April 18, 2002 4:00 AM PDT

Microsoft's crystal ball

Microsoft shipped its Windows XP operating system just six months ago, but the software giant is already preparing for the next wave of computing.

Microsoft has identified a handful of technology trends likely to reshape PCs and is working to define how Windows XP and its successors will take advantage of them, said Chris Jones, vice president of the Windows client team.

Topping the list of trends over the next five or more years is the growing popularity of digital media, the establishment of global networking, a shift to software services delivered over the Web, and the development of smaller, more efficient microprocessors that could lead to consumers owning multiple, powerful, yet low-cost PCs, Jones said.

Of course, as Microsoft supplies the world's most popular PC operating system, its predictions are more than just a hunch: The company can make or break a trend simply by adding new features to Windows. As a result, hardware and software companies closely monitor the company's plans.

Still, Microsoft has had mixed success predicting the future. The company initially missed the significance of the Internet in the early 1990s, and is still playing catch-up to Palm in the personal digital assistant market.

The trends outlined by Jones also highlight a shift that Microsoft may not be able to control, however: The PC may not retain its role as the most important computing device used at work or home. For Microsoft, which derives a hefty chunk of its revenue--and most of its marketing clout--from the licensing of Windows on PCs, it's a trend that cannot be overlooked, analysts said.

"There are going to be shifts over time in the PC market, and that's why (Microsoft is) focusing on other areas," said Gartner analyst Michael Silver. "There's a good chance the form factor we see for the PC will shift."

Silver noted that during Microsoft's 2002 second fiscal quarter, ended Dec. 31, Windows accounted for almost a third of Microsoft's revenue, bolstered in part by the October release of Windows XP.

The Gatekeeper: Windows XP Still, "we think it will be about another four years before alternative devices become viable alternatives to PCs," Silver said. "Certainly other devices will be more important over time for other functions, but for the foreseeable future they will be working with the PC."

Silver said some of the trends that Microsoft is talking about are on their way already. "They will happen in much less than the five-year time frame they are talking about," he said. Silver also said that while Microsoft is already planning to support Jones' laundry list of new technologies, it's the unseen trends that will test the software giant.

"I think what's more likely to cause them problems are real discontinuities that will crop up," Silver said. "Thus far, I think they've actually responded well to (things like the popularity of the Internet), but certainly, it's the major discontinuities that are more difficult to forecast and react to."

Microsoft will incorporate support for some of the technologies Jones referred to in Windows XP with the release of Service Pack 1 sometime this summer. Some of those technologies, such as support for Mira wireless devices, the Tablet PC and the Freestyle graphical interface, will begin to move Microsoft into the handheld device and home entertainment market.

The next big turn of the crank
But many of the new technologies, including a more communications-oriented interface, won't arrive at least until XP's successor--code-named Longhorn--ships in 2004 or later.

"We have no plan to do an interim (Windows) release between now and then. So (Longhorn) really will be a big turn of the crank," Jones said.

Making the shift to the next computing technologies also means refining the Windows graphical user interface "around tasks people want to do today," Jones said. "The way I think about that is the user interface has to become communications-centric. The default thing people want to do is communicate, so we need to have a people-centric user interface," he said.

Microsoft has already started down that road with Freestyle, an alternative interface for accessing Windows XP's digital media features.

Jones said Windows XP is Microsoft's first stab at refining its operating system to be more consumer-friendly. "Windows XP is sort of the culmination for us of the wave of operating systems designed around business networking and internetworking and also the start of this new wave," Jones said.

"Computing is becoming a consumer phenomenon," he continued. "I use this analogy: We used to build cars for auto mechanics. Now we need to build them for drivers. In the old days, we'd say, 'Hey, it's got a great engine, or the gear shift is really good.' But we wouldn't think about where the cup holders are in the car. Now we have a team that thinks about the cup holders and what the steering wheel feels like."

He added that with Windows XP, Microsoft for the first time assembled a product design team in the same way that a consumer-products company would.

Make mine digital
Part of the move to a more consumer-friendly form is support for digital technologies being driven by the popularity of MP3s and DVDs. In the future, all information--whether captured by ink, voice recorder, printed paper or other means--will be quickly and easily made digital, Jones said.

"You would never have this act of taking notes," Jones said. "You would just have a computer that sat with you, and that would breathe in the whole world around you." Voice recognition or the handling of digital photos and digital video in Windows XP could support the trend, but those features are a scant beginning for what the operating system must do in the future, he said.

