When Bill Gates comes to deliver his annual speech at the Microsoft Christmas Party in Redmond, will he be honest enough to admit that 1996 has been quite an annus horribilis for his firm? After all, at least Elizabeth Windsor had the honesty to admit it when things started falling apart for The Firm.
The past 12 months have taken their toll on the emperor of the software industry. Rather than being demonstrably in control of the PC agenda, as Microsoft has been in the past decade, the company's actions in recent months have increasingly shown it to be at the mercy of an industry that has suddenly changed its plans for the future.
Feature-packed standalone PCs and local area networks are no longer the way forward, according to the spin doctors at rival companies. The old PC computing model is suddenly being superseded by a new one that's getting close to fruition: fat servers and thin clients (network computers) over a dispersed wide area network based on open standards.
In order to meet the new challenge, Microsoft has had to abandon its cosy blueprints of yesteryear that mapped out a path to computing nirvana by way of proprietary stopovers at Chicago, Memphis, Nashville and Cairo.
Desperate times have called for desperate measures - the company has engaged in a long list of U-turns and changes of heart that stretch back almost a year (see box).
Looked at purely from a financial perspective, Microsoft's attempts to regain some control in the market have been humiliating. It has had to pay big money to license Java, and the terms of the licence mean Sun gets to vet any code, so Microsoft can't slip proprietary extensions into it and try to seize control of the language by the back door.
Microsoft has also been forced to give away software to buy market share.
Internet Explorer is a loss leader that is a necessary price to pay to get Active X-enabled browsers out there and in use - Netscape doesn't support Active X, though there's a plug-in coming soon. Microsoft realised there was no use crowing about the millions of Active X components in use, if no one could view them. It would be like asking a blind man to gaze on the stellar wonder of the night sky.
Explorer is not the only freebie: Microsoft also threw in Internet Information Server free of charge as part of NT Server. It's a nice little extra, but, looking at it from a purely financial perspective, technology that has a zero return on investment. That's enough to get any financial director leaping off the window ledge.
The stark reality of Microsoft's current predicament is that 1996 has been a year when a lot of money has been thrown at developing new products (the development community is awash with beta releases of Active X tools, Visual J , Merchant Server, Normandy, the works), and very little has been released for the channel to sell.
The Vermeer Technology Web design and management software was stable, so Front Page got pushed out into the spotlight. But it isn't what you'd call mass market. In the UK, few Internet service providers have agreed to support its extensions on their servers. Slough-based Technocom is one of the few ISPs that has done so, because, says technical director Nigel Ramsey, there were persistent enquiries from a small group of customers.
'Front Page has taken off really well in the US,' he says. 'More than 80,000 units sold in the first two months.'
But at about $100 a box, that's just a large drop in what is a billion-dollar company's revenue stream. And now we're past that initial burst of consumer interest, will sales hold up over the next quarter now that Front Page 97's been announced? Many buyers will wait for the real thing.
The company's next big product launch, of course, is Office 97. Microsoft has managed to sell the PC media on the idea that it's a great leap forward, and embraces the concept of an Internet browser on the desktop. The magazines have been awash with glowing previews. That's all very well, but what people are conveniently forgetting is that it's not that long since Office 95 was released. Many people have moved on to it only within the past 18 months, when they made the 'big leap' upgrade to Pentium/Windows 95 machines.
It could well be that market demand for Office 97 upgrades will be extremely weak. That won't be good news for retailers, dealers and distributors looking for product to sell. But it could be good news for their rivals in the direct chain, because it's the Dells and Gateway 2000s of this world that will switch immediately to Office 97 with no problem at all.
The big question that remains to be answered is: are the giveaway strategies enhancing the Microsoft brand name, or dragging it down? Is 'Internet Explorer the freebie' stomping on Netscape and taking over the browser non-market?
In the absence of any credible figures, you have to rely on the companies that run Web sites and monitor their hit rates. And the news from the front is highly contradictory.
Microsoft sympathisers say that use of Explorer is spreading like a rash.
Lotus Notes Web design house Netinfo in Bracknell runs the hugely popular AA database site.
'We monitor our site closely and the change has been dramatic,' says marketing and sales director David Peacock. 'In February, 97 per cent of users were Netscape. Now it's more like 60 per cent Netscape and 30 per cent Explorer. They've come from nowhere to a third of the market in eight months.'
Others aren't convinced at all. Felix Velarde, a director at Hyperinteractive in London, says there's been no discernible major movement. 'We get 150,000 visitors a week to our Snickers site, so we get a good measure of what's being used,' he says. 'Across all our sites over 90 per cent of hits are still Navigator, and Explorer has just a few per cent.'
It seems hard to believe that Explorer will eventually be labelled the 'software they couldn't even give away', and most people would expect that the truth lies somewhere between the two statements.
Ultimately, Microsoft must win the browser war, because all its cards are stacked on it. If it doesn't win, Active X will be crippled. And if Active X is crippled, then the basic foundations on which the Microsoft product range is based - COM and DCOM - are swept aside by alternatives based on Internet open standards.
The irony is that whereas Microsoft used its ownership of a proprietary operating system and core component object model technologies at the heart of that to win superiority in the application and suite markets, it now finds that the technologies that gave it an advantage there could hold it back in the Net connected world of computing.
The ownership of those things that once caused its competitors to moan about Microsoft having an unfair advantage could eventually be seen as the company's Achilles' heel.
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