Microsoft is on the warpath again. Having embraced the Apple Macintosh interface in the 80s, got inside the technology and learned how it worked by developing applications such as Excel and Word for the operating system, it then produced a series of PC versions of the OS that became more Mac-like with each release.
Today Microsoft has unquestionably won the desktop OS war. Windows 95 is still on the ascendant - it has yet to reach its marketing peak - while Apple looks like a company that's been badly roughed up.
When W95 was launched, Microsoft must have known it would need a new adversary and a fresh battleground to maintain its momentum. Lo and behold, along came the Internet, Netscape Navigator and the whole Java bandwagon. Arch-tactician that he is, Generalissimo Gates was quick to spot the future threat to the supremacy of the desktop and applications market from a Java-based Internet, where applications are downloaded and run as needed.
Gates is no romantic. The PC desktop market may have been where he has made his money, but he isn't going to be the heroic captain of the ship when it goes down. He'll be aboard another steamer cruising into uncharted waters.
He has finally decided he wants to control the action on the Internet, and his tacticians have come up with a battleplan that is convincing because it leverages the existing strengths of the company. At briefings last month Microsoft embarked on a war of words that has not only Netscape and Sun in its sights (see box), but will also have enormous ramifications for the whole networking, client/server and group-ware markets. If Microsoft wins the battle for the Internet, it will blow holes in the strategies of its more traditional desktop rivals. The company's audacious, market-defying decision to give away its browser and server products for the Internet has sent its rivals into a spin.
Where there is conflict, there is money to be made. In fact, for the dealer and Var channels, the Internet is the most important and potentially the most profitable arena in which to develop your business today. Every big PC software company is developing Internet strategies, and 'wake up and smell the coffee' is on all their lips. Sun has Java, Borland has Latte, and Symantec has Cafe simmering away on their respective product percolators. Expect a few more aromas as well.
Netscape has been wooing US Vars for over a year now, and late last year it launched a similar campaign in Europe. Its rallying cry has been aimed at both the client/server and Lan markets. It's not just coincidence that it has taken on Azlan and Sphinx/Level V to distribute its products.
As UK sales manager Jim Forrester says: 'The customers of those companies have experience in Netware, TCP/IP and Unix, as well as relationships with key corporate customers. We want to leverage that expertise and those relationships. Our products are the building blocks which provide the application development capability for network-centric computing and applications on the Internet. We want to get in with all these resellers and talk to them about the benefits of our client/server model.' Netscape aims to sign up 500 reseller partners in Europe by the end of the year. This is part of a strategic shift away from direct sales: in the US it wants the 48 per cent of its revenue that comes from indirect sales to have risen to between 70 per cent and 85 per cent by the year end. The company will go on dealing direct with those Fortune 1,000 firms which demand a direct relationship, but everything else will go indirect. In fact resellers could be a key to Netscape's survival: it is going to need troops on the ground arguing with big corporates to pay for its software rather than use the free equivalent software from Microsoft.
Forrester is remarkably upbeat about Microsoft's free software tactics. 'I figure that Microsoft could well get a backlash,' he says. 'Nothing in this world is free - sooner or later someone has to pay the bill. Microsoft's customers for its other products are going to wake up to the fact that they are footing the bill for all the free stuff that's being developed. They won't like it.'
Forrester continues: 'What reseller is going to be happy with free software? There's no margin in it. Most of the corporates we deal with don't want to have anything to do with shareware or freeware. They want software that will be properly supported, and they recognise that it's cheaper and easier to buy it rather than download it. Resellers will reject the give-it-away approach.' Netscape will also engender loyalty and custom among companies that are not keen to see Microsoft become even more dominant. Gates' team may attempt to use its position as number one on the desktop in its bid for dominance over the Internet. But Netscape believes a lot of people will see through that ploy.
'Netscape has achieved huge brand awareness in the Internet market. Resellers will recognise they can leverage that, whereas Microsoft is starting from scratch,' says Forrester.
Netscape has other aces up its sleeve to play on Microsoft. But can it make the most of its advantages and combat all the propaganda that the opposition is spreading? Among the advantages Netscape has over Microsoft are: a cross-platform base (PC, Mac and Unix); a closer relationship with Sun and greater commitment to Java; and the Collabra software technology, which is built into Novell's Groupwise, that it bought last year. Above all else it has server software that will allow the channel to make money.
