.NET Still Faces a Dicey Future

Microsoft's .NET strategy has been a failure so far

When Microsoft Chairman and Chief Software Architect Bill Gates said that the company was betting its future on .NET, he wasn't exaggerating. After a decade of market dominance thanks to Windows and Microsoft Office, Microsoft faces new challenges as the market shifts from desktop-based applications to an interconnected future of Web services. But this shift hasn't gone smoothly for the company. In fact, with relatively few small exceptions, most of Microsoft's .NET effort to date has been a failure.

.NET Passport, of course, is one example. Although hundreds of millions of customers have signed up for the service, the vast majority have done so only because they had no choice if they wanted to take advantage of popular online services such as Hotmail or MSN Gaming Zone. And Microsoft recently had to drop .NET My Services (formerly code-named HailStorm) and rethink its strategy for the technology because none of its business partners showed the slightest bit of interest in it.

Another recent, but quieter, technology abandonment occurred late last year, when Microsoft decided to cancel NetDocs, an online office suite service that would have been available over the Internet and required subscription fees. According to Microsoft insiders, NetDocs was originally envisioned as the .NET "poster child," offering customers online versions of Office's email, personal information management (PIM), and document-authoring features, as well as digital-media management and Instant Messaging (IM). What was radical about NetDocs was that the product wouldn't have shipped in a shrink-wrapped box but would have been available as a hosted Web service.

In an internal document specifying the company's future goals, Microsoft described NetDocs this way: "Use the .NET platform to create a revenue generating subscription service focused on enhanced communications and creativity (NetDocs)." Last week, in court for cross-examination during Microsoft's antitrust remedy hearings, Microsoft Group Vice President Jim Allchin, who heads the company's important Platforms Group, explained why NetDocs was dropped, or "blown up," in his words: "We didn't think that \[NetDocs\] was going to be a viable technology. We decided that technology had a number of issues, and that group was disbanded. Are we \[still\] trying to build some subscription offerings within Microsoft? The answer is yes, we absolutely are trying to do that."

The failure of NetDocs comes at a tough time for Microsoft: The company's latest traditional Office suite—Office XP—is widely considered a lackluster release with few innovative features. But if Office could become a subscription service, a subpar release wouldn't hurt the bottom line as much because Microsoft's customers would continue paying monthly or yearly subscription fees for the product. With the company's traditional sales model, however, new versions often make or break sales: If customers resist a new version, sales can plummet, taking revenues and profits down with them.

I think it's safe to guess that some parts of NetDocs will see the light of day in the next Office version—reportedly code-named Office NGO, for Next-Generation Office—and in other Microsoft products. NetDocs was to have included a component called Universal Canvas, an XML-based display technology. And the NetDocs online document-sharing and collaboration technologies will no doubt be rolled into future versions of SharePoint Team Services, which is part of Office.

But here's the problem. While Microsoft tries to figure out how to get its customers—both end users and corporate decision makers—to go along with online subscription services, weak interim software releases such as Office XP leave the company vulnerable to attack. Consider the recent rash of Office suite competition, a market that Microsoft temporarily sewed up years ago when Corel WordPerfect Office and Lotus SmartSuite fell by the wayside. Today, competitors see the value in supporting non-Windows platforms. Currently, you can choose the excellent—and free—OpenOffice.org office suite, which offers full Office document compatibility, or the product's commercial cousin, Sun Microsystems' StarOffice 6.0, which is expected to cost between $50 and $100 when it goes on sale this month. Both of these suites run on Linux, Mac OS, and other systems in addition to Windows. Compare those prices with the heady $200 to $500 cost of Office, and you can see why Microsoft's current business model is in trouble.

Will .NET ever find its killer app, that one application or service that makes the technology truly must-have? Microsoft's recent flailing and constant strategy changes make the answer to that question more unclear now than ever before.

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