Windows XP is set to deliver a whole series of services.  This article
offers details.

Kelly

washingtonpost.com: Planting the Seeds

Planting the Seeds
With Its '.Net' Transition From the Desktop to the Web, Microsoft Could
Reap New Dominance -- and Scrutiny

By Alec Klein
Washington Post Staff Writer
Sunday, July 1, 2001; Page H01

Begin with the premise that your life is a mess.

You are information-overloaded and device-deluged, and you have no idea
where that beeping sound comes from. The phone? Pager? Cell? Data careen
against
the four walls of your noisy life in the form of e-mail, instant
messages, voice mail, newspapers, magazines and television.

Now imagine an orderly future -- one soon to be introduced to you by
Microsoft Corp., in which the software giant will attempt to harness all
that information
clutter. Need an instant message notifying you of a delayed flight? Want
an e-mail reminder of an appointment with a dentist who schedules the day
on your
online calendar? How about a pager alert when your stock portfolio dips
to a certain level?

These are the kinds of Internet-based services that Microsoft plans to
offer next year as the software maker begins to untether its
technological might
from the desktop, where its operating system runs about 90 percent of all
personal computers, and extend it to the Web. Microsoft calls the
strategy .Net.
The online services are part of an initiative the Redmond, Wash., company
has dubbed Hailstorm. Both are linked to Windows XP, the newest version
of Microsoft's
popular operating system, which is set to hit store shelves Oct. 25.

The relationship between operating system and the proposed Internet-based
services is sure to draw new scrutiny after a federal appeals court's
finding
last Thursday that Microsoft broke antitrust law. Although it reversed
the district judge's order to break up the company and ruled that
Microsoft did
not illegally monopolize the Internet browser market, the appeals court
directed a judge to examine whether Microsoft is improperly bundling
services to
harm competition. It also ordered the court to consider how to remedy
Microsoft's monopolistic actions -- a directive that could upset the
company's designs
for XP and Hailstorm services.

For now, Microsoft executives said they have no intention of deviating
from their plans. They argue the strategies all spring from a desire to
offer consumers
a better product -- and to find a way to help people make more efficient
use of the Internet.

"We certainly think of it as part of our mission to help people manage
information and communicate information," Microsoft chief executive Steve
Ballmer
said in a recent interview. "We've been pretty successful at that in the
business market. Most knowledge workers use our stuff. We had been
reasonably
successful in the consumer market until the explosion of Internet
connectivity, and then things got topsy-turvy."

The most tangible proof of Microsoft's immediate strategy takes the form
of Windows XP, which company officials are touting as the biggest remake
of Microsoft's
flagship product since Windows 95. The new operating system, for example,
comes with a souped-up instant-messaging service called Windows Messenger
that
extends Windows XP further into the Web. It allows users to trade text
notes in real time that appear as pop-up windows, and it also lets them
use audio-video
conferencing.

'Not a Timid Move'

"I would say that what they've done with XP is effectively embed half of
an online service in the operating system," said analyst Henry Blodget of
Merrill
Lynch & Co. in New York. "It's fair to say that this is not a timid
move."

It's also a move born of necessity. Desktop software -- including the
Windows operating system and the Office suite of applications -- still
accounts for
the bulk of Microsoft's sales, about 70 percent. But growth is slowing,
and Microsoft has seen the writing on the Web as the commercial action
moves from
the PC to the Internet.

There has been an increasing sense of urgency at the company since June
of last year, when U.S. District Judge Thomas Penfield Jackson found that
Microsoft
broke antitrust laws by tying its Internet Explorer browser, software
that allows users to use the World Wide Web, to Windows. The appeals
court reversed
that finding but on another count upheld Jackson's ruling that Microsoft
illegally mingled the computer code for the two applications.

Just two weeks after Jackson's ruling, the software maker announced its
.Net initiative to shift products and services, both its own and those of
others,
from the desktop to the Internet.

Some viewed it as a savvy move by Microsoft to limit the potential damage
of a court-ordered split of the company into two -- one centered on
marketing
the operating system, the other selling word-processing, spreadsheet and
other applications. The appeals court threw out the breakup plan, but the
government
could push for it again as another judge looks at possible remedies.

