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Tuesday, September 14, 1999
Microsoft Shifts Its Emphasis to the Web With 'DNA' Strategy
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 AN FRANCISCOThe shift reflects Microsoft's scramble to catch up with smaller, more nimble Internet competitors in an era of ever-accelerating change. The company has been slow to alter its strategy, perhaps to protect the vast bulk of its revenue, which derives from its dominance over the personal computer market. But its hand has been forced as PCs have rapidly faded in importance, relative to the market for Web-based products and services. "The market is moving away from the PC and toward the Web, and if they don't find a way to move with it, the market will pass them by," said Rob Enderle, an analysts with Norwell, Mass.-based Giga Information Group. The company hopes its new program, which it calls Windows Distributed interNet Architecture 2000, or DNA, will help it catch or surpass Sun Microsystems, a leader in the market for Internet servers--powerful computers that manage Web sites and e-commerce. It also seeks to stave off the surging popularity of the free Linux operating system, which competes with Microsoft's Windows NT to run those servers. With its DNA strategy, Microsoft aims to persuade software developers to deploy its tools to create a wide range of Web services and applications that would enhance the company's presence in the burgeoning world of Internet-linked appliances--from hand-held computers and set-top boxes to garden sprinklers and car alarms--where it remains one player among many. Microsoft President Steve Ballmer told reporters and industry analysts that the DNA strategy will be rolled out over the next two years. Some industry watchers say the company is using a three-prong strategy that proved unstoppable for the desktop PC versions of its Windows operating system and for its office productivity programs. First, Microsoft creates tight linkages among its products--such as its Web browser, operating systems, software applications and servers--creating ostensible synergies that competitors find difficult to duplicate. Then the software giant uses its influence over developers and PC makers to control the evolution of key technology standards in ways that favor Microsoft products. Finally, the company tries to deter efforts by potential competitors by pre-announcing products and services--"vaporware" in industry parlance--that may not become available for extended periods. Microsoft portrays DNA as its most significant redirection since 1995, when it rapidly shifted emphasis to the explosive growth of the Web, creating its Internet Explorer Web browser and orienting its other applications toward the Internet experience. The market greeted the news without enthusiasm, however; shares in Redmond, Wash.-based Microsoft fell $1.13 to close at $93.88 on Nasdaq. Borrowing a phrase from Intel Corp. Chairman Andy Grove, Ballmer called the current period an "inflection point," meaning a fundamental change in industry dynamics. In this case, the Web is rapidly moving from mere display of pages to provision of services. Microsoft intends to ensure that its products will be the primary means used by software developers to build and disseminate those services. The first of those products will be folded into Windows 2000, the latest iteration of Microsoft's operating system, due out late this year. Ultimately, the company says it will provide mega-services on its Microsoft Network Web site that will be building blocks for e-commerce. For example, its new Passport Web application will provide an "e-wallet" to help consumers manage credit in online transactions, plus new security software to authenticate those transactions. Other mega-services could include software-update capabilities--to help Web merchants ensure that customers have the current versions of applications needed to exploit e-commerce opportunities--as well as e-mail and instant-messaging components. Microsoft envisions end users eventually obtaining personalized content from a range of shopping and financial Web sites directly from Microsoft's Outlook e-mail product or other applications. Such efforts are based on eXtensible Markup Language, or XML, a standard industry tool for creating interactive Web sites. By using an "open" or nonproprietary standard, Microsoft says that it will promote compatibility with other vendors' products--including those of its competitors--and make the Web easier to navigate. But some experts harbor doubts based on Microsoft's track record. "Microsoft always introduces incompatibilities [in industry standards], then comes back and announces that the solution is to adopt standards that essentially disenfranchise the market leader," said Jeffrey Tarter, editor of the industry publication Soft-Letter. Ballmer agreed with analysts that the success of Microsoft's new strategy will be crucial to its growth. "We'll either come through this inflection point or we'll be in rough shape," he said.
Copyright 1999 Los Angeles Times. All Rights Reserved
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Technology: Software giant aims to transfer its dominance from PC to Net applications, services with new program.
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