January 24, 2002 By LAWRENCE J. MAGID, SPECIAL TO THE TIMES

I've always been a bit skeptical of Microsoft's ".Net" strategy, which would shift some computing tasks from the PC over to the Internet.

Now, I'm even more nervous after the company admitted that a human error caused its servers to fail for five days, temporarily keeping some customers from being able to get important security updates for Windows XP. The update servers are designed to allow Microsoft to keep your operating system up-to-date without having to ship out CD-ROMs.

Windows Update offers a peek at what .Net services will ultimately offer. Eventually, Microsoft and other developers will serve up a wide range of applications that will make Windows, Microsoft Office and other PC programs dependent upon an Internet connection to perform certain tasks. On the plus side, this strategy will make it a lot easier to add new features, fix bugs and offer networking and software applications that would be impossible or impractical on an unconnected computer.

But these benefits come at a cost and at a risk. To take full advantage of these services you have to be connected to the Net, preferably using a high-speed connection such as DSL or cable. In many cases, you will have to pay additional fees.

With .Net, Microsoft sees the opportunity for an ongoing revenue stream. Instead of trying to sell you upgrades every year or two, they'll sell you a subscription.

In a sense, it's like watching movies on a cable or satellite channel versus owning your own video tapes and DVDs. Getting your TV programming from such a service can be great as long as the service keeps working and you keep paying your bill.

.Net and similar concepts are about using the Internet to enhance or even replace your software.

For example, I now use the free Atomica service (www.atomica .com) as my electronic thesaurus and dictionary. If I'm using Word and need a definition, I simply highlight the word, press a key, and Atomica looks it up over the Internet.

I used to use Quicken as my sole program for paying bills and keeping track of my finances. I now pay and receive my bills through Paytrust. I like that I can view or pay my bills from anywhere, even if I'm out of the country.

But if my network connection or Paytrust's servers go down, I'm out of luck. And, if the company were to go out of business, I would no longer be able to view or pay those bills.

That's one reason why it's always a good idea to have a local copy of your data on your own PC and why I would never use a service that doesn't allow you to download your own data. Sadly, the dot-com landscape is littered with companies that have abandoned their business plans--and their customers.

The new paradigm of Internet applications assumes a level of trust. Users must not only trust that network companies will not violate their privacy, but that they will have adequate security to protect you against others.

I've never seen any evidence suggesting that Microsoft would deliberately peer into users' data, but there have been situations where its security was lax, making it possible for hackers to break in.

Still, there are aspects of the idea that make a great deal of sense. The Internet is an excellent vehicle for keeping software up to date.

Online storage services such as www.backup.com can be a lot more reliable and secure than local storage.

Online collaborative tools make it possible for colleagues to work together or for families to share photos, music and other group calendars.

Now all we need are infallible servers, network connections and people.

Technology reports by Lawrence J. Magid can be heard between 2 and 3 p.m. weekdays on the KNX-AM (1070) Technology Hour. He can be reached at larry.magid@latimes .com.