft Senior Vice-President Frank M. "Pete" Higgins is going to try to make software disappear. It's not a new magic act but a new philosophy in software. Microsoft Corp. plans to revamp its entire applications-program line with a new version of Microsoft Office, a software "suite" that includes a word processor, spreadsheet, electronic mail, and data-base packages--all for one low price. The separate programs, to be released over the next 12 months, are designed to work so well together that the individual packages will simply fade away. "We're moving toward a world in which the applications are pretty much invisible," says Higgins.

Software isn't the only thing that might start to vanish. Some of Microsoft's rivals in the applications business also could end up on the endangered species list. That's because Microsoft's technique for breaking down the barriers between programs, a communications technology called Object Linking & Embedding (OLE), will appear in Microsoft's suite long before OLE surfaces in programs from other top suppliers.

Analysts believe that OLE will now become an industry standard for linking applications. Programs written to the standard will, in theory, act virtually as one. With Microsoft Office, for example, a spreadsheet table can be moved into a word processing document as easily as it can be moved around the screen.

EARLY START. That's undoubtedly a useful thing. "Customers used to buy software piecemeal," notes Microsoft's Higgins. "Now they want coherence." For the moment, they'll be able to get it only from Microsoft. That gives rivals an uneasy feeling of d j vu: Because it developed Windows, Microsoft got an early start in writing applications programs for the graphical system. It has 42% of the $2.1 billion market, and its closest rival, Lotus Development Corp., has less than 15%. With OLE, rivals say, Microsoft will once again have an unfair head start. "Just like Windows, we're all on version 1, and they're on version 2," says Fred M. Gibbons, chairman of Software Publishing Corp.

Indeed, Microsoft will start shipping its first programs with OLE 2 this fall, at least six months before major rivals. But Microsoft Chairman William H. Gates III insists it's not just because his company invented the technology. As with Windows, Microsoft urged rivals to get on board with the first release of OLE in 1990, but they were slow. "They can say we're not nice guys, but that's another issue," says Gates.

OLE 2 is also Microsoft's first big step toward so-called object-oriented programming, a technique of building packages out of small modules. With OLE 2, it will be possible to add new features by adding new modules. That could create a whole new business, predicts Bernd K. Harzog, a program director at Gartner Group Inc. He figures the number of OLE-compatible applications will rise from two this year (both from Microsoft) to hundreds next year and thousands within a few years.

POLYESTER SUITS. Demand for such niche programs will create lots of opportunities, says Harzog. But the market for free-standing applications from companies that can't match Microsoft in offering suites now looks dimmer. Suites are already soaring--Microsoft is selling 60% of its applications in such bundles (chart)--and OLE 2 is likely to fuel additional sales. Lotus, which is about six months behind Microsoft in adopting OLE 2, is likely to be a winner. Some 25% of its unit sales will be through suites this year.

Other players may just get the leftovers. Borland International Inc. and WordPerfect Corp. are selling each other's products in a suite and adopting OLE 2, but they have to prove they can integrate their products. Software Publishing's Gibbons hopes customers will add his Harvard Graphics program because, he says, it's better than Power Point, its counterpart in Microsoft's suite. "When you go to present something important, you don't wear a polyester suit," he sniffs.

Polyester or not, companies such as Software Publishing have already seen the power of Microsoft's suites. Gibbons has blamed slow sales and poor earnings to the impact of Power Point arriving "free" on so many PCs. That doesn't mean suites will take over. Customers still buy the best product for a task. "No one builds everything right," says Neal Hennessy, director of global telecommunications for Reader's Digest Association Inc. But as the lines between software packages blur, stand-alone programs could become a memory.

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