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Microsoft's Fiscal Millennium

The details of Microsoft's evolving strategy reveal an ever tighter integration of its software. And with integration a central issue in Microsoft's antitrust ordeal, it raises the question of where to draw the line between business models, software design, and legal strategies.

By Nico Detourn
July 28, 2000

"If the year 2000 is any indication of how Microsoft is poised for the future, it's going to be an amazing millennium for the company," Bill Gates told the 250 analysts, investors, and the media people who descended on Redmond, Washington Thursday for his company's annual financial analyst meeting.

For lending their eyes and ears, the assembled were provided details and a status report on Microsoft's (Nasdaq: MSFT) strategy to place the Web at the center of its business, its business at the center of the Web, and the whole ball of digital wax wherever you want to go today.

First announced last June as a "bet-the-company thing," the Microsoft .Net strategy aims to bring about the evolution of Mr. Softie's business model to better embrace and extend the Internet. In pursuit of that goal, Microsoft announced it was increasing research and development spending for the next fiscal year to $4.4 billion, with much of that going into "next-generation" Web development, wireless technologies, devices, games, services, and sundry software technologies.

The foundation of the strategy is the Windows operating system and the Office suite of productivity applications, and both of these "core businesses" will become more Net-enabled. Web services will be integrated directly into Office, including a new collaboration application, code named "Tahoe," that lets users set up interactive workspaces. In previewing the app at the analyst meeting, Microsoft said it expects Tahoe to offer "a significant competitive advantage in the collaboration software industry."

Microsoft's .Net strategy is about basing software on the Net, where users can "get at this digital world" from anywhere and from any device, whether a desktop PC or a shirt-pocket smart phone. But more than offering Net ubiquity to the user, the strategy offers the company a chance to market its "software as a service" -- a recent Microsoft mantra -- and drive what Chief Software Architect Gates called "a new wave of subscription-type revenue."

Gates said in his speech yesterday that Microsoft is the only company "building the platform and thinking about this the way we are." Interestingly, he also offered a vision of the future in which the "Internet plays the same role that the PC does" today -- thus adroitly avoiding a trademark tussle with arch rival Scott "The Network is the Computer" McNealy, CEO of Sun Microsystems (Nasdaq: SUNW).

It's noteworthy that neither the Microsoft Network (MSN) nor the Internet Explorer browser were mentioned in yesterday's announcement even though both, in one form or another, would be necessary parts of a strategy as webcentric as this.

Both are present, but instead of being named, their essential functions are simply assumed to be available, as needed, for the task at hand: the website where subscription software is accessed, and the windows where Web collaboration takes place, are MSN and Internet Explorer -- just only unnamed.

It's as though the more integrated the parts become, the more invisible they are. And with software integration a central issue in Microsoft's antitrust ordeal, it raises the question of where to draw the line between software design, business models, and legal strategies.

Your Turn:
How much, and in what way, do you think Microsoft's products and business strategy are influenced by its antitrust problems? Share your thoughts with Fool's on the company's discussion board.

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