Will Microsoft’s Concession Affect Corporate Customers?

Microsoft said PC makers can now use rival Internet browsers. So?
Joseph RadiganJuly 17, 2001

Last week, in a widely publicized move that could affect the Justice Department’s landmark antitrust trial against Microsoft, the software giant announced that in Windows XP, the next version of its flagship operating system, hardware manufacturers will be permitted to delete the Internet Explorer icon from the Start menu and replace it with rival browsers. The change will be evident when the software is released in October.

Realistically speaking, the news is not likely to affect corporate technology users.

“Internet Explorer is so ubiquitous, even if the world’s best browser appeared tomorrow, and Microsoft said ‘fine, stick it in,’ it would take years before corporate users uninstalled Explorer,” says Peter Kassner, chief research officer for the Boston-based market researcher, Aberdeen Group. The cost in the short term would be prohibitive, and there’s no clear financial gain for most companies under a hypothetical scenario where a rival browser has demonstrably greater functionality than Explorer.

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“For business customers, this is a non event,” he says.

The immediate reaction among legal experts and some Microsoft rivals was that the company essentially conceded the central issue in its landmark antitrust trial, but at a time when the actual concession has little practical impact. Netscape Navigator, now owned by AOL Time Warner, is no longer a legitimate competitive threat to Microsoft.

“Microsoft is prepared to concede the opening screen real estate as a Pyrrhic victory for the Justice Department,” Kassner says. “The real war is being fought on an almost countless number of fronts. Everything from the Xbox game player, to messaging, to enterprise applications through the recent acquisition of Great Plains.”

While Great Plains’s products may lack the scale to serve the high end of the enterprise software market reached by SAP, Oracle, and PeopleSoft, Kassner notes that the company’s products are geared for businesses with up to $500 million in revenue. The revenue figure covers roughly 97 percent of the corporate market, so Microsoft is leaving very few opportunities uncovered.

The most immediate impact will likely be felt by the hardware OEMs — Compaq, Dell, Gateway, IBM, and Hewlett-Packard — who now have the freedom to promote their own products on their desktops, explains Steve Kleynhans, a Toronto-based vice president with the market research firm Meta Group. Given the tight margins in the hardware market, these featured applications will have to have some demonstrable revenue potential.

Yet a spokesman for Gateway tells that the company is not making any changes to the way it will configure Windows XP on its computers. The hardware maker, which had generally been more resistant than most of its rivals to Microsoft’s policies, had already come to terms with Microsoft about the desktop configuration in the new operating system.

“For us, any time you get more flexibility in the products you sell, that’s a good thing,” says the Gateway spokesman. “But this is going to change very little. We’re going to stick with our XP launch plans intact.”

If corporate users are affected at all, it may be in some proprietary or vertical market applications designed for Windows XP. But even here, corporate IT staffers are unlikely to notice any practical impact, unless a court ruling this fall delays the launch of Windows XP.

Michael Silver, a research director with Gartner Inc. in Stamford, Conn., says corporate users should expect XP to launch on time, but “you might want to have some contingency plan.

“Most of what a business might do around XP would also work on Win 2000,” Silver says.

Meta Group’s Kleynhans notes that the code for Windows XP is virtually identical to that in Windows 2000. The most notable difference is that the installation and setup for XP was simplified for the consumer market.

Because the design of the two operating systems is so similar, Silver says companies that are likely to write new applications around Windows XP—for example, a manufacturer with a mobile sales force or a financial services firm building a customer service application—should be able to move these new programs from 2000 to XP with relative ease. Still, if a company is eager to rush an application into production by this fall, it would be better served building it on 2000 and waiting until next year to come out with a version with the minor modifications for Windows XP.

Kleynhans says corporate users will likely feel a greater effect next year, when Microsoft introduces a version of its Windows 2000 Server incorporating its .Net Internet architecture and Hailstorm Internet identity services.

Hailstorm, which will create an online identity for each Web user that will be transportable among desktop PCs, notebooks, and handheld devices, will find a ready market among E-tailers and managers of corporate networks.

There should be a ready market for the service among E-tailers, business-to-business exchanges, and corporate network administrators that want to monitor employees’ online activity, Kleynhans says.

However, the proposed service has raised the ire of privacy groups and civil libertarians, who allege that Hailstorm will all but destroy what little anonymity remains on the Web.

Kleynhans says, “It’s the kind of capability that everybody looks at and says, ‘yes, we want this, but do we want Microsoft delivering it?’”

Yet a Microsoft spokesman downplays the privacy concerns and says that through Hailstorm, Web users will have to register with only own Web service provider, such as Microsoft, or a Microsoft business partner like American Express, and not with every site they visit.

The Microsoft spokesman says a test version for independent software developers will be out this fall, and the Hailstorm product itself should be ready by late 2002.

As important as the privacy concerns may be, Microsoft is preparing to launch Hailstorm at a time when businesses are demanding greater insight into the visitors to their sites, and corporate IT managers are paying greater attention to Web usage among employees.

Kleynhans notes, “Anybody who has to deal with end users on a large scale will have to deal with this whole concept of online identity management.”