All Microsoft or None?

Jupiter Research outlines the perils and promise of Microsoft's integration strategy.

Microsoft has put its mighty market weight behind integration between the desktop and the server, to culminate in the release of the Longhorn versions of Office and Windows in 2006.

But it's also betting on the server side of its business in order to wring more revenue from a saturated OS market; the high cost of its server software could send some customers in the direction of open source, according to Jupiter Research.

In a report released on Monday, the research firm said Microsoft's integration approach could provide opportunity for partners and ISVs. Open source groups see similar opportunities in their direction.

Microsoft's new software, including Visual Studio 2005, the development tool to be released by the end of 2005, offers a new level of integration, but only to businesses not afraid of being locked into a single vendor environment, according to Joe Wilcox, lead author of "Microsoft 2005: Uncovering Partner and Competitor Opportunities." (Jupiter Research and are owned by Jupitermedia.)

"Microsoft has offered some cool stuff," Wilcox said, "but some of its customers may be cool on the price."

The open source software industry has a radically opposite vision: mix-and-match applications from a variety of vendors that interoperate because they're built on open standards.

"The original concept of Web services was platforms and development frameworks that were application-independent," Wilcox said. Now, Microsoft is making Web services an essential tool of virtually all the products, "but it's either Microsoft's way or the highway."

Microsoft is building Web services via the .NET Framework into all its applications, Wilcox said. But they deploy Microsoft's proprietary XML schemas. If ISVs are willing to be all-Microsoft shops, there's opportunity for them.

On the other hand, OASIS, the e-business standards organization, has been working its way through a series of open standards that ISVs can use as well. The most recently approved was Web Services Distributed Management (WSDM), which lets developers write Web services management applications.

The open source "best of breed" approach could be bolstered by the rising interest in Web services, which let developers sample a smorgasbord of services and APIs to build custom functionality that doesn't reside on a single server or client.

During its February Office Developers Conference, Microsoft exhorted ISVs to think of Office as a platform, saying there was a $10 billion opportunity to extend or customize the suite of programs.

Ken Spencer, a Microsoft regional director and CTO of software development shop 32X, said the integration and "platformization" of Office 2003 with other Microsoft tools and applications such as Visual Studio 2005 can be extremely powerful. For example, Word lets users embed "data islands" in a document, which are refreshed automatically by connecting to an external database every time the document is open.

"Now I can conceive of a document being an application," Spencer said. "The whole document would be under programmatic control."

On the server side, a server software application could automatically search for relevant documents on the network, open them and refresh the data, Spencer said.

Illuminata analyst Gordon Hoff said that Microsoft must convince customers that Longhorn will offer more than incremental improvements. "We're reaching the point where, without more substantive changes -- more frankly disruptive changes -- improvements are more and more incremental. So something like OpenOffice can increasingly be the functional equivalent of what Microsoft does."

The interoperability offered by XML could provide an opening for open source developers as well, according to Sam Hiser, marketing development lead for OpenOffice is a project to create an open source desktop productivity suite. OASIS/ISO is working on standardizing OpenOffice as Open Document, an XML document format that could be used by ISVs to extend functionality of the suite in the same way that Microsoft partners build on top of Office.

Hiser said that, while Microsoft will continue to dominate, "you'll see all these vendors lining up around the OpenOffice file format, and that will change the adoption rate. Microsoft is playing it clever [with its MS XML schemas], but it's boxed into a corner."

Anything Microsoft gets behind can't be called a dying paradigm. The company's dominance of the operating system and office productivity applications market lets it set its own standard. But Microsoft's direction has left plenty of other highways for ISVs to travel.

"Compared to the Linux/open source world, clearly Microsoft products are a lot more nicely integrated -- and a lot less componentized and separable," Haff said, adding that small to medium-sized businesses appreciate all-in-one products, because they don't have the ability to handle integrating different applications. "But it depends on what kinds of prices and packages Microsoft can put together."

Price could be a sore point for those small businesses and independent developers. After Microsoft detailed the pricing for Visual Studio 2005, Wilcox found developers griping. Likewise, in order to achieve more than incremental improvements in Office, businesses will have to buy more than just the suite.

"Many Office 2003 functions are dependent on numerous server software products, such as Exchange and SharePoint Portal, or Windows Server 2003 features, like Rights Management Services or Windows SharePoint Services," Wilcox wrote in the report.

In a study done on behalf of the European Union, Valoris, a European business consultancy, found OpenOffice a viable alternative to Microsoft Office. The EU asked the company to recommend an open document format that would let member states' governments exchange electronic documents. Recommending both Office and OpenOffice as appropriate, the report concluded: "OpenOffice user base size is now such that it is irreversible."

Over the next few years, the Valoris report concluded, Microsoft still would dominate, with 85 percent of the user base.

Most companies would consider 85 percent of the market comfortable dominance. But Jupiter Research found that 97 percent of large U.S. businesses and 93 percent of small ones today run some version of Office. If companies don't buy into Microsoft's integration vision -- and buy open source instead -- those numbers could add up to an unpleasant reality for Redmond.

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