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Commentary: Microsoft bids for entry into games market

The Xbox console will have important, long-term implications for the corporate and home pervasive-computing environments.

While at first glance Microsoft's entry into the game market with its Xbox console may seem to have little significance for corporate users, the Xbox will have important, long-term implications for the corporate and home pervasive-computing environments and for organizations marketing to those environments.

In the near term, Xbox provides several important

See news story:
Who will be king of the game consoles?
innovations. One key point of differentiation is the inclusion of a hard drive, which enables Microsoft to add functionality and patches, as well as create a more complex gaming and user environment that embraces persistence--the ability to have a game extend across multiple sessions.

Not only can game developers provide downloadable demos and fee-based upgrades to games--something no other console system can currently provide--but the interaction model can be connected to e-business strategies by enabling greater levels of personalization.

While it uses a custom operating system, Xbox shares many key programming interfaces with the PC (most notably DirectX), which will simplify the burden for game developers, enabling them to leverage source code, tools and expertise across two major platforms.

In the short term, we believe that Microsoft's Xbox will quickly become one of the two dominant gaming systems, along with Sony's PlayStation 2, because of these advantages.

By 2003, we believe Microsoft will start applying what it learns from Xbox not only to improvements in the PC user interface but also--and more importantly--to the design of .Net pervasive-computing devices for both home and office.

We also believe that by 2005, enough U.S. homes will have high-speed Internet access to create a market for a new form of advertising combined with computer games.

These new "infotainment" marketing tools will range from traditional computer games that simply display the logo of a sponsoring company when they start up to software that is actually integrated with the sponsoring company's Web-based services. For instance, a financial company might provide a stock market game that uses the latest stock quotes off its investment service.

Microsoft has an important advantage in this market over traditional game companies in its ability to create superior development environments. By contrast, Sony and other console manufacturers work with communities of developers who program very "close to their iron" (hardware). It is doubtful, for instance, that Sony will ever get a customer relationship management software provider like Siebel to program close to Sony's iron.

While Xbox does not signal the demise of the traditional PC, it does foreshadow changes in the client device market that will generally complement the Microsoft .Net initiative and pervasive "lifestyle computing."

While the development of high-speed Internet access from the home and home pervasive computing is still in its infancy, corporate IT groups should develop some awareness of the new Xbox environment to be ready for the shifts in marketing via the Internet that will become important in the latter half of the decade.

Meta Group analysts Steve Kleynhans, Dale Kutnick, Val Sribar, Peter Burris, David Cearley, and William Zachmann contributed to this article.

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