In-Depth

Microsoft's Future: Crystal Clear

• 02/01/2010

In this economy, stalwarts in boring, old industries like car manufacturing are declaring bankruptcy and changing business models with their very survival in question. Tech companies face even more uncertainty: Fickle customers, economic dislocation and clever competitors can dislodge even the toughest companies.

Microsoft is used to being in the hot seat, but temperatures are rising as Google Inc. guns for end-user and enterprise apps, Apple Inc. pushes ahead with the Mac and the iPhone, VMware Inc. wants to own virtualization and providers of cloud services move to reshape the very way we compute.

Ever curious, Redmond magazine reached out to dozens of Microsoft watchers to get their predictions about the company's future. Despite the uncertainty, many are bullish, believing that Microsoft can reinvent itself and remain a critical supplier to both consumers and enterprise IT. While no one is predicting the company will suddenly gain the design prowess of Apple or even the hip status of Google, there is broad consensus that Microsoft will continue to set the agenda for the desktop, the data center and for how people work, collaborate, gather and process information.

"They're very well positioned. One could even say Microsoft has gotten its mojo back," says Ray Wang, a partner with Altimeter Group, an IT advisory firm based in San Mateo, Calif. "With the success of Windows 7, with Bing and with what's happening with SharePoint and Office, all signs indicate they've got that innovation thing back into gear."

Windows Will Rule the Desktop
Despite threats such as Google's new Chrome operating system, a bare-bones OS for netbooks interfacing to cloud services, most agree that Windows client supremacy in the enterprise is not at risk. "It'll still be a long time before Windows is knocked out as the dominant operating system," says RedMonk analyst Michael Cote, arguing that the fat-client model is safe for now. "Thinking of work and personal life without laptops and netbooks and desktop computers is far-fetched. We have multiple generations of users who are trained to use Windows."

If Windows 7 proves to be a success -- and so far it's off to a roaring start -- Cote doesn't believe that most people will leave Windows anytime soon.

Microsoft won't leave this market to chance, however, and will push hard to move everyone and anyone to Windows 7. "Over the next couple of years it's going to be a simple mantra of Windows, Windows, Windows and more Windows," says Jim Payne, senior lead analyst and architect at Citi Cards Integrated Partner Solutions, a unit of Citigroup Inc. that runs credit-card processing for retailers. "Now that Windows 7 is out I'm expecting to see more widespread corporate adoption beginning in the late third quarter of this year. If not, this could be a bad sign for the Windows brand name itself," Payne adds, pointing out that he is speaking for himself, not for his employer Citigroup.

While it crows about Windows 7, Microsoft has been remarkably mum as to what's next for its flagship desktop OS. Some say the next version will be called Windows 8, and other reports suggest the project is now code-named "Windows vNext."

Questions about a new kernel abound. What will Microsoft do with Project Midori, the microkernel-based OS that will work across distributed parallel and multi-core systems? That's a research project that once appeared a possible successor to Windows 7, though two years ago insiders suggested it might never make it out of the incubator stage. Directions on Microsoft analyst Matt Roswell wonders if Midori will ever see the light of day, and if so, when. "Not any time soon -- and if it does it won't be in the context of a full Windows release," he notes. "You might see it branded separately or run on mobile devices."

Whether Midori drives it or not, Windows 8 could be a fairly big shift. "What they might do is make Windows 8 a 64-bit OS only. It's getting harder and harder to find new PCs with 32-bit processors in them, so they might optimize for 64-bit next time around. They're doing that already with a lot of their server apps," Roswell says.

Influential ZDNet blogger Ed Bott predicts Windows 7 will have a three-year life cycle. "Windows 8 is in the planning phases right now, and I'm certain that those plans are focusing on simplifying and reducing pain for users and IT pros," Bott says. "I'd expect Windows 8 to be 64-bit only, to include a greatly improved upgrade story and to have more self-healing features. I also expect that business editions will have a full hypervisor to allow virtualization of apps that require sandboxing or are incompatible with the new OS."

Consultant, trainer and Redmond author Greg Shields believes new versions of Windows clients will come more frequently. "We absolutely won't have as much time between Windows 7 and vNext as did we between Windows XP and Windows Vista," he says. "Microsoft won't make that mistake again: allowing IT to get too comfortable with an OS and not feeling some kind of upgrade on the horizon." (For more predictions on the future of Windows, see Mary Jo Foley's column, "Don't Write Windows' Eulogy Yet.")

Bottom Line: Windows will remain the de facto desktop standard, but it remains to be seen whether upgrades will be more incremental in line with the Linux distribution model or if Microsoft will stick to major new releases every few years. Look for a 64-bit-only kernel and a slimmed-down Windows for next-generation netbooks.

