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Part III: How Will HailStorm Affect You?
This overview of HailStorm's partners and competitors reveals some surprising possibilities ahead
by Robert Eisenberg
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 ven if HailStorm achieves only half the success that Microsoft wishes for it, this set of Web services will make an impact on several key players in this arena—and not just end users.
HailStorm Faces Stiff Competition
The HailStorm platform competes with technology from traditional Microsoft enemies Sun and Oracle, and—because of the XBox—Sony. It is unclear whether IBM will partner with Microsoft on HailStorm, although Gartner reports that initial indications suggest they will. However, HailStorm's real battle is with AOL.
AOL vs. Microsoft:
The announcement of HailStorm marks the beginning of the battle of the titans, unless they decide to forego the battle, draw lines, and divide the spoils—or partner instead. Assuming the two companies avoid partnering, at stake is the lucrative market for delivering electronic services to consumers—anytime, anywhere—as AOL is now beginning to do. The winner of this fight will provide the majority of consumers with basic messaging, e-mail, calendaring, and an elaborate instant messaging platform (see Figure 2).
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 | Figure 2. New Instant Messaging Platform. Click here.
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In the future, delivering personalized messages based on the end user's calendar, contacts, and purchasing patterns, with options to purchase products based on these attributes, will be a standard part of instant messaging. Consumers targeted by HailStorm are the same people that AOL relies on for its revenue, so AOL is going to fight very hard to keep them and be the one that delivers these new services to them. AOL will leverage its 28 million users by relying on its extensive content and the fact that people are already used to signing on to its service, its instant messaging, and its content from Time Warner. It is unlikely that AOL services will be tied into HailStorm at all, as both companies are fiercely competing for control. Moreover, AOL's instant messaging platform and connection software is proprietary, making it all the more difficult for AOL to win the battle in the courts and in the arena of public opinion.
As operating systems and applications become more Internet-centric—and integrate e-mail, chat, streaming, and instant messaging services—the operating system begins to directly compete with AOL.
AOL may respond by doing any combination of the following:
- Focus on its alliance with Sun Microsystems and attack Microsoft head on. AOL already owns the Netscape browser, and has access—via an alliance with Sun—to Sun's products and developers, including the iPlanet App Server. AOL could tighten this alliance with Sun and attack Microsoft as an IT company. Microsoft and AOL would probably prefer to partner at some level, but all-out war is possible too.
- Refocus on its Netscape browser so it competes with Microsoft Internet Explorer.
- Install its instant messaging, e-mail, and other proprietary Internet apps as the default for its users in Windows.
Sony vs. Microsoft:
Sony and Microsoft are in competition largely because of the XBox, Microsoft's new game console, which goes head-to-head with PlayStation 2. The XBox ships with a hard disk, e-mail, chat, an Internet connection, and the ability to access HailStorm services, which means game players can access customized games from any XBox device. Sony plans to counter by adding a modem to its PlayStation 2 and, for the first time, adding a hard disk so that it can utilize AOL services for instant messaging, e-mail, chat, and Internet connectivity. Sony partners Real Networks and Macromedia add streaming technology and Flash-based streaming video and online games. Sony is also partnering with Cisco to create better broadband access for multi-player online game playing. In short, Sony has aligned itself with Microsoft rivals in preparation for the coming console-gaming wars.
Sun vs. Microsoft:
HailStorm services are similar to the context-based services Sun hinted at in its Sun One launch. According to the Gartner research firm, Microsoft is well ahead of Sun. HailStorm is almost ready to begin shipping, while Sun has given little detail on its strategy beyond those at the launch presentation. Sun's Project JXTA has some interesting peer-to-peer capabilities, and could be a threat to HailStorm down the road, says Gartner, but at this early stage it seems unlikely. If HailStorm becomes the standard, it will make the Microsoft specification the de facto standard and mantle it as the industry leader at great cost to Sun.
Sun could revitalize its partnership with AOL-Netscape and try to fight HailStorm head-on, leveraging the relationship Sun already has with J2EE developers, who have been very loyal to the Java platform. All the companies mentioned here other than Microsoft currently embrace J2EE at varying levels.
