As Web portals rapidly emerge as an alternative to the typical computing desktop,
Microsoft is caught between beefing up its online presence and maintaining its software cash cow.
As a result of the success of free email--the
first service provided by portals that mimicked a standard PC
application, pioneered by
Microsoft's acquisition Hotmail--users can now bypass the standard desktop applications in favor of
scheduling software, address databases, and other "productivity"
applications found for free on various Web sites.
Microsoft executives argue that
these Web-based applications leave a lot to be desired in terms of
performance and local accessibility.
"This [strategy] overlooks the
very obvious problems of Web-based applications," said Laura Jennings, vice
president of the MSN portal site, such as data which remains unavailable on local computers.
But portals like Yahoo, Lycos, Excite, and Netscape Netcenter, along with a number
of start-up companies, are embracing this strategy by expanding their
personalized services, and so far, Microsoft has been lagging behind.
To be sure, to keep up with the growing role of portals in offering
personalized services, Microsoft must perform a precarious balancing act
between its Web properties and desktop applications. But many observers
believe that in fearing the cannibalization of its desktop software, the
company may have missed a huge opportunity on the Web to promote these same
MSN's free email service, Hotmail, is by far the most popular area of the
MSN Web site, according to Jennings, with 33 million active accounts-- more
than Yahoo's email service, she notes. The service successfully drives
traffic to other areas of the site, Jennings said. Even so, the company
still does not offer a calendar, address book, or Web hosting service on
MSN, which could leverage the company's successful Exchange and Front Page
"We have every intention of offering a full suite of communication
applications," Jennings said, declining to specify unannounced products.
"We really do see this as an extension--we do not think it's a conflict.
We think Web-based applications can make our traditional applications more
Additionally, analysts say the company's Internet strategy is mired in the
past--when MSN's chief competitors were
online services like the early versions of America Online and CompuServe.
"They're living in a different world from the rest of us. They're living in
a world that was very real in the early '90's, but has changed dramatically
since then," said Rob Enderle, an analyst at Giga Information Group. "They're
demonstrating the fact that they don't get it--and kicking and screaming
they're going to be dragged into it."
"They need to figure out: Do they want to lead the parade, or watch it pass
them by?" he continued. "Right now, they're in the process of realizing
there is a parade."
MSN's failure to offer a Web hosting service that could easily tie in to
its Front Page Web authoring software is "criminal, it's so short-sighted,"
according to Enderle.
"There is a place in the world for Web-based applications and traditional
client-side applications talking to a server," Jennings said, emphasizing
that due to its large traffic, Microsoft must vigorously test any
application before rolling it out. "We don't see the world evolving as an
Portals, start-ups seize the day
But while Microsoft is taking its time testing new applications, portals
and start-up companies are seizing on a perceived open market. New
companies like Ruksun, with its Easy Diary service, and When.com, both of which offer online
calendaring, may someday enjoy more traffic than MSN, analysts say.
"Right now, in this space, there is no Microsoft," Enderle said. "A lot of
people realize that Microsoft is vulnerable. They're concerned about
cannibalizing their other offerings, but if they don't, somebody else is
Services like Visto, a Web-based email,
scheduling and personal information manager, already support Microsoft's
Outlook email program.