Windows Server Will Rule the Data Center
While Windows dominates the desktop, Microsoft is still fighting to drive deeper into the data center. As applications move off Unix and other proprietary mid-range systems, the choice is typically between porting them on Linux-based systems or Windows Server, says IDC analyst Al Gillen.

"Over the next five years, Windows and Linux will be the ones to gain share," Gillen says, though he doesn't see organizations switching existing applications and systems from Linux to Windows or vice versa. The growth of both platforms will come from those migrating from Unix and legacy systems, he explains.

Keeping Windows Server relevant could prove challenging with anticipated growth in cloud computing on the horizon. If companies are going to continue deploying systems running Windows Server, Microsoft will need to add features that require less maintenance and have tight integration with the cloud, says Andrew Brust, director of new technology at twentysix New York and a columnist for Redmond sister publication Visual Studio Magazine.

"The easier Microsoft can make it to provision servers, keep them secure and make them communicate with other IT assets -- on- and off-premises -- the higher value they'll deliver with Windows Server," Brust says.

One big area of server computing Microsoft will attack is management, and the company's main weapon is System Center. The System Center line is gaining robust IT-automation and change- and configuration-management features, claims Andi Mann, an analyst at Enterprise Management Associates Inc. (EMA). Microsoft's acquisition of Opalis in December puts it in a position to compete with the likes of CA Inc., IBM Corp. and Hewlett-Packard Co. when it comes to data center automation.

Opalis is touted for its IT process-automation software, which creates workflows that automate typical data center management functions such as incident ticket management, virtual machine lifecycle management and run-book automation, according to Microsoft. Opalis could prove a critical piece in Microsoft's quest to fulfill its "Dynamic IT" initiative, thanks to its ability to run workflows and orchestrate functions across different enterprise-management systems. Over time, it will fill key holes in System Center's multiplatform story, Mann predicts.

"System Center is going to creep up in the market," he says. "A lot of people dismissed System Center as a midsize enterprise-management tool for Windows. In 2010, people are going to realize that [view] is underselling what System Center is doing."

Bottom Line: Windows Server and Linux will both gain share as organizations move away from Unix and legacy server systems. But as cloud-based services take hold,

System Center will become Microsoft's key weapon in managing internal and external infrastructures.

Virtualization: VMware Will Hold Off Microsoft
If the prediction of ZDNet's Bott -- that future business editions of the Windows desktop will have a full hypervisor -- comes to pass, that will certainly up the ante for desktop computing. Meanwhile, the opportunity for data center virtualization is just as significant, says IDC's Gillen.

The question is, can Microsoft beat back VMware in the data center where premises-based servers and the cloud infrastructure are likely to converge in the years to come? "At this point I don't think Microsoft is in a position to directly leapfrog VMware in terms of having the level of maturity and level of customer deployments that VMware has been able to achieve," Gillen says. "And VMware is moving forward as quickly as they can because they know that Microsoft will be coming at them as quickly as they possibly can."

EMA's Mann agrees, and sees ISVs as the new battleground, noting that at last year's VMworld conference, some 190 partners crowded the exhibit floor. "If you think about Microsoft coming to parity with that sort of partner landscape, it's going to take a long time," he says. "That's millions of man hours of development that has gone in there -- that's not going to be fully realized in 2010."

But Mann and others point out that companies are implementing virtualization tools from multiple vendors. "They're not going to throw away VMware, but they are going to acquire Hyper-V, and it's going to get solid penetration over time," Mann explains. "We're already seeing Microsoft not only build out its own tools, but its partner ecosystem for managing Hyper-V. I'm seeing this happen right now: ISVs are announcing support for Hyper-V in all sorts of areas."

Burton Group analyst Chris Wolf remembers that when Windows NT hit the scene in the early 1990s, people scoffed at the idea of Windows becoming a dominant server OS in the data center. "Today it is, and VMware execs know all too well that history can repeat itself," Wolf says of Windows.

"Microsoft won't come anywhere close to leapfrogging VMware in 2010, but they will cement themselves as the solid No. 2 in the market and primary alternative to VMware."

Indeed, virtualization and hypervisor technology will be critical in linking desktops and data centers to the cloud. Seeing that trend, VMware has aggressively moved to make that bridge. The company acquired SpringSource, regarded as a leader in the "lean software" development of applications that are compatible with cloud infrastructures. It promises to be a key weapon in VMware's newly launched vCloud Initiative.

Bottom Line: VMware will maintain its position over Microsoft when it comes to virtualization in 2010, but Hyper-V will continue infiltrating the enterprise and amassing a larger ecosystem. Virtualization will become a key technology in bridging internal systems with public and private clouds.

