Microsoft Reveals Its Future in 'NGWS' Briefing

Updated from 2:13 p.m. EDT

Microsoft (MSFT) finally revealed many of the details of its long-promised "NGWS," or Next-Generations Windows Services initiative. Chief Architect Bill Gates and CEO Steve Ballmer led a long list of senior Microsoft managers who told an auditorium full of reporters in Redmond, Wash., why and how NGWS will become a large part of Microsoft's future. (See TheStreet.com/NYTimes.com joint newroom's coverage of the new initiative.)

The company provided a few hints, and a couple of peeks under the covers, about NGWS' content at a Florida session last month for software developers. Two weeks ago, Microsoft postponed until today the press briefing on NGWS. The postponement was done to make sure reporting of the NGWS plans was not diluted by the expected heavy coverage of U.S. District Judge Thomas Penfield Jackson's final ruling in the antitrust action against Microsoft by the Justice Department and its state attorneys general partners.

NGWS is Microsoft's effort to reposition itself for the future of software, which is rapidly being redefined in the marketplace away from disc-based products sold in shrink-wrapped boxes to "software as services," sold and delivered over the Web.

Microsoft executives admit privately that they understand this massive shift is already underway. The software giant also understands that if it is to have a chance to be as important in the software-as-services era as it has been in the era of boxed software, it must begin immediately shifting its own focus, as well as that of its customers, to this new paradigm.

Industry analysts who have been briefed on parts of NGWS -- Microsoft has kept it under wraps, even to favored analysts and reporters -- say on a no-attribution basis that they are impressed with the breadth and vision embodied within NGWS. Many companies are competing in this arena, but, they say, Microsoft may be able to hold the high ground because of that comprehensive approach. It is helped, of course, by the power of its incumbency atop the traditional PC and server software market.

The extended stay of enforcement of the "conduct remedies" assessed by Judge Jackson -- issued this week as the judge approved the Justice Department's request to send the Microsoft appeal of Jackson's rulings to the Supreme Court -- could give the company just the window of time it needs to establish NGWS.

A major issue is how NGWS would be continued by and divided between the parts of a split Microsoft, should the other part of Jackson's decision -- to break the company into two independent businesses -- be upheld in a separate appeals process. Since Microsoft sees NGWS as in effect a long-term replacement for its ubiquitous Windows operating systems, NGWS would probably go to the new "Windows company" in such a division of Microsoft's assets, not to the "applications company," which would continue to develop, sell and support such end-user products as Microsoft Office.

But a divided Microsoft might not have the financial resources, the breadth of developer skills, nor the industry clout to establish NGWS as the next platform standard in computing.

Microsoft was expected to explain to reporters at Thursday's all-day session how it will attempt to establish NGWS over the next few years, while continuing to maintain Windows' dominant market position. Company executives admit privately that such a transition will be a difficult job, but is essential, because funding the development of NGWS will require the revenue produced by continuing sales of Windows operating systems to original equipment manufacturers, or OEMs, and end-users.

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