Microsoft Readies Tools to Power Web Services Plan

Top Microsoft brass like chairman Bill Gates and CEO Steve Ballmer will hit stages in San Francisco and Chicago Wednesday to unveil Visual Studio .Net, a set of tools for software developers that will let them create applications based on the company's .Net technology.

Microsoft's .Net strategy is aimed at moving the company away from pre-packaged software and toward Internet-based services that will let companies and customers easily exchange data and conduct transactions. The strategy permeates every aspect of Microsoft, from its Windows operating system to its MSN Internet unit to its budding line of enterprise software that powers heavy corporate functions like databases and communications.

Visual Studio .Net will let enterprises and independent software makers tap the .Net technology--based on the XML standard that describes types of data--in those products to create custom applications.

"It ushers in a new platform for Microsoft, a new way of building software," says John Montgomery, a group product manager in Microsoft's developer division. "You get the opportunity to do something like this about once a decade. We have spun every product in the company and pointed it at this new platform, this new tool, and said your product must integrate with this, you must plug into the .NET framework and work with Visual Studio."

Cornerstone Of .Net

Microsoft has boasted that its Visual Studio test program, of which customers could try experimental versions, has been one of its most successful, leading some analysts to boost expectations for the product.

Thomas Weisel Partners analyst David Readerman says sales of Visual Studio .Net in this quarter could hit $200 million, up from his earlier estimate of $150 million.

While that hasn't changed Readerman's overall estimates for Microsoft quarterly revenue of $7.3 billion, Readerman said in a recent research note that Visual Studio was key to a successful roll-out of the .Net strategy.

"We view this product release as very strategic to the company's broadly defined .Net Web services architecture, its Windows XP client, .NET Enterprise Servers and Internet/MSN services such as Passport, Alerts and My Services,"' Readerman wrote.

If the product is embraced by the millions of developers who build products based on Microsoft offerings, it could also drive demand for Microsoft's enterprise server software, a market where it is still playing catch-up to rivals like Oracle , Sun Microsystems and IBM, analysts say.

"That's the whole point of all of this stuff," says Rob Enderle, an analyst with Giga Information Group, a technology consultancy. "It's like getting people to buy one piece of a stereo set-up in the hope they come back and buy other parts because it all works together."

Economy, Training, Java Are Negatives

Nonetheless, Visual Studio faces challenges. It is debuting amid a tepid technology market, at a time when many companies are delaying rollouts of new products and holding off on major purchases.

Some developers may need extra training to learn the workings of the new product. And while it supports more than 20 programming languages, backing for Sun's widely used Java technology is minimal, due in part to a legal settlement that bars Microsoft from using current versions of the language, analysts say.

"These factors may cause some fits and starts in the migration to the .Net platform, but we're far more optimistic about its prospects than we were a year ago," Credit Suisse First Boston analyst George Gilbert said in a research note.

But with a cash hoard of $38 billion, support from the twin pillars of Windows and Office, and a track record of sticking with a product until it succeeds, there seems little to stop Microsoft from making a splash in Web services.

"They are the only vendor [compared to Sun and IBM that is hardware-independent, and they have economies of scale that are unmatched, so their only obstacles are the government and their own ability to execute," Enderle says.

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