Audience Snubs Microsoft's Grand Internet Strategy

P> LAS VEGAS -- Microsoft CEO Bill Gates has been criticized recently in the computer industry, and by leading computer magazine writers, such as Forbes ASAP's George Gilder, for failing to coherently address the business opportunities in the Internet. And during the keynote address at the industry's top networking conference at the Las Vegas Hilton, Gates tried to present the company's newest product, Exchange, a messaging and collaborative software package, as an appropriate corporate interface to the global computer network.

"Computer communications is changing the way that we work and do business in a very dramatic fashion," said Gates, whose address was simultaneously broadcast over the Internet. "For Microsoft, the Internet is basically driving everything that we do. It is a case of wanting to embrace the protocols, build a server in, build a browser in. But there is a big question. Can the PC world and Internet world come together?"

Gates added that network servers will be key to the Internet revolution. Of course, Microsoft has an edge in server software, where its Windows NT competes against offerings from Novell Inc. By suggesting that the Internet is nothing more than an extension of interoffice networks, Gates is trying to maintain dominance of the industry on his own terms. Microsoft's Exchange is PC-based software that works with Windows NT.

Gates' current world view has been shaped by his stunning successes. But the business model Gates has adopted -- and is continuing to pursue through the new Internet strategy -- may be failing him in the new Internet-driven computing era, according to Internet experts.

"The Web cannot be controlled by just one company," said Tom Jermoluk, president and COO of Silicon Graphics Inc., a leading, high-end computer maker.

And David Clark of the Massachusetts Institute of Technology Lab for Computer Science, an organization funded heavily by Japanese electronics giants, and a speaker at Interop, added that open systems were essential to the spread of the Internet.

Microsoft Exchange is a proprietary system, giving customers access to the Internet through just one channel. "Innovation seems to thrive in [open systems]," Clark said. "There are fewer barriers. There is lots of experimentation going on. Two years ago, the future of the Internet was in doubt. There were questions as to whether it would grow, or be marginalized. But now, there is too much investment for it to vanish."

Gates acknowledges that -- but he seems stunned by the change eroding his world-leading position in computing.