It is likely that HailStorm developers will utilize the .NET framework to access and create HailStorm services, even though it's not mandatory for them to do so. Over time, HailStorm could weaken J2EE's position on the Web.
Oracle vs. Microsoft:
Oracle's growth and future are tied largely to its application software and consulting services. This means that if HailStorm services gains a foothold at the enterprise level, its core business is threatened. Oracle is likely to try to add similar capabilities to its own application software and, possibly, to make those services available to other application software products. Oracle's notification engines for companies such as eBay and American Express definitely places Microsoft and Oracle in direct competition.
It will probably be some time before HailStorm Notification and Preferences become ubiquitous across enterprise applications, and it's unclear whether Oracle will use these services, create their own, or do both.
Just as a successful HailStorm weakens J2EE for Sun, for Oracle it probably weakens its database leadership. More importantly, it may force Oracle to use Microsoft products with its application software, and to provide consulting on these products in its services division.
IBM and Microsoft:
Microsoft and IBM jointly created SOAP, UDDI, and WSDL, and it appears that these two companies are tied together to promote Web services in many ways. Gartner predicts that IBM will endorse HailStorm and create enterprise-based services for it by 2002.
IBM recently announced J2EE-based Web services with an authentication engine, and a new applications server that runs Web service standards SOAP, UDDI, and WSDL. IBM will also add Web service standard support to DB2, Lotus Notes, WebSphere, and MQSeries.
IBM is the vendor closest to Microsoft in the Web service space and would be a formidable enemy for Microsoft. However, after reviewing this news article ("IBM Aims for the .NET" on InfoWorld), it does not appear that they are moving away from HailStorm. With the exception of IBM's as-yet-unnamed authentication engine, which is too new to understand clearly, they are reengineering their products around Web services, adding SOAP and UDDI support to Notes, Tivoli, DB2, and other products. IBM's WebSphere server will fully support Web services.
Because Microsoft can use IBM's enterprise customers, experience, and consulting for HailStorm and IBM can profit from integrating HailStorm services, these two companies may decide to partner. Either Microsoft will partner with IBM in the enterprise space or else IBM will become its toughest competition there.
Groove Networks and Microsoft:
Relative newcomer Groove Networks, a company created by Lotus Notes founder Ray Ozzie, may prove to be a significant relationship for Microsoft. Groove Networks' first product is a slick peer-to-peer online collaboration, browsing, and file sharing application. The company's peer-to-peer and workflow experience makes it a valuable partner to Microsoft in providing peer-to-peer HailStorm services and in helping to build a sophisticated notification service.
HailStorm Services Are Not Free
The most successful Internet company, AOL, maintained its access fees at the height of the page-view boom, which has proven to be a very smart decision as banner ad revenue declines. Following this model, Microsoft will charge for the use of HailStorm services. Microsoft is operating HailStorm as a business unit with a P&L (profit and loss) accountability, so it will earn most of its money selling subscriptions to end-users and not rely on an advertising-based business model. Microsoft will provide a base set of services, including Passport authentications, and base levels of other services free of charge. Microsoft has not revealed the names or quantities of these other free services. Because it's unclear what consumers will purchase, Microsoft probably does not yet know the mix of free versus billable services. Even after HailStorm's release, Microsoft will probably adjust the mix of free vs. paid services frequently until it finds a good balance.
This is also a good time for Microsoft to begin earning money from some of its MSN Internet Service customers. A recent CNET article, "With HailStorm, Think Fee, Not Free", quotes Merill Lynch analyst Henry Blodget as follows:
"Today, there are roughly 230 million unique monthly users of MSN," Blodget wrote. "However, Microsoft has a billing relationship with only a tiny fraction of these users—specifically, the 4.5 million subscribers to its MSN Internet access service." If Microsoft can establish a billing relationship with these customers, the company could also pitch additional HailStorm services to them, he added.
Microsoft will generate revenue selling development kits to developers and certificates to companies that create HailStorm-compatible services, although the fees are expected to be nominal.