Jones conceded that this transformation could be some time off, given that only 16 percent of people in the world have a PC. "This whole notion of bridging the analog and digital world--we're just not there yet," he said.

In addition, the exact form the operating system may take is hard to predict, Jones said. Previous innovations, like e-mail, defined a new digital form for communication that didn't try to imitate their analog predecessors. "E-mail didn't try to have the fidelity of the letter," Jones said. "E-mail's selling proposition was convenience, speed and cost.

"I don't think we've really internalized the social implications of that trend," Jones said. "What happens when you don't get paper mail anymore? That could happen in five or 10 years. You wouldn't get paper bills at home anymore, and personal correspondence would be largely electronic."

Keeping in touch
Another trend Microsoft sees is the establishment of worldwide networking. But the company is still trying to determine how that will take shape.

"Let's say we're sitting here and would like to go try out a restaurant," Jones said. "I would like to actually go call up the network and find out where the interesting restaurants are. But not only that: Tell me which friends of mine have visited which restaurants. You should be able to get that no matter what kind of networking you are using."

Jones allowed that the fulfillment of this trend is many years off because of the enormous amount of infrastructure that must be built in homes, businesses and in between. He also cited the need for common standards to make sure various networks can talk to each other.

"What we haven't figured out yet is what happens when the cable comes into the home and intersects with your home (audio-video) network," Jones said. "There's sort of a convergence device that plugs in to that hub. The question is whether that is a home server or something else."

Another puzzle is deciding where data will be stored. Microsoft is trying to prepare for two scenarios: one where data would be kept locally and replicated among disparate devices, or a second concept where data would be stored on a server and cached locally for quick access. Risky business special report

Much of that data would be in some digital form, the majority of which Windows XP's current file system would not be able to easily organize or search. With Longhorn, Microsoft plans to introduce the first pieces of a new file structure capable of storing, cataloging and searching disparate digital content.

"I'm going to have some active CPU agent working for me," Jones said. "I think the natural evolution of the PC is to be that active agent that works on your behalf--that understands your storage and your data (and) that understands how to bridge to all these devices."

see related story: Is Microsoft getting ahead of itself? That description fits Microsoft's .Net My Services consumer Web services plan. .Net My Services will eventually allow consumers to access their personal information online from any device and to perform a range of tasks, including shopping, banking, and checking e-mail and calendar items. But the initiative has been sidetracked because of internal debates over a proper business model and a lack of industry support.

Jones sees Windows as a possible foundation for software services delivered immediately across a global network. For example, Microsoft hopes to evolve Windows XP's automatic update feature such that one bug or security fix could be immediately dispatched to all users. Microsoft's .Net Web services plan, which strives to link systems over the Web, would play a key role.

"The automatic update--an incremental update found in Windows XP--that's something every application should have," Jones said. "Every developer over time, instead of burning a CD, they put the information on a server and it sort of falls down to the computer."

Market researcher Gartner predicts that next year 80 percent of companies developing platform software, such as operating systems, will support Web services architectures.

"We want Windows to be a platform for multiple companies to succeed in software services," Jones said.

Take two--they're small
Finally, Jones said hardware will play an important role in making all of the other scenarios a reality. He said that in microprocessors, companies like Advanced Micro Devices and Intel will focus less on clock speed and more on consolidation of chipsets.

"The miniaturization aspects of Moore's Law are going to be more beneficial than the ramping of the CPU," Jones said. Coupled with that shift, "computers are going to become increasingly more affordable, so people will have more than one," he said. "You will have a computer in your television or a computer in the refrigerator. You won't care, because they will be so inexpensive."

The larger problem is defining the PC's role in this new ecosystem, particularly as more devices increase their computing power. This issue is still being debated within Microsoft, but Jones said he believes people will continue to want a general-purpose PC. This idea ties to the networking trend in which a general-purpose PC would connect all the CPU-based devices together.

As the PC's role changes and Microsoft looks to position different flavors of XP--Home for consumers, Professional for businesses and Embedded for devices--the company plans to work more closely with computer makers on new designs.

"One of the big investments we need to make is with the hardware manufacturers, in a different and deeper way than in the past," Jones said. "We have not done a good enough job with form factors or really thinking about the breakthrough scenarios in the market that the top 10 to 20 percent of people are going to want to buy."

 

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