Cloud Ascension
As Microsoft's Windows Azure and SQL Azure cloud services become commercially available this month, critics question whether Microsoft can catch up with Amazon Web Services LLC, whose EC2 is the dominant cloud platform today. Many believe Amazon will remain the preferred choice because it offers both Windows and Linux hosting services.

"Amazon Web Services permits the user to install Linux or Unix, or builds from IBM, in addition to Microsoft Windows Server and SQL Server," says Brian Livingston, editorial director of the Windows Secrets newsletter and Web site, which itself is migrating its data center to Amazon's cloud services. "I think that Amazon Web Services is far more flexible and far more malleable than Azure, though I think there will be plenty of people who will find Azure meets their needs."

Others believe Amazon's edge is meaningless for now, given the limited number of actual cloud deployments compared with business-critical systems still running in data centers. CIOs have expressed concerns about cloud-related security, reliability and compliance, so they're moving forward slowly as well. (For more on the cautious adoption of the cloud, see the Redmond Report article "Cloud Formation," January 2010.)

"It's going to take years -- probably five years -- for customers to get comfortable enough to move some serious stuff out there," IDC's Gillen says. However, a recent survey of 670 IT executives by Saugatuck Research suggests the move might happen sooner. The survey found that while only 3 percent of executives currently see cloud services as an extension of their existing internal IT infrastructures, 50 percent believe it will steadily progress into their portfolios by the end of next year. That number is expected to rise to 76 percent by year-end 2013. Only 14 percent of executives were uncertain if the cloud would become mainstream in their operations.

The appeal of services like Windows Azure and EC2 today is for non-critical functions such as development, testing and storage. While only a handful of organizations are actually extending their internal infrastructures to the cloud, Saugatuck and others see rapid cloud-based software development occurring.

"It's really the second wave of cloud computing, after the use of cloud services for peripheral and adjunct processing and storage," says Saugatuck analyst Bruce Guptill. "As that wave grows, so will Microsoft's presence and fortune with Windows Azure."

Bottom Line: Migration to cloud services will be incremental, but as companies like Amazon, Google, Microsoft and VMware build out their cloud portfolios, they will become an important component of enterprise infrastructures in the next few years. During this period, Windows Azure will become a key extension of the Windows infrastructure.

SharePoint 2010 Saves Office
Microsoft's Office franchise is clearly under siege as rivals offer less-expensive alternatives. At the same time, those satisfied with earlier versions see little reason to upgrade.

"We're at a watershed moment in productivity suites," says Burton Group analyst Guy Creese. "For many years, the wisdom was to go with Microsoft Office and its affiliated upgrade cycle. However, as a standalone productivity [suite], it's getting harder and harder to add productive features to Office."

Perhaps the most noteworthy new feature in Microsoft's forthcoming Office 2010 is Office Web Apps, which provide online versions of Word, Excel, PowerPoint and OneNote. Users will be able to access and share documents using a Web browser, a feature already available in Google Apps.

Brust predicts that if Office Web Apps prove stable and fast, it will go a long way toward keeping the full Office suite viable. "Giving people Web access is very liberating," Brust says. That, he maintains, will give more value to the traditional Office product, supporting rich-client computing while adding the ability to extend the apps online.

Microsoft's biggest challenge with Office moving forward may be the need to revamp pricing. According to Creese: "If Microsoft were to continue on its development trajectory -- BPOS, OneNote and introducing collaborative features -- and drop the price of Office to $50 per user, enterprises would stop looking at alternatives to Office."

While Google Apps may not be an immediate threat to Office, Google is not giving up that easily. Google is rumored to be in pursuit of DocVerse, a hot Sillicon Valley company start-up launched by former Microsoft executives Shan Sinha and Alex DeNeui. DocVerse offers its own rich online office and collaboration tool. Google also recently acquired AppJet, whose Etherpad provides secure document sharing. All of Google's efforts feed into Google Wave, the company's new Web-based collaboration tool, which is now in beta and has received mixed reviews from testers.

The Office suite may have a trump card, however. As Microsoft extends Office, it's becoming inextricably tied to SharePoint. Due out in the coming months, SharePoint 2010 is widely anticipated. It offers improved search, support for user profiles, social data and enhanced enterprise content management.

Perhaps most noteworthy, though, is SharePoint 2010's tight integration with the rest of Microsoft's 2010 product wave, including updates to the Dynamics app suites, Office 2010 and BizTalk Server 2009 R2 that allowing connectivity to various back-end systems. This will establish SharePoint as the portal for sharing everything from Office documents to customer relationship management data, as well as allowing users to create dashboards that tie to various back-end systems.