This is all part of a larger picture in which Microsoft moves toward selling most of its software on a subscription basis. Subscription software will help the company create a more predictable revenue stream and wean the company off revenue generated by software upgrades. Microsoft recently backed off of its subscription plan for Office XP, but it is working on an alternative that is acceptable to its customers.
Will HailStorm Succeed?
For HailStorm to succeed, of course, consumers and businesses have to come to a majority agreement that the system's strengths tower far above its weaknesses. Below is a summary of the main issues potentially working against the landslide acceptance of HailStorm:
- Individuals and foreign and domestic governments have expressed concern over privacy and security issues within Passport. It is possible that Microsoft will have to compromise on data ownership to win the approval of governments. This could consist of partnering with other companies or nonprofit organizations.
- Operating the massive data centers required to run the HailStorm services will be a huge undertaking and is not one of Microsoft's core competencies.
- AOL is a formidable competitor, with years of experience running data centers and delivering its products online—and it already has 28 million paying users.
- AOL and Sun could refocus on their partnership and challenge Microsoft and HailStorm head-on.
- IBM possesses strengths in Web services, has recently announced a J2EE-based set with an authentication engine, and has the experience and enterprise customer base. If IBM does not partner with Microsoft, they will be a significant threat in the enterprise space.
- Many people would rather see a distributed HailStorm-like system, based on a peer-to-peer framework, so that control is spread over many companies and systems. Open-source groups are very interested in creating a peer-to-peer solution with capabilities similar to HailStorm. Currently, peer-to-peer technology is at an early stage and does not pose a significant threat, but it will be an ongoing concern to Microsoft.
- Obviously, the current antitrust case is a threat even though it appears that Microsoft is making significant inroads in its appeal.
- Microsoft has to be careful not to stir up antitrust sentiments by integrating HailStorm too closely with its other products.
However, even with all these things in mind, it seems Microsoft has many of the things it can bank on to help drive the success of HailStorm, among them:
- Microsoft currently leads the pack in building and supporting Web services so HailStorm will almost certainly be the first Web services platform to market.
- Microsoft's Notification service gives it a powerful instant messaging commerce platform, putting it technologically ahead of all other current instant messaging offers out there.
- Microsoft's experience with creating Office will help them create an ambitious set of services.
- Microsoft will drive traffic to HailStorm though various types of bidirectional integration with its other products, including Windows, Office, Passport, MSN, Hotmail, Windows CE, and XBox. One example of Microsoft's power is that it has more worldwide users of MSN (an ancillary Microsoft product) than AOL has of its core product, even though Microsoft only generates revenue from a small percentage of them.
- Microsoft has a huge base of third-party developers and is very good at creating third-party developer programs. Therefore, it's likely that there will be many third-party developers and HailStorm-compatible services created, which will help ensure its success.
- Microsoft has huge cash reserves and the marketing know-how to execute on HailStorm.
From these two lists, we can clearly deduce the keys to Microsoft's success. In the consumer market, Microsoft must alleviate consumers' concerns about security and privacy, partner with AOL or find a way to beat AOL at its own game, and successfully bring HailStorm to market before any competitors can do so.
In the enterprise market Microsoft must alleviate the privacy and security concerns of business and government, attract third-party developers to HailStorm, and sign enough business development deals with enough application vendors to make HailStorm the standard plumbing in the enterprise.
What Will HailStorm Bring?
If successful, HailStorm will result in representing an important shift in Internet usage. It will achieve the lofty goal of Internet-based computing at home, at the office, and on the road. If the technology proves its worth, distributed services will make numerous daily decisions on behalf of users.
Intelligent Network and Convenience:
HailStorm's ability to sort through e-mails, voicemails, faxes, and appointments—and prioritize them intelligently—will mean that, in many cases, the network can decide which action to take and notify users of the most convenient ways to accomplish tasks. Network-based computing will provide new levels of convenience. For example, with one calendar, one password, and one set of contacts, the network can help schedule trips for you, your family, and your hosts that accommodate everyone's schedule.
Instant messaging will become commonplace as an intelligent commerce and cross-selling platform. Sales and marketing will have new opportunities to perform one-to-one marketing based on preferences and location, raising targeted selling to new heights of accuracy.
