The Bloor Perspective: Microsoft's 3G plans, IBM's web services plans, and Napster's survival plans

All the days spent in the courtroom seem to have given Microsoft plenty of time to contemplate life, the universe and everything. Never one to sit on its laurels the company is keen to look for new markets to move into. We saw recently that the troubled telecom operator WorldCom may be on its shopping list and now there is news the Redmond software vendor may be taking on other struggling telecoms companies in the 3G space.

With the telecoms industry on its knees, Microsoft smells an opportunity. The idea is that Microsoft will get the mobile operators to adopt mobile devices that use the Windows operating systems and based on a design by Intel, Microsoft and Texas Instruments. The devices would be produced by Asian manufacturers making them inexpensive and quick to deliver.

This plays into the hands of the company's .Net strategy. Microsoft is betting the business on its move into web services and the more devices there are running the company's operating system and other software the more it makes in licensing fees. The story has a familiar ring as the strategy is remarkably similar to the one used to gain dominance in the PC sector where the company 'encouraged' PC vendors to adopt the Windows operating system.

This time the competition comes from incumbent mobile manufacturers such as Motorola, Nokia, Panasonic and Sony-Ericsson. Many of the devices produced by these manufacturers use the Symbian operating system and so phase two of the plan will no doubt be to 'encourage' these manufacturers off the Symbian platform and onto Windows.

In normal market conditions you may question whether or not this strategy will work. After all, the mobile market of today is far more mature than the PC market of the 1980s and the incumbent vendors are established international organisations, not Taiwanese clone makers. But as every telecoms associated vendor continues to report losses, the Microsoft pill can be greatly sweetened by the offer of a cash infusion.

Love 'em or loath 'em you've got to admire the balls of Bill et al.

*IBM's web services credentials*

Later this month IBM will release Version 2.0 of its Eclipse open source development platform featuring an enhanced Java toolset, improved team and repository support, and support for the AIX, HP-UX, Solaris, SuSE Linux and Windows XP operating systems. A port to the Apple OS X operating system is promised for later this year.

As a tool integration platform Version 2.0 provides an open, seamless model that enables the easy integration of external tools. This will ease the concerns of developers as tools from 175 other vendors form the complete Eclipse framework. IBM is hoping to establish a developer community around its WebSphere application server similar to the Microsoft Developer Network.

WebSphere Studio is also getting new capabilities with the provision of a single, portal-like environment supporting all development activities. The tools are based on Eclipse and cover IBM's DB2, Domino and Tivoli product sets. A Tivoli plug-in allows developers to monitor applications, a Domino plug-in enables developers to create integrated WebSphere and Domino applications and the DB2 plug-in will give developers the ability to build DB2 based applications for mobile devices.

Big Blue is also expected to announce WebSphere-based industry specific integration plans and WebSphere Business Connection, which provides business-to-business integration capabilities for web services and EDI-based systems.

IBM has firmly established itself in the open source community with its impressive and successful adoption of Linux. Now it is moving forward to the next big thing - web services. The Eclipse framework has been welcomed by many vendors although IBM's total Eclipse vision has yet to be completed as some vendors have yet to deliver the tool sets needed to complete the picture.

These announcements show IBM is ready for web services but whether or not it wins the final web services battle has yet to be seen. Microsoft and Sun have a lot of history and that may mean they take their eyes off the ball. If that happens, Big Blue is ready and waiting to come in from the sidelines.

*Napster 2002*

In the latest twist Napster has now filed for bankruptcy through Chapter 11 just weeks after founder Shaun Fanning and CEO Konrad Hilbers resigned and then rejoined the company. That is not to say this spells the end of Napster - the company is planning a new fee based system.

Last month saw the announcement that media giant Bertelsmann AG had purchased Napster for $8m, just half the amount of an offer Napster previously rejected. Interestingly, the resignations and rejoining happened inbetween rejection and acceptance of the offer.

By filing for bankruptcy the company has protected itself from creditors, to whom it owes millions of dollars, and perhaps more importantly from the potential millions of dollars demanded as damages from musicians who have allegedly lost royalties through Napster's free distribution of their work.

In an attempt to get legal, the company closed its original free distribution system last summer and has been working on a payment based-system since. While the company's CEO boasts the Chapter 11 filing gives Napster the chance for a new beginning, the future depends on the success of paid-for services. It will face stiff competition from existing services that have been established by the major record labels themselves.

Unsurprisingly the record labels have not been keen to play ball with Napster, which has been trying, unsuccessfully, to establish distribution deals with the majors for the last year. The market place is further crowded by consumer electronics manufacturers who are all trying to take advantage of CD burner sales and the slow, but steady, roll out of broadband.

Gateway recently signed up with Emusic to bundle music with its direct order PCs. The company has also opened its own music site and launched a campaign against a Congress bill that would require computer manufacturers and consumer electronics companies to install anti-piracy software in digital devices.

Whether or not Napster 2002 emerges from the ashes is yet to be seen. The original appeal of the site was that it was free. Furthermore, everyone liked Napster standing as David to the Goliath of the record labels - we've seen many breakdowns of just how much money the music industry makes from CD sales.

With a paid-for service content will be paramount and the biggest challenge facing Napster or anyone else attempting to gain a share of the music marketplace is winning over the record labels. So far, it looks as though Goliath is winning.

**Bloor Research is a leading independent analyst organisation in Europe. You can find out more at http://www.bloor-research.com or by emailing mail@bloor-research.com .