Bottom Line: Offerings from Google and others will chip away at Office for workers who don't need the entire suite, but new features in the suite and SharePoint will create a new model for enterprise information sharing.

Microsoft Builds Bigger Data Warehouses
With the release later this year of SQL Server 2008 R2, Microsoft is looking to bring business intelligence (BI) to the masses. While SQL Server has had BI and reporting features for years, the new release promises to greatly enhance the deployment of tools that let individuals create their own dashboards. Key to making IT comfortable with enabling self-service BI is SQL Server 2008 R2's Master Data Services, which will provide what Microsoft describes as an "authoritative source of master data" -- or what others describe as a single version of the truth in an auditable and secure manner.

A new self-service BI tool from Microsoft will be available via technology called PowerPivot, formerly code-named "Project Gemini," which will allow users in Excel 2010 to load tables with millions of rows of data sets from any source, accessible through ODBC or OLE DB, according to Microsoft. In short, PowerPivot is a data-analysis tool for Excel that lets users work with massive volumes of data, perform queries and share results.

"PowerPivot will be a great [feature] that a lot of Excel power users will really like and, over time, learn to use very effectively," says twentysix New York's Brust. PowerPivot is a component of SQL Server 2008 R2.

"PowerPivot is very cool, bringing in-memory and columnar [data] to Excel, but like all things Microsoft, we'll have to see how well it works out-of-the-gate and how much development is required to use it in corporate solutions," notes Wayne Eckerson, director of The Data Warehouse Institute (which, like Redmond magazine, is owned by 1105 Media). "Microsoft's BI strategy is still spread across SharePoint, Office and SQL Server, which is kind of fragmented, but hopefully they can hold it together and deliver bona fide solutions," Eckerson adds.

BI is moving to the masses, with or without Microsoft, Eckerson continues. Meanwhile, Microsoft is trying to compete in the large-scale data warehouse field now dominated by Oracle Corp., IBM and Teradata. Later this year, it will unveil its highest-end database to date, Parallel Data Warehouse, which will be delivered through OEM partners including Dell Inc., HP, IBM and EMC Corp., among others.

Forrester Research Inc. analyst James Kobielus says Microsoft will face some key challenges as it expands its footprint in BI and the enterprise data warehouse field.

"To be ready for the industry changeover to the all-cloud, all-in-memory, all-solid-state-drive data warehouse architectures [later this decade], Microsoft needs to start thinking of converging its premises-based solutions -- especially SQL Server 2008 R2 Parallel Data Warehouse -- with its Windows Azure cloud platform," Kobielus says. "By the end of this new decade, the cheapest, most scalable, most flexible data warehouses in the world will be in clouds -- public and private -- as will most transactional and analytic application processing."

Bottom Line: More users will be able to access and crunch data in new ways, and it appears Microsoft will be a leading player in this field. And just as SharePoint will be a key platform for collaboration, it will also enable teams to access information sources that were once only available to those with more elaborate tools.

Mobile Mess
If there's one area where Microsoft is universally mocked, it's for its failure to deliver a competitive mobile-computing platform. Only 7.9 percent of smartphones sold in the third quarter of last year were equipped with Windows Mobile, down from 11.1 percent in the same quarter of 2008, according to Gartner.

In addition to getting beaten up by Apple's iPhone and Research in Motion's BlackBerry, Windows Mobile is also facing the Google Android platform, which had no market share a year ago -- it was not yet released -- but accounted for 3.5 percent in the third quarter.

According to a study released last month by market researcher ChangeWave, a startling 21 percent of those who intend to buy a new smartphone within the next three months are leaning toward an Android-based device. That's up from just 6 percent in September. By comparison, only 6 percent are considering Windows Mobile phones, down from 9 percent in September.

"Their mobile strategy is a mess, and I'm not sure what they can do to salvage it," Directions on Microsoft's Roswell says of Microsoft.

Others agree. "Windows Mobile had a shot, but they're going to have to do something different if they're going to come back and capture that market," says Altimeter's Wang. "The history of Microsoft is that they work and work and work at it until they get it right. I don't think it will die a quick death -- I think they'll give it one more shot to get it right, and if it doesn't work they'll just go on with it."

Bottom Line: Windows Mobile will continue to exist and be used by a small portion of enterprises, but Microsoft's success in mobile computing will ride on its ability to deliver its entire portfolio of apps and tools to other mobile platforms.

What Does the Future Hold?
In the end, there's much work to be done in Redmond for Microsoft to remain strong. Despite threats from Google, Amazon, Apple, IBM, Oracle and SAP AG, among others, Microsoft will remain a key player in the enterprise -- but it will no longer own the enterprise or the consumer. Microsoft appears to realize that. But there's one thing we can predict about Microsoft: The unpredictable will happen.