Security and Privacy Concerns:
For the network to become sufficiently intelligent to provide these services, it must be used often and must accumulate huge amounts of data, which raises security and privacy concerns. As the network becomes a larger part of people's lives, it will know specifics about their health, personal relationships, and personal habits. Permitting Microsoft to tie all this information together requires a high level of trust in Microsoft, the third-party HailStorm vendors, and the network in general. Microsoft, other technology companies, governments, and other agencies will have to agree on security and privacy issues. Gartner estimates that consumer use of HailStorm by private people at their place of employment will expose 40 percent of corporate data.
Will consumers accept this risk? History shows that any technology that introduces a significant increase in convenience will likely succeed. The adoption of the automobile also had a significant downside, introducing pollution and risk of injury and death through accidents, but the convenience of mobility overrode those concerns. Perhaps more aptly, the introduction of banking also introduced some risks, but the convenience and increased security that arose from keeping money in one place justified the risk of abuse. It is likely that consumers will make a similar decision about HailStorm.
Pay for Access:
The time has nearly passed when free services rule the Internet. As the dot-coms have painfully discovered, services cost money to provide. AOL just raised its rates and is working toward a cable-TV model where it collects a base rate and charges additional fees for extra content and services. Microsoft plans to follow this example with HailStorm. Using a fee-based service model, HailStorm would likely have failed had it been introduced a year ago.
Technology Convergence:
Traditional Internet services such as e-mail, chat, and instant messaging will be integrated into future versions of Microsoft's operating system, the first one being XP. The newest versions of Internet applications look more like traditional desktop applications. The XBox, PlayStation 2, television, PC, intelligent notepad, Palm device, RIM BlackBerry device, and cell phone are becoming distributed nodes on the Internet, gaining access to networked data, e-mail services, preferences, notifications, and content. All this technology converges to create a new distributed computing platform centered on Web services.
Microsoft As a Reasserted Leader:
If HailStorm succeeds, it will put Microsoft in a leadership in the Web service space. Combine that with its dominant position on the desktop and its proven marketing ability, and Microsoft has a frighteningly clear upper hand in the technology world. Microsoft also enters the enterprise software space with its horizontal building block services, including notification, device, and preference support. Microsoft will face stiff competition from AOL in the consumer space and from Sun and Oracle in the enterprise space.
Benefits to Everyone
The benefits to consumers and businesses are that applications that could not practically be created in the past can now be created with reasonable effort. Almost all applications need a way to know what people are doing, if they want to be notified, and how to notify them. It's not practical for each application to build this plumbing and integration itself.
Think of the following applications and notification requirements:
- An accounts payable application—if a big check needs to be signed urgently and no signee is available
- A sensor management application—if a room is too hot and is going to catch on fire
- A manufacturing application—if a critical part is not working and the plant is down
People need to be notified and the system needs to be able to receive their responses. The HailStorm concept of user and group IDs, calendars, contacts, notifications, preferences, and identities being made available safely and securely to other programs and devices across the Internet will provide the infrastructure for real intelligence across applications and for many ways to reach people.
Having standard APIs made available so that cell phone companies, PBX vendors, and e-mail systems can focus on their core business and leave the rules, roles, routing, and integration to standard plumbing services will again benefit consumers and businesses with increased convenience. This should lead to the general integration of key information that is now stored separately on individual devices. The same contacts and e-mails on a user's Palm should also be available on the user's PC, and inboxes should show messages from cell phones, PBX systems, and e-mail systems.
Things change quickly in the technology market. It remains to be seen whether one vendor will control the consumer side and another the business side, or whether the competition will be more mixed and more vendors will control major segments of this market. What is of major importance to developers, consumers, and businesses is that the technological companies are forced to compete with open standards, ensuring that innovation in the Web service space continues at a fast pace.
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Part I: What Is HailStorm? 
Part III: How Will HailStorm Affect You? 
Part II: HailStorm's Design and Structure 
Is HailStorm good for business or is it simply good for Microsoft? Do you plan to use HailStorm? If not, why not? What problems do you anticipate with integrating HailStorm services into the enterprise? Join the enterprise.general discussion group and let us know.