Editor 4-Aug-01
Microsoft.NET Gains Speed

Bill Gates' arch-nemesis #2 (Scott McNealy of Sun Microsystems) was right. "The network is the computer." Microsoft now struggles to seize monopoly control of a world defined by competitors it despises.

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[This is an updated and expanded version. The original from 12-25-2000 is here].

Netscape's Marc Andreson loudly (and very, very unwisely) boasted that Netscape would make Windows irrelevant. Microsoft believed him, and crushed Netscape out of existence to make the world safe for Windows (and lost a landmark anti-trust battle over how they did the crushing).

With Netscape safely destroyed, Microsoft finds the problem didn't go away. Others far stronger than Netscape have taken up the cause: IBM, Sun, Oracle, Hewlett Packard, Linux, AOL Time Warner - each is a name to be reckoned with. All working in the same direction they take on the characteristics of a lava flow - and they have friends, lots of friends (OK, maybe not AOL, but the rest of them do).

Microsoft's long successful effort to freeze the evolution of computing is clearly crumbling, so we have .NET. .NET embraces the Internet and the concept of network computing, and extends it with the concepts of world domination and preserving the Windows and Office monopolies.

Contents:

What is .NET?

.Net (pronounced Dot Net) is a little better defined now than when it was when anounced (see Help Desk), but Microsoft admits full implementation is still two years away (translating "Microsoftish" into English, that's 5 to 10 years).

While a complete definition of .NET is still a long way off, and many changes will be made in that time, its guiding principles are well defined and pretty simple to understand. Anything you hear about .NET, from Microsoft or from others, must be judged against these principles. If it doesn't match, then someone is either lying or doesn't have a clue.

  1. Microsoft has never been successful competing in a market where they could not leverage monopoly power.
  2. Microsoft's financial structure is a pyramid scheme that depends on rapid growth to keep it from collapsing.
  3. The PC market over which Microsoft has monopoly control is saturated and can no longer supply growth. Recent changes to licensing terms and the aggressive anti-piracy campaign are last ditch measures to squeeze more money out of the existing market, and are limited.
  4. The Internet blind-sided Microsoft, breaking the hold on technology that allowed them to enforce a decade of almost total stagnation.
  5. It is imperative to Microsoft that they establish a new monopoly they can leverage, both to maintain growth, and because the PC market will contract as the world moves to special purpose network devices and server-centric computing.
  6. So strong is this imperative, Microsoft will steam ahead with projects that are obvious violations of anti-trust law. They will fight the DoJ, the FTC and the courts tooth and nail to drag out any enforcement until free markets have been destroyed and there is no hope of reestablishing competition. This strategy was wildly successful in the PC market and they expect it to succeed again.

Here are key concepts of .NET as it stands today:

  • Software is not a product to be purchased or licensed. It is a service you lease or rent.
  • Software does not reside on your PC's hard disk, but on the servers of ASPs (Application Service Providers) and is maintained and upgraded by the ASPs.
  • Only a small part of any program you are using runs on your PC. The rest runs on an ASP servers.
  • Your business data resides on ASP servers and is accessed through Microsoft .NET services. You do not have a local copy, and could not use it if you did because the software runs only on the ASP's server. The ASP is responsible for backup and security.
  • A full function PC will not be needed for most work because the real computing power and data storage is on the ASP servers.
  • All access to secure sites and all financial and credit card transactions on the Internet are cleared through Microsoft's Passport.NET services.
  • When you start up your computer, it connects to a Microsoft portal server. Your personal preferences, financial data, appointment schedule and workspace are all maintained for you on a Microsoft Passport server. This is true no matter where you log in from or what computer or other Internet access device you use.
  • You do not need Windows to use .NET services, but you will use Windows by choice because then your .NET experience will be "richer" (in other words, non-Windows devices won't work quite right).
  • You will be able to access .NET services offered by Non-Microsoft platforms through XML and SOAP.
  • When you are working, various tasks will be handled by various servers run by various ASPs, all transparent to the user.
  • The most important .NET services will be Microsoft's, particularly your office productivity applications (Microsoft Office) and your accounting (Microsoft Great Plains / Microsoft Small Business Manager / Microsoft Money). Most other services will be adjuncts and extensions to these and may be provided by other ASPs.
  • The existing Passport, Microsoft Instant Messaging and HotMail services will be expanded into key .NET services.
  • Any software that still resides on your computers will be automatically updated and maintained over the Internet without your involvement, as will licensing.
  • Initially some of this will be free, until dependency is established. Eventually it will all be charged for on a monthly, contract or usage basis.
  • You will be charged by the month for access to your own business data.
  • All this happens over high speed "always on" Internet links.
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How will .NET Work

Major components of .NET are XML, SOAP, C# and ASP servers.

