InformationWeek

October 30, 2000

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Still At The Top?

Microsoft's sway rests on a stack of new technology

By Aaron Ricadela

More on Microsoft:

sidebar:New Focus On Developers: Q&A With Sanjay Parthasarathy

sidebar:X Marks The Box: Microsoft Woos Game Developers

Microsoft Solidifies Its .Net Plans (9/28/00)

The future of windows (9/4/00)

TechWeb: Microsoft Plans MSN Blitz For Late October (10/4/00)

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ob Lokken read the press release and saw his company evaporating. Lokken, the CEO of Knosys Inc., had founded the Boise, Idaho, software developer in 1995, hoping to tap what he thought was an emerging market: Windows-based data-analysis software that even small companies could afford. A little more than a year later, the tiny vendor had won contracts with Hewlett-Packard's ink-jet printer division, data-video projector manufacturer InFocus Corp., and the Veterans Administration--for the Knosys Analysis Suite, its online analytical processing package. The press release, disclosing Microsoft's acquisition of OLAP technology from Israeli developer Panorama Software Systems in October 1996, put an end to Lokken's dream. "Having not fallen directly off the turnip truck, we knew what it meant: Sometime in the next year to year and a half, Microsoft would bring an OLAP product to market."

Five months later, Microsoft summoned Knosys, Cognos, Hyperion, and more than a half-dozen other OLAP vendors to its campus for a technology preview of its new server. The day after the meeting, Knosys shut down all research and development of its product and instructed its engineers to begin building a client for Microsoft's OLAP server. "Our first product was completely wiped off the map, and our second product became the genesis of the company," Lokken says.

Microsoft's relationships with its roughly 10,000 independent software developers have always been complex. Development shops can profit enormously by creating software for the world's most popular PC platform, but Microsoft's tendency to follow its independent software vendors into new markets also puts their products at risk. Yet Microsoft, without a large direct sales force or full-fledged consulting group, leans heavily on its independent software vendor and reseller channel to get its products in front of customers. "Microsoft's basic approach--building a platform and then getting lots of innovative developers to create solutions around it--has been the same since the beginning of time, and now it's more important than ever," Bill Gates, Microsoft's chairman and chief software architect, said recently.

Even so, navigating the waters around Redmond, Wash., could get trickier for developers. Microsoft is roiling from within over long-standing assumptions in its business plan: Customers today are more concerned with Internet bandwidth than PC operating systems, and its server products are under attack from Oracle and Sun Microsystems at the high end and from Linux at the low end. Sales of server products grew just 9% during the first quarter ended Sept. 30, far short of the 20% growth CFO John Connors says he'd like to see. And revenue from key desktop products--namely Office--is stagnant. All this is compelling Microsoft, and, by extension, its partners, to rethink the way it develops, distributes, and prices the software that IT shops rely on.

Developers say there's an upside to these challenges. Microsoft is more willing these days to listen to independent software vendors and other partners, and to incorporate the technology it needs into its platform. Case in point: Knosys, back on track with sales growing at about 200% a year, is working on a Web server that will complement Microsoft's OLAP server, part of its SQL Server 2000 database. Lokken says Microsoft's engineers are responding to his request for better pooling of database connections in an upcoming service pack for SQL Server. "They've become sensitive to the fact that they have a bad reputation for hurting people who were on their platform," says Lokken, whose company had to live hand-to-mouth for nearly a year on consulting and support revenue after Microsoft dropped its OLAP bombshell.

Bob Lokken Photo by Steve Welsh That change is one of necessity for Microsoft, which finds itself in a world where anytime, anywhere access to Internet data threatens to marginalize its Windows operating system, long the focal point for developers. Microsoft's development tools have always offered a good bargain: Integrated development environments once cost thousands of dollars per seat, but Microsoft dropped the price to several hundred dollars. Competitors such as Oracle concentrated on selling their technology to CIOs, but Microsoft worked the trenches, drumming up support among the low-level code jockeys and small development shops. The vendor's overall strategy--capturing developers as a means to proliferate its technology--hasn't changed. It's just becoming harder to execute.

"Microsoft's operating system will do very well for years to come," says Kerry Gerontianos, president of Incremax Technologies Corp., a 20-employee software developer in New York. Gerontianos is also president of the Association of Microsoft Solution Providers, an international trade group. "But at some point, it might be a little different world, where operating systems aren't as central to communications and data processing," he says. More customers are building applications that involve cell phones and handheld computers, which don't necessarily rely on a Microsoft operating system. Is there any guarantee Microsoft will dominate that area, too? "Not necessarily," Gerontianos says.