But Microsoft views .Net not as a legal solution but as a way of
extending its software from the PC to a variety of Internet-enabled
devices, including
mobile phones, televisions and video-game consoles. At the time .Net was
announced last year, Chairman Bill Gates compared the transition to the
one that
occurred when computers shifted from the clunky text-based DOS system to
the snazzier, point-and-click Windows platform.

"We think of it as a platform," said Charles Fitzgerald, Microsoft's
director of strategy for the U.S. .Net platform. "It is a platform for
building services.
. . . Our business used to be pretty simple. Our concept was, this is a
[computer] box that has Windows. But the world has gotten more complex."

.Net's Hailstorm

There was a good deal of confusion over .Net at first as industry
observers struggled to grasp the meaning behind the concept. But the
implications of .Net
became more apparent in March when Microsoft outlined one of the first
components of it: Hailstorm.

Hailstorm is a set of 14 Web-based services that Microsoft and other
developers will use to create software products. The services include
"myContacts,"
an electronic address book; "myNotifications," which provides automatic
alerts for events; "myCalendar," a time and task management tool; and
"myWallet,"
which maintains receipts, payment instructions and other transaction
records.

"These services will allow different technologies in your life to work
together on your behalf under your control," said Fitzgerald, the
Microsoft strategy
director.

Picture a college student who uses Hailstorm and an online music service
offered by a record label. The music company could offer tickets to
upcoming concerts
that fit his profile, informing him through Hailstorm's myNotifications
service in an instant message. If he wants to buy the ticket, Hailstorm's
myWallet
would then buy the ticket on his behalf, using a credit card or another
form of payment. And Hailstorm's myCalendar would note the concert date.

How does the idea strike a potential customer such as 22-year-old Charles
Rowe Jr., an information-systems major at New York's Pace University?
"It's okay
in certain aspects," he said, warming to ideas such as the instant alerts
for appointment changes. But the college junior said that much of the Web
is
already designed to offer consumers similar services, such as online
calendars. "For a person who knows their way around the computer, they
don't necessarily
need all that," he said.

Though Hailstorm remains a concept of the future, Microsoft said it
already has begun active discussions with several potential corporate
partners that
are considering using the services, including online auctioneer eBay Inc.
and American Express Co.

EBay, for example, could send subscribers a notification if they are
outbid on an auction item. At American Express, Hailstorm subscribers
could receive
instant notifications if it suspects fraudulent activity on one of their
credit cards.

"We do see benefits that it could provide to our customers," said Molly
Faust, an American Express spokeswoman, who cautioned that the company
had not yet
committed to the service.

In another profound shift in Microsoft's business model, the company will
generate revenue from these new services not from its usual one-time fees
but
from subscriptions, which the company figures may furnish a steadier
stream of cash. Although pricing has yet to be announced, the company
said that consumers
will pay a flat annual fee for the package of Hailstorm services.
Microsoft also will derive some revenue from software developers who
employ its products
and services, according to a Microsoft white paper on the Web services.

Hailstorm is based on XML, or extensible markup language, an open
industry standard. Microsoft executives said that means software
developers can create
applications based on a computer language free to anyone and compatible
not just with the company's operating system but also with rival systems,
such
as Macintosh's and Unix's, as well.

Passport as the Key

Hailstorm, however, works only when users sign up for a Microsoft service
called Passport. It's an authentication and identification service for
consumers
to create a unique user name and password, which will give them access to
various Web sites operated by Microsoft or its partners.

Critics fear that Microsoft is trying to take control of the Internet by
requiring users to sign up for Passport, which already has 160 million
accounts,
before they can get access to Hailstorm services.

"If Microsoft's plan may be described as the building of Fortress
Microsoft, Microsoft Passport -- Microsoft's Web identity service -- is
the cornerstone
of that plan," said an anti-Microsoft group, Project to Promote
Competition and Innovation in the Digital Age, in a recent white paper
called "Passport
to Monopoly." "A monopoly in Web identity services will enable Microsoft
to control the means by which users access distributed applications from
the Internet."