Microsoft may have made a big mistake in announcing it will give away Internet Information Server. The channel will be the decisive factor.
Blocking netscape's way
It is not going to be easy for Netscape to maintain its dominance in the Internet market. It has an 80 per cent share of the browser market and a lead in servers, but this could change. These are just a few obstacles in its way:
- Microsoft: The giant has woken up to the threat of Netscape and the potential of the Internet to undermine its desktop application business. It has decided to try to muscle aside the smaller firm by letting everyone have its browser (Internet Explorer) free, and by bundling Internet Information Server free with the Windows NT server. This will put pressure on Netscape, which relies on revenue from its server products, particularly in the corporate markets where buyers are used to paying for large multi-user site licences and reliable server software. Will Netscape resellers be able to convince their customers to pay for Netscape's server product when Microsoft is giving away similar software? It'll be a struggle.
- The company itself: Can Netscape remain calm, keep its nerve and reassure everyone that it can win in the long term? Founded just 24 months ago, it's still a young and untested company. It has fallen back to earth from being overhyped on the stock market and from now on resellers will constantly ask themselves if it's making the right moves. For instance, was the decision to release a less-than-complete Navigator Gold a good one? Netscape is obviously gambling that getting product out well ahead of its rivals is more important than finished product. It will release patched-up versions with more functionality later, and is gambling that users will appreciate the new functionality and overlook the gaps. Watch the share price as the markets take a view on this strategy in the coming months.
- The relationship with Sun: This key partnership is said to be under severe strain because the companies have conflicting philosophies. Netscape has Microsoft on its tail and wants to ship its software fast. But Sun is being a prima donna perfectionist and taking its time over Java. Will Microsoft come through the middle and colonise the Internet in the meantime?
- Java itself: It is said to be slow. The jokes emanating from rival camps include one that claims it was named after a type of coffee, because you can go off and make a cup while a Java applet downloads and kicks into action. More worrying are the growing concerns over security: what will customers make of reports of hidden applets that download to the browser's machine and stealthily transmit information back to the server without you knowing? Sun's rivals have a powerful FUD weapon to scare off buyers.
- Standards: Everything that Netscape has presented to the Web Consortium has been adopted. But will the standards committee continue to take that approach? What if Microsoft goes along and starts presenting standards that give it an advantage simply by setting the agenda? Netscape's lead on the standards front is not assured in future.
Key products in the netscape portfolio
- Navigator: Version 2, which has been available for several months. It supports new HTML commands such as frames, allowing for greater programming flexibility and integrated mail facilities. Integrated mail means you can receive mail messages with URLs in them that hotlink to the sites. Microsoft lags on this front. But there are still glaring problems: the out-box indicates who the sender of a message is, not a list of the recipients - an irritating and frustrating oversight.
- Navigator Gold: This is the enhanced version of Navigator 2, just out of beta. Netscape seems to have made a decision to cut back development of Gold to get the product out fast. Users are already complaining that the product is far from satisfactory. Its editing suite, for instance, doesn't support tables and forms, two of the key elements that existing HTML programmers use. It's possible that these key HTML elements will be superseded by better technology later this year, but the lack of support for them today is not doing Gold's reputation any good.
- Navigator X: Future versions of the browser will incorporate message tracking and threading using Collabra technology, which will pitch Netscape against Lotus Notes, Novell Groupwise and Microsoft Exchange. They will also support streaming audio and video, VRML and 3D extensions, and True Type fonts - although Microsoft is putting font technology at the head of its browser development plans and could overtake Netscape in this key area.
- Suite Spot: This is a suite of five integrated servers aimed at the intranet market, also due to ship in Q2 this year. With Suite Spot, businesses can use the Internet to allow communication and collaboration internally, while seamlessly integrating this with open information on the Internet. The suite will include Netscape's Live Wire Pro software, a visual environment for application developers to build next generation live applications, along with a choice of any of the following five servers: Enterprise Server, Mail Server, News Server, Proxy Server (for Web site replication) and Catalogue Server (for directory/search services). The full suite will be priced at about $4,000.
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