It won't be for lack of trying. The vendor's new strategy, called Microsoft.Net, involves a future generation of software--written partly by Microsoft and partly by independent software vendors and business IT departments--capable of supporting apps on PCs, company networks, Internet servers, wireless devices, and TV set-top boxes, all replicating and tracking changes to data across multiple systems. Microsoft also plans to supply reusable business-logic components such as security and authentication routines that third parties can incorporate into their apps by calling them over the Internet. The vendor expects independent software vendors to supply many more of these application "building blocks," such as hosted storage, advanced search engines, translation services, and credit-card processing engines.

Kerry Gerontianos Photo by Chriss Wade By themselves, such components aren't very exciting. But start plugging them into applications such as an online store or a brokerage on the Web, and they may let independent software vendors buy application logic, rather than write the code themselves--a major time-saver. Third-party developers that create such Web services for, say, online storage could charge by the amount of disk space and guaranteed uptime they promise. Microsoft plans to make its money from such Web services by selling software vendors the tools and servers necessary to build hosted applications and applets, and by offering its own online services through company-owned sites such as the Microsoft Network and bCentral, a site for small businesses.

This will likely mean a new learning curve for developers. Sanjay Parthasarathy, Microsoft's VP of platform strategy and business development, says the education won't be "so much at the technology level, but at the opportunity level." Translation: There'll be new ways for independent software vendors to make money by reselling business logic. Microsoft promoted Parthasarathy to the role of developer evangelist last month after group VP Paul Maritz's departure. Parthasarathy, who has spent 10 years at Microsoft, will report directly to president and CEO Steve Ballmer; part of Parthasarathy's job will be making sure companies understand Microsoft's new developer products.

In December, Microsoft plans to release the first public beta of Visual Studio.Net, a new version of its flagship development tools suite that aims to turn some 5.4 million Windows developers into creators of Web services--the reusable components that live on Internet servers. The tool suite, scheduled to ship next summer, is designed to let developers take components they've written and publish them to the Web.

One way to look at Web services is as an evolution of Microsoft's component model. Version 1 of Visual Basic, released nine years ago, introduced reusable visual components for on-screen controls; version 2 ushered in reusable business logic, dubbed the Component Object Model. Windows 2000 brought COM+, which Microsoft likens to "version 2.5" of COM, to take advantage of transactions and message queuing. Visual Studio.Net, Microsoft says, makes it simpler for developers to write scalable Web applications and make available middle-tier business logic as components that can be hosted, bought, and sold over the Internet. "Today, we have a world of applications and Web sites," Gates said in a recent speech to developers. In the .Net world, "everything that was an application becomes a Web site."

Features in Visual Studio.Net will let developers publish components to the Web, automatically keep track of changes to those components during transactions, and make them accessible through HTTP and the Extensible Markup Language, both Internet standards. Microsoft is also replacing DCOM, its proprietary protocol for sending requests over the Internet between Windows servers, with the Simple Object Access Protocol, which uses XML to send requests between Windows and non-Windows servers. "In order for us to reach Unix, Macintosh, and Linux machines, we need to work in an Internet-friendly way," says Dave Mendlen, lead product manager for Visual Studio at Microsoft.

There are other changes to Microsoft's development model as well. The current version of Visual Studio, release 6, requires writing low-level code to drop data into a Web page. Visual Studio.Net replaces that with point-and-click interfaces for handling server requests and generating XML code.

The new tool suite will also introduce C# (pronounced "C sharp"), a Javalike language that's supposed to resolve a problem independent software vendors face when choosing a Microsoft-supported language to write in. Visual Basic developers are plentiful and, relatively speaking, cheap--Microsoft estimates there are 3.2 million of them worldwide--but the language isn't very powerful. C and C++, while more robust, require higher-paid developers who know how to micromanage computing resources--asking the computer to use a chunk of memory, putting it aside, and then telling the computer when the program's done with that memory, for example. On the other hand, Java, the object-oriented programming language developed by Sun, manages those tasks automatically--one reason it's become so popular with Web developers. But so will C#, some developers maintain. "If you're using Microsoft technologies, you'll likely use C# over Java at some point," says Incremax's Gerontianos.

Java has a big head start over Microsoft's evolving Web environment. Sun's Java 2 Enterprise Edition has emerged as a standard for building component-based applications in non-Windows environments; it's backed by E-business high-fliers BEA Systems, IBM, Oracle, and iPlanet, Sun's software development alliance with America Online's Netscape division. Microsoft has cooled on its Java technology, Visual J++, since Sun filed a lawsuit over use of the language. There are rumors that Microsoft is looking to sell the tool, but Mendlen says, "I can't imagine anyone willing to pick up that beast at this point."

Other non-Microsoft languages, such as Perl and Python, are popular for Web development as well. Also, many younger developers entering the workforce prefer to run their apps on Linux, not Windows, which leads them to different development communities--groups that share source code and ideas.