Windows 2000 only a first step for Microsoft

In October 1996, Microsoft Corp.’s Jim Allchin began handing Alpha code to 3,500 developers for a product the company would unveil to the world as NT 5.0.

The code was intended to finally deliver the kind of scalable, reliable operating system Microsoft envisioned when it wrote the original New Technology OS/2 specification back in the late 1980s. But while the NT OS/2 specification made it to the Smithsonian Institution, its NT 5.0 spinoff endured a destiny of missed deadlines and intense scrutiny.

More than three years after Allchin’s Alpha giveaway of what is now Windows 2000, Microsoft finds itself not at a climactic end but at an uncertain beginning. The reason: over the past three years all of network computing has fallen under the spell of the Internet. Microsoft is now scrambling to position Win 2000 as a cornerstone of its future and reinvent itself as a provider of software services available over the Internet.

It is a future so littered with challenges that last month Bill Gates, who calls Win 2000 Microsoft’s most important product ever, stepped down as CEO to lead the company’s development efforts. And it all starts with Win 2000, the focal point of Microsoft’s attack on the enterprise data center, e-commerce and application-hosting services.

“If Microsoft can establish Win 2000 as reliable and stable on the server side, it lets the company play in all these new environments more believably,” said Dwight Davis, an analyst with Summit Strategies in Kirkland, Wash.

This means Microsoft will have to shake its reputation for server crashes, security bugs and product delays. And ultimately the company may have to deal with landscape-altering penalties in its ongoing antitrust case, which could lead to a breakup of the company.

First, it must win over the corporate data centre where Unix and mainframes are king. Early reports indicate that Win 2000 has a shot, thanks in part to new support for clustering and symmetrical multiprocessing.

The real showdown issues, however, center on Active Directory and Kerberos. Both technologies replace glaring management and security weaknesses in NT 4.0.

“It’s clear Active Directory and Kerberos are a big step forward for large networks to be built with Win 2000,” said Tony Iams, an analyst with D.H. Brown in Port Chester, N.Y. “But getting your mind around that stuff is incredible. It’s like 3-D chess. It will be ugly.”

After the enterprise, it may only get tougher as Microsoft tries to convince a cynical industry that Win 2000 can handle the demands of the Web and e-commerce.

The operating system is the core of Windows Distributed Internet Architecture 2000 (DNA), a Web development platform announced in September. But delivery of the platform’s components, including a key XML server called BizTalk, is lagging, and Microsoft must deliver soon or risk losing customers.

“We are not totally buying into DNA yet,” said Chris Smith, chief information officer of furniture retailer HomeLife, an early adopter of Win 2000. “We use Silverstream Software as our application development platform and XML server.”

Microsoft also is using DNA 2000 to woo service providers that need platforms on which to host applications. In the absence of a complete product, Microsoft is throwing around money to win mind share and technical assistance, including a US$90 million investment last year in USWeb/CKS, and commitments of US$50 million to Digex and $10 million to Corio.

If Win 2000 is to be a player in the service provider market, especially for application hosting, Microsoft must re-architect the operating system, observers say.

For example, Win 2000 must give service providers a way to dedicate portions of a server’s computing resources to individual customers. Microsoft is trying to address that issue, and last month the company invested US$5 million in Interland, a Web-hosting company in Atlanta, to support development of the firm’s provisioning technology. The technology lets providers automatically provision space on NT-based servers to more quickly and easily set up Web sites in a shared hosting environment.

Infrastructure security

Microsoft also must create a more centralized, scalable, secure infrastructure that has fewer moving parts, according to Jonathan Lee, chief strategy officer and founder of Corio in Redwood City, Calif. “Microsoft’s whole strategy must cater to those needs,” he said.

Microsoft’s answer may be its Next Generation Windows Services (NGWS), which new CEO Steve Ballmer announced last month. Microsoft has only said NGWS is an Internet-based platform with a new interface, file system, XML schema, application development model and software-based services. Ballmer said details are coming in April, but already confusion exists over how NGWS relates to DNA 2000.

“Fundamentally, NGWS is Microsoft’s vision of server-based computing,” said Summit’s Davis. On top of all that, Microsoft also will need to re-engineer its core applications – Exchange and Office – to run in a hosted world, reinvent its licensing model, and completely revamp its relationship with the sales channel.

So after three long years developing Win 2000, the operating system is really just a vehicle for what likely will be a wild ride.