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Commentary: Microsoft's long-term outlook depends on Windows.Net

The software giant's revenue depends overwhelmingly on selling upgrades of software to its huge installed base and will have to lean on its Windows.Net strategy in the future.

By Chris Le Tocq, Gartner Analyst

Microsoft's revenue depends overwhelmingly on selling upgrades of software to its huge installed base.

As the growth rate in this business slows, however, Microsoft must look for new sources of revenue. It has thus evolved its Windows.Net strategy and subscription pricing as a way to ensure future revenue growth.

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Windows.Net encompasses Microsoft's vision of the future of the Internet based on XML and Simple Object Access Protocol. The vision also includes a view of the next-generation Internet as consisting of services consumed by devices that actively interact with services and content rather than just accessing them.

Moreover, Windows.Net is an end-to-end strategy that touches all parts of the company--platforms and tools as well as services from the Microsoft Network (for consumers and small businesses), bCentral and the Knowledge Worker group (i.e., Office and next-generation Digital Dashboard technology).

In one important way, Microsoft's Windows.Net strategy resembles its previous platform strategies based on the Windows operating system with its application programming interface (API). In offering the functions via APIs, Microsoft aims to transfer its desktop leadership into the Internet, but via a controlled transformation that maintains ties to the desktop.

Microsoft's challenge is to persuade businesses that its Windows.Net services are more attractive than what they have on their desktops today.

CEO Steve Ballmer was quoted recently as saying that the Windows.Net services have to be better than today's desktop services. The risk for Microsoft is to transition revenue from its cash-cow desktop business model to the uncertain flow of revenue on the Internet.

IT executives face the challenge of reconciling Microsoft's shift to selling user-targeted services delivered directly through the Internet with control of desktops across the enterprise.

Entire contents, Copyright © 2000 Gartner Group, Inc. All rights reserved. The information contained herein represents Gartner's initial commentary and analysis and has been obtained from sources believed to be reliable. Positions taken are subject to change as more information becomes available and further analysis is undertaken. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of the information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof.