• Sidebar: What Is .NET? Microsoft Executives Answer

.NET not only represents new technology for Microsoft but also a new marketing challenge. Instead of being aimed primarily at the desktop, which Microsoft has dominated, .NET is pitched at a much broader market: a distributed computing environment in which smart client devices are fully integrated with server operating systems and applications. Instead of winning desktop ISVs, few of whom remain anyway, the company must convince corporate developers and consultants of the value of .NET, and its partner strategy has gained a more vertical focus. These shifts have not been easy for the company: marketing challenges and some early branding missteps have the company struggling to explain .NET and establish its unique value proposition.

Changing Goals

Microsoft has applied the label ".NET" to a huge range of products and activities. However, the fundamental goal of the company's .NET evangelism is to maintain and extend its strength on the desktop while also driving sales of server products, such as Windows .NET Server and SQL Server. Attracting developers to the company’s .NET development tools is vital to this effort because applications created with the .NET development platform will run almost exclusively on Microsoft operating systems and will integrate most tightly with its server products.

To motivate developers to move to .NET, the company is promoting two of its strengths: a specific architectural concept—the Web service—which is used to integrate information systems and applications; and a significant simplification of the development process compared with the company’s previous tools and platforms.

(For information on the company's .NET development platform, see the Dec. 2002 Research Report, "Windows .NET Server: Microsoft's Application Server," and the Feb. 2002 Research Report, "The .NET Development Platform." For information on the overall concept of Web services and their relationship to the platform, see the July 2001 Research Report, "Understanding .NET.")

Microsoft had to shift its focus because the Internet emerged as a critical business technology, and the company recognized that the locus of action shifted from the desktop to the network. But its most popular products for use on the most popular network—its Web browser and e-mail client for use on the Internet—generate no direct revenue for the company. Based on open standards and protocols combined with simple, generalized clients, this new technology arena has also reduced the importance and threatened the value of Microsoft’s proprietary but aging Win32 platform.

The rise of the Internet has similarly affected thousands of other companies that previously developed client-side software. The number of ISVs that target applications for the desktop has dwindled dramatically. Entire categories of software once delivered by desktop applications, such as encyclopedias or phone number and address databases, are now delivered more cheaply (often free) over the Internet. The main vendor left standing on the desktop is Microsoft itself.

Microsoft's answer to the shift to networked and distributed computing is a new platform built around Internet-friendly technologies, such as XML and the Hypertext Transfer Protocol (HTTP). The company also positions itself as the leader in Web services, which use these technologies for application-to-application communication.

But it is not enough that organizations adopt Internet technologies: Microsoft’s evangelism can succeed only if it convinces customers and partners to use those technologies on the Microsoft platform, and on the Microsoft server applications that run on top of it. Thus, the company is also building the new platform to address long-standing problems—particularly application reliability and security—that have kept its products from being used in mission-critical situations.

Overall, as it moves off the desktop the company finds itself in a highly competitive environment in which existing enterprise systems are still critical, non-Microsoft tools and platforms are strong players, and important standards are set or influenced by others.

Changing Tactics

In marketing .NET, Microsoft has used a blend of time-tested and new tactics. They include garnering developer support, promoting its products to senior business executives rather than to mid-level technical executives, and offering special support or promotional opportunities for early adopters and preferred partners that have demonstrated a commitment to .NET. It has also adopted some tactics championed by competitors, such as nurturing "communities" in which developers and customers can share problems, successes, and resources.

Courting Developers

A major contributor to the success of the Windows platform was Microsoft’s effort to court developers with low-cost development tools, free or cheap documentation, subsidized or free hardware, and cut-rate prices on Microsoft products for use in development. While owners of competing platforms, such as OS/2 and the Macintosh OS, saw developer documentation and tools as a profit center or, at minimum, a cost-recovery effort, Microsoft saw developer tools as generating a multiplier effect—if the tools enabled an ISV to develop a killer application that attracted millions of users, each of those users would buy a copy of Windows. Thus, thousands of small developers found it far easier to develop (or port) applications for Windows than for other platforms, building momentum for Windows as an application platform.

That effort continues today and is critical to the adoption of .NET. The Microsoft Developer Network (MSDN) provides thousands of lines of sample code, cheap access to Microsoft applications, and vast resources on the Web. Periodic Professional Developer Conferences can attract up to 10,000 technical attendees who see and learn how to use new Microsoft technologies.

The company is also courting the allegiance of university computer science programs, where the next generation of software engineers is learning to write code—much of it involving non-Microsoft technologies, such as the JavaScript and Perl scripting languages; markup languages, such as HTML and XML; and protocols, such as Simple Object Access Protocol (SOAP), HTTP, and TCP/IP.

Microsoft is particularly concerned that academics are turning to Sun Microsystems’ Java when they need a strongly managed programming language. Java is now the standard in many university computer science programs and is required for graduate school entrance exams, replacing C++, a language at which Microsoft developer tools were acknowledged leaders. Meanwhile, Microsoft has steadily withdrawn support for Java, which is heavily promoted by Microsoft competitors, such as IBM and Oracle, as well as by Sun itself.

Microsoft has responded with its own Java-like language, C#, which benefits from being a newer, and in some respects, superior product to Java. Nevertheless, adoption of C# is not a sure thing. Although Microsoft has been successful in getting publishers to print a large number of books on C#, the language plays a significant role in less than 5% of the case studies that Microsoft itself cites as examples of .NET adoption, and the company has, in some cases, had to offer financial incentives to get universities to give C# a more prominent role in their computer science programs.

Courting BDMs

Business PC purchases in the 1980s set the stage for Microsoft’s extraordinary growth in the 1990s, and Microsoft could often convince businesses to buy PCs through the "back door." That is, standalone PCs and standalone applications could be purchased and used at the departmental level, so Microsoft sales channels focused on mid-level executives and departments who were on the front lines of PC use.

But decisions about enterprise servers and distributed computing are not made by departments; these decisions bubble up to business decision makers (BDMs, in Microsoft parlance) who might vet technology decisions based largely on business priorities, such as compatibility with suppliers or corporate-wide standards. As a result, Microsoft has shifted much of its .NET marketing effort to more senior business executives who actually make large software purchases.

Microsoft now makes a greater effort to furnish its sales channel with marketing materials aimed at BDMs. Although marketing a deeply technical product such as .NET development might normally be confined to technical audiences, advertising campaigns such as "Business Agility" and "One Degree of Separation" appear regularly on prime-time television, where they are more likely to be viewed by less technical audiences.

Most of Microsoft’s senior managers, including CEO Steve Ballmer, have been assigned one or more major customers for whom they act as "executive sponsors." Their prestige and positions within Microsoft open doors at large companies that would be closed to regular field sales staff.

Microsoft has also given high priority to case studies and early adoption incentives that illustrate the benefits of .NET. Non-technical managers who are relatively immune to sales pitches that emphasize Transaction Process Performance Council (TPC) benchmarks or American National Standards Institute (ANSI) compliance can be attracted by examples of how competitors or businesses in other markets have reduced costs or improved financial reporting systems. Microsoft’s .NET Web site lists more than 200 such case studies.

To gain such public support for its products, the company often offers significant incentives. Firms willing to take a chance on new technologies can receive extra technical support, free services from Microsoft Consulting Services, and discounts or other financial inducements. The ultimate prize for cooperation is a place on the stage at a globally televised product rollout, with a personal introduction from Bill Gates, such as the starring role that Kinko’s got at the 2002 Las Vegas Comdex during Gates’s keynote address.

Communities

In spite of Microsoft’s efforts to woo developers, many have elected to investigate alternative platforms, such as Linux. The open-source operating system has improved with remarkable speed over the years partly because of a "community process," facilitated by the Internet, that allows thousands of developers—both volunteer and professional—to discuss problems and ideas.

Microsoft has used such communities in the past—before the Internet, the CompuServe Information Service featured lively forums on Visual Basic, for example—but the company’s interest waned to the point that it almost cancelled the "Most Valued Professional" (MVP) program that offered participants who shared their Microsoft skills in Internet newsgroups some modest recognition. The success of the open source communities has prompted the company to do an about-face. It has nearly doubled the number of MVPs in recent years and has increased the benefits of MVP status.

Continuing this trend of building a community around its products, a recent Microsoft development tool called Web Matrix, designed to encourage casual developers to work with ASP.NET technology, was designed with community support built into the product interface. Users of the product can access a special Web site, code samples, and developer forums from inside the Web Matrix environment. (For more information about Web Matrix, see "Web Matrix Makes ASP.NET More Accessible" on page 21 of the Aug. 2002 Update.)

One critical distinction between Linux communities and Windows communities is that Linux developers have easy access to the Linux operating systems source code, while the source code for Microsoft’s software is tightly guarded. However, Microsoft has recently relaxed access to its source code by launching its Shared Source Initiative in 2001. This effort gives source code access to its largest customers, universities, and some governments, partners, and ISVs.

The company has also begun hosting free developer "Workspaces," which allow developers to build .NET applications cooperatively. These Workspaces, similar to the popular Source Forge technology that is widely used by the Linux community, allow developers to share their own source code with others, track bugs, and offer community discussion boards. They can also check code in and out to ensure orderly development. More than 300 Workspaces are currently active.

Changing Partners

The .NET evangelism campaign demands new partnerships: instead of desktop-oriented ISVs who build software to run on Microsoft’s client platform, Microsoft must appeal to internal corporate developers, system integrators and consultants that write custom applications, and vendors of complex enterprise line-of-business applications.

Finding Enterprise-Ready Partners

Because its product line appeals to such a wide range of organizations, Microsoft has worked successfully with partners of almost any size and scope. Partners could sell Microsoft software to virtually any customer, from a quilting shop to NASA.

But only a fraction of these partners are big and specialized enough to take Microsoft into the enterprise. As a vendor to the masses, Microsoft itself lacks such specialized knowledge.

After a brief effort to elevate the role of Microsoft Consulting Services to provide such services (an effort that was aborted after conflicts with partners), the company renewed its reliance on partners who adopt Microsoft’s relatively inexpensive OSs and horizontal server applications and build custom applications on top of them.

Most visible is the company’s ambitious effort to identify the most promising vertical markets for .NET technologies, such as healthcare, retail, and manufacturing, and to tackle those markets with a phalanx of specialized partners—some small, some large. These "go to market" partners, most of whom are early adopters of .NET technologies, are featured on Microsoft Web sites that cater to particular verticals, and in some cases they have been instrumental in developing Microsoft’s market strategy for their particular vertical.

ISVs on the Sidelines

Microsoft's .NET partner strategy is still missing some key allies. The companies that win engagements in specific verticals fall into two general categories: smaller firms that specialize in only one or two verticals, and who succeed because of their narrow focus and niche expertise; and larger, better known consulting organizations or enterprise-oriented ISVs who have ongoing relationships with specific enterprises, and who influence their platform choices. This latter group includes global consulting organizations and large ISVs, such as Hewlett-Packard (HP), IBM, Oracle, SAP, and Siebel.

Although Microsoft has been able to negotiate some endorsement of .NET from most of these ISVs, none has embraced it wholeheartedly. Microsoft came close with Siebel, which in Oct. 2002 announced a new technical and training relationship with Microsoft, but that announcement focused on a subset of .NET components, such as client technologies and specific server applications, as well as Web services. Siebel’s focus on .NET was further dimmed by an announcement, a few days later, that it wanted to ensure continued interoperability with Java enterprise software.

Partner or Competitor?

Behind this reluctance to join hands with Microsoft is an enduring fear that the company’s ambitions could turn it from a partner to a competitor. For example, Microsoft Business Solutions (the former Great Plains and Navision) offers financial, human resources, inventory, supply chain, and other such applications for the small and mid-size business (SMB) market. Although Microsoft insists that it has no ambitions to compete with companies like SAP, who offer such solutions for the enterprise, many of these influential partners have also begun to target the SMB market. Mark Hanny, vice president of SMB and partner marketing for IBM software, has called the battle for the SMB market a "Normandy Beach" of the software business, a reference to the famous and bloody Allied invasion on D-Day in the Second World War.

In addition, Microsoft’s entry into certain key enterprise software markets—including business intelligence, customer relationship management, and enterprise application integration—is worrisome to ISVs in those markets who wonder why they should promote the platform of a company that appears to be eyeing their business.

.NET Business Framework

As part of an initiative to create a common business application platform based on .NET, Microsoft is also building a set of higher-level components that perform specific business functions, such as a general ledger. This effort represents another potential collision with partners: although many vertical ISVs will welcome the provision of these components as part of the Microsoft server platform, the choice will be harder for firms that currently develop the types of components Microsoft plans to create.

For example, an ISV that develops financial software that includes a general ledger will have the option of using a Microsoft component in the future or of continuing development on its own general ledger. The first option might reduce costs, but it could also reduce sales because general ledger functionality will be readily available through many more channels. Using the Microsoft component would also make the ISV dependent on Microsoft’s priorities and development schedule for a critical part of its business. Finally, it would link the ISV more tightly to Microsoft’s server platform, which is likely to be the optimal—if not the only—platform on which such components will run.

(For more details, see "Business Platform to Draw ISVs to .NET".)

Remaining Hurdles

Before .NET has the momentum in the market place that Microsoft wants, the company must establish a clear brand, ensure that the transition does not leave its installed base of developers behind, and establish the unique value proposition of .NET.

A Challenging Brand

In a series of moves reminiscent of the company’s earlier "Active" branding, the term .NET has been applied to almost everything Microsoft has done or plans to do. It has been used to describe products (the .NET Enterprise Servers), services (the .NET My Services, introduced under the code-name HailStorm), a software platform on top of Windows (the .NET Framework), a development environment (Visual Studio .NET), and a brave new vision for how computers will work—"federations" of servers using Web services in the background to communicate, obtain and massage data, and deliver unprecedented levels of functionality and collaboration.

As a consequence of this carpet-bomb branding approach, the market remains confused about what .NET is and where it is. Microsoft executives now promise a more consistent approach to using the .NET moniker in the future, but still find themselves trying to answer the question "What is .NET?" And they don’t always deliver the same answer. (See the sidebar "What Is .NET? How Microsoft Executives Answer".)

