Microsoft planning Web-based strategy

Microsoft Corp. is unveiling a plan to dominate software development in the post-personal-computer era, extending its Windows technology to include building blocks for creators of new Web-based applications and electronic-commerce services.

The strategy, to be outlined Monday in San Francisco, represents Microsoft's (Nasdaq:MSFT) most decisive shift yet away from the PC-centric approach that has long encouraged software developers to create programs that work mainly with its Windows operating systems.

The new strategy recognizes that the Web, rather than stand-alone computers, is the new target for software developers, and seeks to extend Windows into that decentralized environment. Several elements of the strategy must still be worked out, and it is unclear whether Microsoft can successfully create technical ties between the Web and Windows and thus preserve its privileged position in the software industry. But the company said it is nonetheless reorienting all of its products around the approach, dubbed Windows DNA 2000, much as the company shifted to broadly embrace the Internet in December 1995.

"It's going to have as profound effect on the investments we make at Microsoft as the Internet did," said Paul Maritz, group vice president heading Microsoft's relations with software developers. "This is what the company will be about."

Dominance is at stake
At stake is nothing less than dominance of the software infrastructure of the rapidly expanding digital economy. High-volume sales of Windows PCs have given Microsoft control of the specifications used by most independent computer programmers, who in turn have developed software that serves to keep people buying Windows-based PCs.

But the advent of the Internet has made it possible to develop server software that can be manipulated with only a Web browser. Browsers can run on non-Windows PCs, handheld devices, phones and TV set-top boxes, reducing the need for Windows. The trend is heavily supported by Microsoft's biggest rivals, including International Business Machines Corp., Oracle Corp. and the alliance between Sun Microsystems Inc. and America Online Inc.

Microsoft hopes to extend its sway over the Web world by making it easier for programmers to create more sophisticated programs. Most leading Web sites still hand craft their own e-commerce software and painstakingly link it to existing transaction-processing, inventory and order-fulfillment systems.

Megaservices offered
Instead, Microsoft will offer Web developers the ability to pluck technology components from its popular MSN Web site. These "megaservices," as the company is calling them, include an Internet identification and payment technology called Passport, the LinkExchange system for exchanging banner ads, the Hotmail and Instant Messenger communication technologies, and Windows Update, a way of sending software upgrades and patches electronically. A new product, code-named Babylon, will help link Web software to existing back-end systems.

In addition, the company will broadly use a standard technology known as Extensible Markup Language, or XML, which identifies different types of data on Web sites and can be used to automate processes that now must be executed manually. For example, Microsoft is demonstrating the ability of users to create personalized shopping tools by dragging and dropping e-commerce Web sites into their Microsoft Outlook e-mail and calendar software. The identifying XML tags allow catalog entries, prices and availability to be recognized on the Web sites and automatically incorporated in the software.

The overall goal is to help make the Web more than a collection of static documents, creating a platform to stitch together new services that are flexible enough for the ever-changing business models of Web-based businesses.

"Over time, what will get distilled out is the new platform," Maritz said.

Beefed-up expertise
Microsoft has a long history of promising new products early, a strategy that can serve to freeze competitors' investments in products the company considers threatening. In this case, Microsoft Chairman Bill Gates articulated the need to develop a Web platform, initially dubbed Megaserver, in a widely circulated internal memo last year. Since that time, Microsoft has beefed up its expertise through a series of investments in Web system integrators, hosting services and network operators.

Microsoft, however, has had mixed results so far in setting standards for Web development. Moreover, other companies and industry groups have announced products that could displace elements of Microsoft's Web platform. Novell Inc., for example, has developed a Web-based personal-identification technology called DigitalMe that could supplant Microsoft's Passport.

Still, the popularity of Windows and the financial power Microsoft can muster to extend it can't be discounted. "They are going to drive superhard to improve what they've got," said Dan Nordstrom, chief executive of Nordstrom.com, a unit of Nordstrom Inc. that plans to use Microsoft's Web platform for a forthcoming shoe-sales site. Nordstrom said the wide acceptance of Windows makes it easier to link Nordstrom's systems with those of its shoe suppliers. "Everybody knows how to work on it," he said.

Maritz acknowledged that not all of the pieces of the new model are ready. The cornerstone of the effort is Windows 2000, the successor to the Windows NT line that is due before the end of the year. Next year, the company plans new releases of its SQL server database and its Visual Studio toolkit, as well as several new additions to its line of server software.