It may sound like Microsoft is capitulating to the network-as-computer crowd. But look closer at the resources required to fulfill the .NET vision, says Kusnetzky. They won't fit the downsized network appliance that Internet first-movers like Ellison and McNealy see running write-once-run-anywhere applets independent of OS. "It's not clear that people will want to have Windows 2000 and 1GB of disk and 64MB or more of memory on their handheld devices," Kusnetzky jokes.
Actually, it won't be quite that bad. True, Microsoft plans to have a version of Windows.NET on every platform that can handle it-desktops, servers, Pocket PCs. It's not true that every wristwatch and toaster oven that connects to the Internet will have to run Windows, says Goffe. But, he adds, "there is some software that needs to run on the device that understands XML and Web services."
Whatever you call it, that code will force competitors to wait for Microsoft programming direction and bind them to a product release schedule that trails Microsoft's. And in high-tech sales, being first to market is half the battle, notes Enderle.
Can it work? Impossible to say. Microsoft's last three tries at adapting the Windows success to something other than desktops-namely, to Pocket PCs-have won few converts. Palm OS-based handhelds still own something like 80 percent of the market-in part, because Windows and its appurtenances are too cumbersome.
On the other hand, Micro-soft is already pretty rich in Net assets. Internet Explorer, the marketing tactics of which got Microsoft into so much trouble with the Justice Department, is now the cyberspace vehicle of choice 86.1 percent of the time, according to Web analysis firm WebSideStory Inc. Microsoft's MSN group of consumer sites are the third-most-often-visited pages on the Web, according to PC Data Online.
Programming expertise? No one else could even attempt this gambit, points out Enderle, and the market does like someone other than the government to set standards. As for communal standards committees, Microsoft knows how to play them, says Enderle.
But Enderle, Williams and Kusnetzky all see Microsoft's revenue model and margins coming under attack as it migrates away from the usual strategy of selling software licenses to every desktop on a LAN. On the Web, it will have to compete with companies like Oracle that sell limited-use permits where, say, a 300-person company need only buy a license for the 40 or 50 people using the Web service or software at any one time.
Large ASPs like AT&T are more powerful than any of the hardware OEMs Microsoft has dealt with in the past and, because of the antitrust troubles, the prices they get for Microsoft code will be enjoyed by lesser ASPs as well, predicts Enderle. Then there is the acknowledgment that its desktop software is history. "For a company to publicly obsolete every product on the market two years before it's going to ship their replacements-we have seen a lot of companies go under for a lot less," declares Enderle.
But Microsoft isn't just any company, and a preannouncement that might kill another company's product line is one of Microsoft's most effective marketing weapons. "No other company can freeze the market for years while it builds its products," says Kusnetzky. "Even though other people have competing products today that do what Microsoft is talking about, they don't get a full hearing because people are waiting to see what Microsoft will do. It's an amazing example of marketing power."
Williams describes it as a calculated balancing act: "They are shooting their own golden goose in as sensible a way as possible so as to still retain control and mindshare." It will be interesting to see whether Microsoft falls or catapults to new heights.