Although the impending release of Windows .NET Server will give the brand another push, it is not likely to reduce the confusion. The operating system will not be dramatically different from its predecessor in terms of its .NET readiness: Windows 2000 already functions as a foundation for XML Web services applications built with the .NET Framework. (See the Dec. 2002 Research Report, "Windows .NET Server: Microsoft's Application Server.")

Migrating the Installed Base

With its Visual Basic (VB) language and development environment, Microsoft dramatically expanded the number of developers who could produce client-side software. Even non-programmers could dabble in programming by dragging "controls" onto a "form" to create a user interface.

Although .NET and its prime development tool, Visual Studio .NET, are attracting developer interest for their own sake, Microsoft can gain a huge head start on building a .NET development community if it lifts the huge installed base of VB programmers into the .NET arena, thus quickly closing the gap between the Java community and the .NET community.

Microsoft faces some risk that VB developers pondering the significant differences between earlier versions of VB and current incarnations of VB.NET will be put off by those differences and opt to delay upgrading or even switch languages entirely. However, the differences between VB and Java are even greater than those between VB and VB.NET, and Microsoft hopes that the pain of upgrading to VB.NET will be small compared with the pain of learning an entirely new language, as well as an entirely new integrated development environment.

Another risk is that developers who want to work with Web services might conclude that they must be able to develop for the platform used by well-known application server products such as BEA’s WebLogic, IBM’s WebSphere, and Sun’s iPlanet. In contrast, Microsoft’s application server strategy is relatively unknown. (For more information about Windows .NET Server’s application server capabilities, see the Dec. 2002 Research Report, "Windows .NET Server: Microsoft’s Application Server.")

The Unique Value of .NET

Through much of Microsoft’s corporate history, the company has been able to set the standards, official or not, that ISVs lived by. The Windows graphical user interface (GUI), though derived from earlier GUIs, defined what nearly a billion computer users consider to be the computer desktop. The Win32 APIs were the platform to which tens of thousands of applications were written. Approximately 80% of the world’s digital business documents are encoded in a proprietary Microsoft Office format.

But the Internet, which began life before and without Microsoft, was built on open standards, and even Microsoft had to honor these standards in its own push to become an Internet player. Its dominant Web browser, Internet Explorer, is based on the open-source Mosaic; proprietary Microsoft network protocols, such as NETBEUI, gave way to the Internet’s TCP/IP. Today, as much of the world's information might be encoded in Hypertext Markup Language (HTML) as in Office formats.

Most significant for .NET, the core technologies that it uses to communicate with external entities are public protocols and formats such as the SOAP (of which Microsoft was one of the inventors) and XML.

As a result of the need to support open, public standards, Microsoft is having to articulate a different value proposition for .NET than it is used to—that .NET is the best implementation of a set of industry standards, rather than of Microsoft-specific technology.

Even the name itself—.NET—is generic (a close cousin, "dotcom," is already showing up in the latest versions of dictionaries in English and many other languages) and is a widely used suffix in Internet addresses. Microsoft’s preferred description of one core technology—"XML Web Services"—is identical in concept to the "Web services" touted by BEA, IBM, Oracle, and Sun.

The technologies that are indisputably Microsoft inventions—C#, the Common Language Runtime, ASP.NET, ADO.NET—are meaningful to the professional developer, but less so to the BDM. Meanwhile, Microsoft's inability so far to deliver applications (as opposed to developer tools) based on the .NET development platform has made it difficult to demonstrate the new platform's superiority.

Finally, even if Microsoft can establish itself as the Web services leader, that might not translate into real business any time soon. Web services as a technology has failed to meet early forecasts for adoption. Among other problems, Web services involve interoperability between many companies and a critical mass of companies that need to interoperate using common standards has yet to develop. This process will take time because even basic Web service standards, such as SOAP, are immature. (See "Base Web Service Protocols Updated".)

Microsoft’s main ally is the fact that, although it has had difficulty releasing brands and products that clearly articulate the business value of .NET, most of its competitors are in the same boat in selling Web services. The company still has time to demonstrate that, given enough time and the odd misstep by the competition, it can emerge with a compelling and potentially dominant technology.

And in the meantime, unlike many of those competitors, Microsoft remains profitable and wealthy during tough economic times. Although company executives often suggest that .NET is a bet-the-company initiative, the company’s current technologies, which are only beginning to be shaped by the .NET architecture, are selling well, giving the company not only the time but the financial resources to push .NET forward.

Resources

For a description of Microsoft’s .NET vision, see the July 2001 Research Report, "Understanding .NET."

For more information about the .NET development platform, see the Feb. 2002 Research Report, "The .NET Development Platform."

For background on the role of XML in Web services and the .NET Framework, see "XML to Glue Applications Together" on page 8 of the Mar. 2002 Update.