Much of the structure of .NET imitates Java. As a consequence of their ill-fated attempt to kill Java to protect their Windows monopoly, Microsoft has been exiled by the courts from Java development. Since Java largely defines computing in the new era, Microsoft found they had to duplicate its functionality, so they built a new language, C# (pronounced "C sharp"). It has remarkably Java like features. It even includes a cross platform CLR (Common Language Runtime) that interprets intermediate code, just like Java. Of course, C# itself runs only on Windows, unlike Java.

A major difference between .NET and Java, according to Microsoft, is that the .NET runtime is designed to interface with languages other than C#, including older languages like Cobol. If this actually works it could save some companies a lot of money, but we're going to have to see it to believe it. On the other hand, many compilers for other languages are already being modified to optionally produce Java byte code, so this capability is also becoming available for Java, just from a different direction.

XML (eXtensible Mark-up Language) is the glue that is supposed to tie .NET together and make diverse systems (including ones not running Microsoft software) work together. Microsoft did not create XML, even though they sometimes claim to have done so. It is a W3C standard based on SGML (Standardized General Mark-up Language), an ISO standard mark-up scheme originally written by a lawyer.

Another component of .NET is SOAP (Simple Object Access Protocol), which allows one computer to ask another, possibly very dissimilar computer, to run a process and return the results to the requesting computer. The example usually given is a client computer asking an ASP server (through SOAP) to stream a stock ticker to it for continuous display on the desktop. The stock ticker program runs on the ASP server, but the result is displayed on the client's screen. Basically, SOAP is an RPC (Remote Procedure Call) language.

Microsoft, of course, did not originate SOAP either (it was originated by David Winder of UserLand Software. Despite that, Microsoft submitted it to the W3C committee (apparently without asking permission) for approval as a public standard. IBM, Hewlett Packard and others also back SOAP, but the W3C has decided to study it (and alternatives) before issuing a standard.

All of these components (and more) are used to outfit a vast network of ASP (Application Service Provider) servers, which dish up .NET processes in response to requests from the client computers of .NET subscribers. Of course the core ASP servers will be Microsoft's, but other companies will fill in the gaps and provide auxiliary services (until Microsoft has time to incorporate these into their own services and put the ASPs out of business - haven't we seen this scenario before - software development or some such?).
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HailStorm and Passport

HailStorm is a group of key .NET services - the first that will be implemented. It includes Passport and Microsoft Instant Messaging.

Passport is the most important component of HailStorm. Passport is an Authentication service currently associated with HotMail and other MSN (Microsoft Network) services. Yes, that's the same Passport that's already been involved in a major scandal. See Microsoft Caught Claiming Rights to Your Stuff.

The objective of HailStorm is to provide a central clearing house for every user of the Internet which will authenticate access to all Internet sites and clear all financial transactions done on the Internet. In other words, the objective is to charge you for access to your own information and to Internet services provided by others. Essentially, they intend to take a cut of every financial transaction or purchase made on the Internet.

To implement HailStorm, Passport will be expanded to provide a central repository for all your personal financial data, passwords, credit card numbers, appointment calendar, and other important personal information. This is all to be held on the servers of one of the most "ethically challenged" companies in the world today. Microsoft swears they'll keep their hands off it, but they've been caught lying about that sort of thing many times in the past.

Further, all your personal information will be in one place where it will be easily available to any agency that can get a subpoena from a court, and to any skilled hacker who can pry into the database.

Microsoft Instant Messaging is another key component of HailStorm. It is clearly designed to push AOL, Yahoo and other instant messaging services out of business, funneling all your personal communications (and who you associate with) through the HailStorm servers. There will, of course, be a charge for this. Microsoft Instant Messaging will be expanded to host .NET services provided by other publishers.

Users of Microsoft Instant Messaging will, of course, be cleared through the Passport service.

Windows XP is the first version of Windows that implements HailStorm services. Access to Passport and Microsoft Instant Messaging is built in and nearly impossible to remove or bypass.

It is more than clear that HailStorm brings up serious anti-trust concerns. It was designed when Microsoft fully expected the Court of Appeals to completely overturn their monopoly abuse conviction. Instead the Court of Appeals unanimously upheld every count. This leaves Microsoft and its entire .NET plan vulnerable to court challenges from competitors and privacy advocates, and such challenges are already being filed. The major effort is aimed at getting an injunction halting release of Windows XP.
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Collaborating and Cooperating

Microsoft designed Windows 2000 to finalize world domination, but that just isn't going to happen now. Incompatibility with "weaker systems" was designed in, but those "weaker" systems proved tough as nails, and those incompatibilities came right back to bite them - an example.

With .NET, Microsoft is touting interoperability and standards compliance - but isn't this just "embrace, extend, extinguish" all over again? Well, I'm sure Microsoft would like it that way, and will make every effort to make it that way, but they may be too tangled up in actual standards to actually do it. Everybody knows that game now and will be watching for it. Larger businesses will start applying pressure when they see it happening.

