XP: Microsofts Bid For Net Dominance

Those looking for high drama on Broadway will find it later this week at what's sure to be a cleverly staged production put on by Microsoft at a theater in New York to promote Windows XP.

Those looking for high drama on Broadway will find it later this week at whats sure to be a cleverly staged production put on by Microsoft at a theater in New York.

It stars Windows XP, the controversial new operating system thats been touted by its admirers as the savior of the personal computer industry - and denounced by its detractors as a monopolist tool that will stifle technological innovation.

While the plot seems to center on the fate of instant messaging (IM), online services, digital media, digital identification, e-wallets, digital photography and the Java development language, critics warn that the real story is just how far one company will go to maintain its monopoly and assert its dominance over Internet development.

Certainly, Microsoft has made no secret of the fact that its future fortunes - and its ambition to turn itself from a software company into a services one - rest on the success of the latest version of its monopoly-making OS. Windows XP is the gateway to .Net, the framework for a set of next-generation technology and Web services that Microsoft said will be the basis for its business going forward in the long term. "People want to do more and more with their PCs," Microsoft Chairman Bill Gates said of the new OS. "Windows XP builds on their dreams, taking the power and adaptability of the PC to a new level."

But Windows XP could face less than rave reviews. Not only are PC sales - the driver of many consumer upgrades - in their biggest and longest slump in history, but Windows XP is shadowed by legal, licensing, privacy and security concerns that might mar its appeal to consumers, enterprises and developers.

Giga Information Group estimated that 2 million to 5 million copies of Windows XP will be sold in the coming months, mostly as upgrades, versus the roughly 25 million copies sold when Windows 95 went to market, said Rob Enderle, a Giga analyst. And though he called Windows XP "arguably the best operating system product that Microsoft has ever released, and a substantial improvement over even Windows 2000 in terms of usability, image consistency and cost of ownership," Enderle said, "current market conditions are overwhelming any demand for this product."

So are a number of other issues.


One of the most pressing Windows XP security concerns is the inclusion of TCP/IP raw sockets, which allow Windows applications to spoof their IP addresses, making it increasingly difficult to defend against denial-of-service (DoS) attacks.

Microsoft disputes the problem, but most security experts said that at the very least, its an additional headache for those trying to stop DoS attacks.

Another problem might be a case of "good idea, bad execution." Windows XP includes a desktop firewall that lacks some key traditional firewall features, such as the scanning of outbound traffic, that could warn someone if theyre part of a DoS attack.

"I wouldnt call it a desktop firewall," said Steve Cullen, senior vice president of Symantec. "Its actually another security threat."

Finally, with Windows XP, Microsoft is advocating that people leave their machines on all day, with automatic "relog-in" for different family members, Cullen said. Given the increasing use of broadband Internet access and millions of Windows desktops operating 24/7, its a target-rich haven for hackers, Cullen warned.


If Windows XP is the gateway to .Net, then Passport is the gatekeeper. Microsofts user identification and authentication service is a key component of the companys plan to deliver subscription-based Web services and help facilitate e-commerce transactions. Not only do Windows XP users have to sign up for Passport if they want to use the IM software thats now a seamless part of the OS, but Microsoft makes sure to include repeated - and some early reviewers say, annoying - promptings in Windows XP, urging them to sign up for Passport.

Bowing to concerns about Passports ability to hold and share so much personal information, Microsoft in September proposed a "federated" approach to sharing digital ID data. This calls for companies to agree to accept one anothers digital IDs, much the same way banks honor the automated teller machine cards of other banks.

It remains to be seen whether Microsoft will have any takers. This month, Sun Microsystems, backed by 33 high-profile companies, proposed its own method for sharing digital ID data. And Sun invited Microsoft to join its Liberty Alliance Project.


Bowing to customer demand, Microsoft in the past few months has modified its software licensing plans - numerous times.

This month, the company extended the period of time customers would have to sign on to its new Software Assurance licensing program - from Feb. 28, 2002, to July 31, 2002 - after receiving numerous complaints. Software Assurance does away with version upgrades, and instead sets up a two-year maintenance program that companies pay for annually, providing Microsoft with a more predictable revenue stream.

The problem: Many customers are stretching out their upgrade cycles, from three years to six years.

Gartner estimated the Software Assurance program could raise some users Microsoft software licensing costs from 33 percent to 107 percent.


Microsoft officials announced in mid-July that Windows XP would not include a Java Virtual Machine, citing "legal difficulties" with Sun over Microsofts use of Java. In fact, according to terms of the settlement of Suns lawsuit against it this year, Microsoft gained the right to include a basic VM - the software needed to run Java applications and code - in any product it chooses for seven years.

The decision to exclude Java may have had less to do with the dispute over the Windows-specific changes Microsoft made to Java than Microsofts wish to see Java become unpalatable for Web sites.

Whats the alternative? Microsoft hopes developers will instead turn to its new .Net technologies - a set of languages and Visual Studio .Net integrated tools - which are accepted among Windows programmers. If it can get such .Net languages as C Sharp and Visual J Sharp generally accepted, it will halt defections to Java and provide an alternative for building next-generation Net applications.

Nevertheless, some PC manufacturers, including Compaq Computer and Dell Computer, will continue to ship Java-enabled systems by adding the VM themselves.


As Windows XP enters the marketplace, Microsofts antitrust problems are far from over. This month, the federal judge overseeing the case, Judge Colleen Kollar-Kotelly, tapped Eric Green, a Boston University law professor, to mediate settlement talks among Microsoft, the Department of Justice and 18 state attorneys general. The talks have so far been fruitless, and most expect the final remedy phase of the trial to resume in March.

Kollar-Kotelly will likely make the final decision about punishments for Microsofts illegal behavior, and many are clamoring for forward-looking remedies that would address Windows XP and its bundling of heretofore stand-alone technologies.

The European Union is also looking at Microsofts market tactics, and may levy large fines against the company.

Todd Spangler, Brian Ploskina, Charles Babcock and Randy Barrett contributed to this report.