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P2P boost for Microsoft's .Net?

The acquisition of XDegrees, a small company known for its secure peer-to-peer technology, could help bolster the software giant's .Net Web services plan, analysts say.

Microsoft's acquisition of XDegrees, a small company known for its secure peer-to-peer technology, could help bolster the software giant's .Net Web services plan, according to analysts.

Microsoft acquired Mountain View, Calif.-based XDegrees last Tuesday. Terms of the deal were not disclosed, and the company said little about any plans for XDegrees' technology, except that it has "natural synergies with Microsoft's focus on storage," according to a press release.

Analysts point to a key role that XDegrees could play in several of Microsoft's upcoming products as part of its .Net software plan--specifically, in a new version of Windows, code-named Longhorn. One of the primary goals for the Longhorn architecture is to improve the ability of Windows and Office applications to find, access and share documents. XDegrees technology seems tailor-made for that application, said analysts.

"XDegrees' products go right to the heart of what Microsoft said it was trying to do with its .Net initiative. The acquisition is a way to get an essential technology without having to reinvent the wheel," said Laura DiDio, an analyst at research firm Yankee Group.

XDegrees software builds on a technology called XRNS, for Extensible Resource Name System, which assigns a URL-type identifier to each device and file on a network--anything from a database to a document--to allow users to easily search a network of servers, storage devices and desktop computers for specific information.

"There's definitely a master plan at work here," said Rob Batchelder, an analyst at Gartner. "It is pretty obvious that Microsoft needs to offer people collaborative environments (as part of .Net) that can integrate Web services, instant messaging, interoperable software, and the ability to locate and share data."

The .Net system includes new releases of the company's Windows operating system and server application software. It also embraces other server software, along with development tools and a framework to make programs more Internet-aware.

Microsoft declined to comment on its plans. A company representative said only that "these guys (XDegrees) are obviously smart around issues involving security and storage, and that is something (Microsoft) is looking to take advantage of."

The two companies removed product descriptions and specifications from the XDegrees Web site shortly after announcing the acquisition last week.

On the Internet, beyond the corporate network, technology that lets people search for and share files--as popularized by music search service Napster--is commonly known as peer-to-peer (P2P), and its main emphasis is on ease of use. "Microsoft is acquiring the basic technology fabric for how information will be organized in the future using P2P methodology," said Batchelder.

While security was not a primary concern for mainstream peer-to-peer software, XDegrees' technology includes security and authentication across firewalls. According to analysts, that attracted Microsoft's attention.

"XDegrees was wise in realizing that creating a virtual name space without creating a virtual security system to go along with it was a prescription for disaster because that is what enterprises care about," said Batchelder.

Microsoft already has a relationship with Groove Networks, a company whose software helps people create peer-to-peer networks to share data or work on common projects. Analysts said that while there is overlap between Groove and Xdegrees, the latter provides more of the "guts and glue" of P2P networks. In other words, both could co-exist in Microsoft's future.

Other companies producing technology competitive with XDegrees include Xythos and Endeavors.com.

If Microsoft integrates peer-to-peer technology into its products, it would open up yet another front in the company's battle with Sun Microsystems. Last year, Sun introduced Jxta (pronounced "juxta"), an effort to create a standard, open-source technology for file-swapping services. Analysts said that Jxta has attracted some attention and raised awareness of peer-to-peer for business use. But Sun would face stiff competition from Microsoft's products--especially if peer-to-peer were integrated into its core Windows operating systems and Office suite of products.

"Microsoft realizes time is of the essence" for developing its products, said DiDio.