Issues Microsoft must handle to make an impact in '07

Five hurdles Microsoft must negotiate to stay on top next year

It was a rough 2006 for Microsoft, relatively speaking for a company that posted US$44 billion in revenue, as it weathered long-awaited new versions of Windows and Office. But as the software giant heads into 2007, the newest incarnations of its cash cows are out there, a number of important product upgrades are on the board, highlighted by Longhorn Server, and the path to success over the next 12 months is littered with other challenges such as services and cross-vendor interoperability.

Here are five hurdles Microsoft must negotiate to stay on top in 2007.

Sell Vista and Office (and Longhorn).

No less than the foundation of its existence. Chris Liddell, Microsoft's CFO, told shareholders in November that he expects revenue growth in fiscal year 2007 of 13 percent to 15 percent, and with Office and Vista accounting for more than 90 percent of its revenue, those two products need to be a home run. The question is will corporate users bite? Microsoft has reorganized its executive ranks as part of its Vista/Office bet so if things go haywire both heads and revenue will tumble.

Ray Ozzie Live

Ozzie, no less Bill Gates' replacement as chief software architect, has made many public pronouncements about the dramatic impact services will have on computing, and 2007 is the time for Ozzie to crank Microsoft's wheels of progress against the likes of Google.

"There are all sorts of business model issues around software-as-a-service that Microsoft has struggled with and is quite nervous how it will all play out," says Dwight Davis, an analyst with Ovum Summit. "Those issues have been bubbling in the background, but in 2007 it comes to the fore."

Cross-vendor interoperability

Steve Ballmer said in announcing the interoperability partnership with Linux-rival Novell that the pair were giving "customers greater flexibility in ways that they have certainly been asking." And the questions won't stop in 2007 as Microsoft needs to commit to the realization that the corporate world isn't all Windows. The newly standardized Open XML file format, which is the default in Office 2007, is one big step. "From a milestone point of view, standardizing Open XML is a signal that we have finally gotten into a much more global and open world," says Guy Creese, an analyst with the Burton Group.

Consistency, consistency, consistency

Microsoft is pushing integration across its back-end and front-end products, especially in areas such as security, connectivity, business intelligence and real-time communications. "If they are doing something like supporting certificate-based authentication, IPv6, network access protection, I expect this to work across all platforms," says Fred Wettling, infrastructure architect for Bechtel Corp. "When I look at Vista, Windows Mobile, Windows Embedded, those are all operating systems and there are differences there."

Licensing clean-up

In 2001 Microsoft said it was making volume licensing easier and ushered in Licensing 6.0 and Software Assurance. The dust from the resulting customer backlash is still settling. In 2007, the company's Software Protection Plan and its software "kill switch" are tied into licensing, including requirements for a corporate license validation infrastructure. Another backlash in the making?

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