Newsletter: Microsoft's Challenges Include Reviving Office, Delivering On .Net

According to the 2003 annual list compiled by Directions on Microsoft, a Kirkland-based research house and newsletter, Microsoft's top challenges next year include boosting sagging sales of Office, delivering the first .Net-enabled server and first Windows server upgrade in three years, and minimizing the spread of Linux on the server and the desktop.

"Office XP did relatively little to boost the bottom line," according to a statement released by the research firm on Wednesday. "Microsoft must deliver an Office that will prompt customers to upgrade and prove that Software Assurance is worth the substantial premium."

Microsoft plans to ship an Office upgrade currently known as Office 11 in mid-2003 as well as Windows.Net Server 2003 in April of 2003.

The report also noted that Microsoft needs to keep a distance between Windows and Linux to justify price premiums and cannot allow Linux to make any inroads on the desktop.

"As [Microsoft knows, from its own successes with Internet Explorer and Windows Media, free products tend to take the wind out of commercial business models. Although Linux has a way to go before it equals Windows, the gap is narrowing," the list asserts. "Any Linux gains [on the desktop will tarnish Microsoft's crown jewels, the desktop OS and Office, which generate virtually all of its profit."

Last year, Directions on Microsoft identified Linux as No. 6 on Microsoft's Top 10 Challenges list, although a preliminary version of the list initially identified Linux as Microsoft's No. 2 headache. That's no surprise to Microsoft Chairman Bill Gates and CEO Steve Ballmer, who both pointed out in 2002 that Linux is Microsoft's biggest threat going forward.

In addition to those three issues, Microsoft also faces these other seven challenges in 2003, according to the list. They include winning developers away from Java for the enterprise server business; publishing clear and unchanging product road maps; delivering on better security and management and enacting simpler licensing; managing partner and ISV fears; justifying money-losing ventures; keeping a low profile in court; and maintaining employee satisfaction and commitment.

The list will be formally published in the company's newsletter in January 2003 but is available now on the firm's Web site.

The 2003 Top 10 list claims that Microsoft's moves into line-of-business applications such as CRM and business intelligence solutions represent a clear threat to partners, primarily ISVs.

"Microsoft is steadily moving into lines of business that its partners once thought were too specialized for Microsoft to care about," the list states. "Any signs that Microsoft is becoming a competitor could embitter former partners and have a chilling effect on partner enthusiasm for the .Net framework."

However, it appears Microsoft had made progress making solution providers and integrators happier in 2002 because there is no reference to "alienating consulting partners and resellers" as there was in last year's list. In last year's Top 10 list, for example, "Keeping Partners Happy" was deemed Microsoft's fifth top challenge for 2002. In 2003, however, the focus of concern zooms in on ISV partners as Microsoft's biggest challenge.

The list this year is similar in some respects , however, to Microsoft's Top 10 Challenges for 2002. For example, the older list cites beating back Linux, convincing customers to upgrade, selling annual licenses and subscriptions and delivering .Net as top challenges. But some of the challenges cited in the 2002 list--converting MSN eyeballs into revenue and making gains in wireless and PDA markets--were omitted in 2003.