Anti-Microsoft forces also are concerned about privacy and security
issues related to Passport. Such data as the user's name, e-mail, Zip
code, birthday,
occupation and credit card numbers are stored in Microsoft computer
servers. But the company said that the system is tightly secured, the
information is
encrypted and the user controls the data.

People can sign up for Passport through a variety of Microsoft sites,
such as its free Hotmail e-mail service, or through Microsoft partner
sites. Or, the
first time consumers connect to the Internet after buying a PC with
Microsoft's new Windows XP, the operating system will guide them through
an online
registration form that asks them whether they want to sign up for a
Passport account.

That, too, has raised the ire of critics, who assert that Windows XP will
steer users to sign up for Passport, which in turn will lead users to
Microsoft-affiliated
Web sites and services. For example, when users sign up for Passport,
they automatically are given accounts for Microsoft's Hotmail and MSN
Messenger Service,
its instant-messaging software.

Microsoft, however, views Passport as a convenient way for people to surf
the Web without being forced to use multiple sign-on names or to
repeatedly enter
the same personal data, such as a credit card number, on different Web
sites. It also is a mechanism to secure the user's data. "We're putting
privacy
of the user first," said Bob Muglia, Microsoft's group vice president of
personal services.

Windows XP, meanwhile, comes with what company officials call "good
plumbing," software code that works seamlessly with the XML language of
Hailstorm. That,
they say, will make it easier for developers to create software based on
the Hailstorm platform that interacts with Windows XP.

"XP will be a delivery platform for the Hailstorm services," said Wendell
Laidley, a San Francisco-based analyst at Credit Suisse First Boston
Corp.

But for all that Windows XP does for Hailstorm, the operating system also
is designed to build on its own position on the desktop. To that end, the
new
software comes with various new features, such as "fast user switching."
That technology allows users to establish multiple Windows accounts on
the same
PC so that they can run multiple applications at the same time.

In addition, Windows XP comes with a new feature called "remote
assistance capability," which allows users to get computer help by giving
Microsoft or anyone
else access to their PC from over the Internet.

Last week, however, Microsoft abandoned a controversial feature of
Windows XP called "smart tags," which could have linked selected words in
Web sites'
text to the sites and services of Microsoft and its affiliates.

Icons in the Trash

One controversial change that remains in Windows XP is Microsoft's
decision to eliminate all software icons -- except for the recycle bin --
from the first
scene users see when they log on to the desktop. Computer makers who sell
space on the scene to other software makers consider it valuable real
estate.
Microsoft calls it clutter but said users will have the option of putting
icons on the desktop if they choose.

As an alternative to the desktop icons, Microsoft has expanded the start
menu from one column to two. When users buy a new PC with Windows XP,
they will
find two Microsoft icons in the upper left column of the start menu: one
for the company's Internet Explorer Web browser, the other for Outlook,
its e-mail
program.

In the lower left column there will be about six other icons, probably
half from Microsoft, the company said. All the icons in the left column
will update
themselves depending on how often those applications are used, officials
said. The icons in the right column will include several default folders,
including
"My Documents," "My Pictures" and "My Music."

"We've done a ton of work on Windows XP to really unlock what the PC can
do," said Greg Sullivan, a lead product manager for Windows XP. "We're
making it
really easy, we're also improving the quality. The operating system
should get better. So that's what we're doing. We will add capability. We
will improve
capability. We need to have these things. To not improve the operating
system while everything around it is improving so dramatically would be
silly."

Some said Windows XP also demonstrates that the company is ready to put
its legal troubles behind it.

"I would characterize it as: They're coming back and they're ticked off,"
said Rick G. Sherlund of Goldman Sachs Group Inc. in New York. ".Net is
really
going to change the company's strategy. It's repositioning Microsoft away
from the maturing PC platform to take advantage of handheld devices and
cell
phones."

But at first blush, analysts said it was unclear how the court ruling
would affect Microsoft's business strategy, especially since a lower
court must revisit
the question of whether Microsoft illegally tied its Web browser to
Windows. Said Sherlund: "They're not off the hook."

© 2001 The Washington Post Company


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