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 applications.
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 applications.
"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 valuable."
"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 either-or proposition."
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 going to."
Services like Visto, a Web-based email, scheduling and personal information manager, already support Microsoft's Outlook email program.