With Balmer in command, we don't have to worry about Microsoft becoming nice, or ethical, but they have to face reality, and reality (IBM, Sun Microsystems, Oracle, Linux, AOL Time Warner, Hewlett Packard, and all their friends) is a whole lot bigger than Microsoft this time. Several of these companies are well ahead of Microsoft in implementing Web services.

But that's all in the "big business" arena. In small business and consumer markets, Microsoft rules. Expect to see them play .NET hardball there - a very, very nasty game of .NET hardball. Every attempt will be made to get a stranglehold for HailStorm services. A lot of people, both competitors and customers, are going to get hurt.
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Promoting .NET

Microsoft doesn't have a product yet, but don't expect that to slow down the selling any more than it has in the past. They've cranked up the vapor marketing engine full blast. Once again, Help Desk can assist you in understanding what's going on.

As in the past, Microsoft is playing software developers as their trump card. If they can build enough momentum behind .NET, they can starve competitors for developer interest. This move has failed only once (Java), but Java has so much momentum it's going to be a hard nut to crack - it's displaced Microsoft Visual Basic as number one in help wanted ads.

To build momentum, Microsoft started in early 2000 ordering their faithful pool of Windows developers to start migrating to .NET. They have been turning up the heat ever since. This has upset and confused many developers because it turns their comfortable Windows world upside down.

Microsoft is distributing beta .NET development tools with Visual Studio, their suite of programming tools. They are working some .NET features into Windows XP to try to build critical mass.

Elsewhere Microsoft is applying their vast wealth to tie hosting services to .NET. An example is the deal just completed with ASP USi (USinternetworking). For $50 million Microsoft dollars, USi has agreed to give preference to Microsoft applications and .NET services.

This deal could impact USi's future, because their clients tend to be large corporations using Unix and Linux back-end servers, and who require highly customized "best of breed" services. A "one stop shop" featuring "one size fits all" Microsoft solutions may not go over well. Oh well, the money is now, and .NET isn't for a while yet.

Microsoft has also invested about $150 million in cash strapped competitor Corel (publisher of WordPerfect Office) to encourage them to embrace .NET for their products. As a result of this investment, Corel is selling off their Linux development programs.

Given the current shortage of venture capital for .com startups, and the weakened condition of Microsoft's competitors, expect Microsoft to be buying a lot more .NET loyalty for a very modest cash outlay.

Microsoft is already marketing hard to financial institutions, credit card companies and on-line retailers to sign up for Passport authentication services. American Express and eBay are already signed. The intent here is to get them committed so they won't sign with anyone else.

In their biggest .NET move yet, Microsoft has purchased Great Plains Software outright. Great Plains is a leading publisher of Windows based accounting and business management software. More important, it was moving to be a major accounting ASP. By this $1.1 billion purchase, Microsoft has put itself in direct competition with its so called "Windows development partners" and put them all on notice they will play a decidedly minor role in .NET, if any (but do hurry and port all your stuff from Windows to .NET anyway).

Microsoft Great Plains has subsequently announced it will rewrite all its software in C# to make it totally compatible with .NET. and have announced a low end accounting package, Small Business Manager, to fill the gap between Great Plains and Microsoft Money. They plan to increase Great Plains business from $250 million to $10 billion by dominating .NET accounting (and obviously by driving most other accounting vendors out of business). Details in our article Microsoft Guns for Intuit.
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Can They Do It?

Who will Microsoft get to buy into this tightly controlled .NET environment? How will they build critical mass? That one's easy. The millions who subscribe to MSN (Microsoft Network) as their ISP (Internet Service Provider) and subscribers to HotMail will have no choice, they're all on board automatically. They are the perfect guinea pigs, having already demonstrated a high tolerance for poor service.

To achieve greater control, Microsoft has just announced that MSN email users must use Outlook as their mail reader. No other program will work now. Users trying to protect themselves from rampaging Outlook worms and viruses by using another reader must give that up. Far wiser to give up MSN instead.

Businesses that use Microsoft's bCentral portal are another band of recruits that have proved willing to filter their Internet access through Microsoft services. Initially, many services will be free (to generate dependency), then they will be replaced by "Pay-to-Play" equivalents. This has already happened with ListBot, a free email newsletter service used by about 100,000 businesses and hobbyists. It has now been replaced by List Builder at $149 / year.

I predict Microsoft will have partial success, particularly on the consumer side, and will do a tremendous amount of damage to competitors, customers and themselves trying to trap everyone else. We are likely to end up with a seemingly divided Internet, Microsoft on one side, the rest of the world on the other, and the two not speaking to each other. Some factors weighing against .NET are:

  • They will be fought tooth and nail in the courts by competitors, privacy advocates and the Department of Justice. These actions are already getting under way.
  • Their conviction as an abusive monopoly will be in the way continuously. Every time they are hauled into court they will be presumed guilty (and, given their history . . ).
  • Broadband Internet connectivity will prove insufficiently universal, insufficiently reliable, and too slow for .NET services. Microsoft will end up supporting two totally separate architectures, and it will be both confusing and expensive.
  • The billing structure required for so massive a project will be very difficult to deploy, and will probably break down frequently. There will be constant lawsuits.
  • Microsoft needs many, many "partners" to effectively deploy .NET. Unfortunately for them, just about everyone is highly familiar by now with the concept that "A Microsoft partner is a victim they haven't gotten to yet". They will end up having to buy "loyalty" at a high price.
  • Microsoft's internal management structure is contentious and not up to a project of this scale. It will be in a continuous state of partial collapse.
  • Microsoft's vast server farms will prove inadequate for the loads they are asked to sustain. There will be frequent outages. For upscale servers Microsoft is totally dependent on Intel's Itanium, a completely unproven chip. Their competitors have Sun Enterprise servers and IBM Mainframe servers, beasts of an entirely different class.
  • There will be disruptive penetration by hackers and viruses.
  • There will be disruptive redesigns to redirect .NET against new products from competitors.
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Business Impact

Many business are already signing up for .NET, as suppliers of .NET services, as clients of the Passport service (American Express and others) and as end users.

.NET's primary pitch is that Microsoft and its associated ASPs do everything. You need no expertise and no internal resources, you just make one easy monthly payment. This pitch is extremely attractive to people who don't know what they're doing.

Microsoft is also promising manufacturers "shop floor to boardroom integration" through .NET. Example: if you're in a sales meeting you can instantly check loading of your manufacturing equipment over the time of a proposed contract and set pricing and delivery promises accordingly. Some manufacturers are so enamoured with this concept they are already signing up.

Other businesses will have a very hard time accepting the concept of all their critical business software and data being on someone else's server, who knows where, and the possibility of being cut off completely from it due to a billing error, network problem or a temporary inability to pay the .NET bill. Security is also a major consideration - ASPs have already been caught selling data from their client's accounts - it's just too tempting.

Companies that do go with .NET are likely to find they underperform in their markets due to unreliability, insecurity and unpredictability of the .NET structure.

Microsoft Instant Messaging, a key component, was recently off line for the better part of a week. Can your business stand to be cut off from all its data for that long? Can you be unable to place orders, cut invoices, access order entry, etc. for that long? HotMail has also been suffering. These services are not nearly as complex as they will be under .NET but are already becoming unstable at a small fraction of the load they will carry as .NET services.

Essential .NET services may be suddenly withdrawn due to anti-trust action. Now that Microsoft stands convicted of abuse of a monopoly, and has no credible avenue of appeal, its competitors are gunning for major aspects of .NET and could force Microsoft to change plans. The whole structure is vulnerable because it was designed when Microsoft expected their conviction to be fully overturned.

ASPs are already noteworthy for going out of business and leaving their customers stranded without access to services or data. Further, a big company like Microsoft will have major changes in services and the cost of those services every time there is a round of musical chairs in the executive suites.

Performance of a business' systems will be at the mercy of their local DSL or cable service. Those who need more reliability will find they have to lease expensive dedicated T1 lines.

As a single, huge, monolithic system all based on Microsoft software, it is almost certain to be periodically ravaged by fast moving viruses that take advantage of the close integration of .NET systems. Data theft from .NET servers will become a major industry.

We still warn that the combination of .NET and UCITA could prove deadly. Under UCITA you have no rights and will probably be out of business before any problems you have with Microsoft licensing are resolved. "We don't care? We don't have to care, we're Microsoft!" (to paraphrase Lily Tomlin's phone company skit). While the current version of UCITA seems stalled in most states, it will be brought back over and over, always with heavy backing from Microsoft.

Once a .NET structure is in place and a large number of businesses are captive, Microsoft will have little incentive to make changes. New business methods deployed by companies that are not subscribed to .NET may leave .NET subscribers at a competitive disadvantage.

All in all, the specter of Microsoft.NET is so frightening, we recommend that any business interested in its own long term survival start thinking very seriously about moving to alternative platforms. For a start, you can investigate Linux. IBM and Sun Microsystems are also well on the way to developing competitive Web services offerings, and are much better positioned to provide reliable service. IBM's services will be deployed primarily on Linux.

Moving to a Unix or Linux based accounting system now would give your business a good measure of control over its future, and you can still use your Windows workstations. If you stay with Windows accounting, you will probably eventually be forced to .NET when Microsoft Great Plains takes over your current vendor or puts them out of business.
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- Andrew Grygus

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