Once Again, Sun Steps Into Microsoft's Path

Sun Microsystems(SUNW Quote) and about 30 of its closest friends are taking a pass on Microsoft's(MSFT Quote) Passport.

Sun and its partners today announced the formation of the Liberty Alliance Project, an initiative to promote an open identification standard on the Internet that's a clear swipe at Microsoft's single sign-on Passport initiative.

The group is hailing its efforts as a breakthrough initiative because it will let consumers decide which institutions control different types of information. The goal of both Microsoft's and Sun's programs is to create a single electronic form that consumers can use to register and buy throughout the Web.

"What you will see with the Liberty Alliance is just like what you see with the Cirrus network on your ATM card: How you choose to manage your information is up to you," says Jonathan Schwartz, chief strategy officer for Sun. "In all likelihood, you will want your bank to keep your financial information, your hospital to keep your health information, and your telephone company, perhaps, to manage your buddy list."

For instance, a user might be able to sign on once to view suggested movie choices based on his preferences, as well as gain access to his bank account. But in order to actually purchase a ticket for one of those movies, the user might tell his bank to ask for additional information, such as his mother's maiden name, before advancing the money. Or, he could choose to have the same level of security for both. He could also elect to not give his financial information to the ticket-selling agency at all.

For those reasons, the Liberty Alliance isn't just a coming together of anti-Microsoft moguls in the technology industry. Firms as diverse as Bank of America(BAC Quote), United Airlines, a unit of UAL (UAL Quote), and Schlumberger(SLB Quote) are also members.

Under Microsoft's Passport plan, users would be able to submit information once, and then have that information available to different Internet sites they choose to sign on to. That program has received a lot of criticism, though, from consumer groups that don't trust Microsoft to keep a tight lid on sensitive consumer data.

Microsoft, in some ways, stole the thunder from the Liberty announcement last week when it announced it would open Passport up to different standards. Also, using the ATM analogy, it said that someone signing up for an authentication service with rival America Online, a unit of AOL Time Warner(AOL Quote), could still get access to Microsoft Web sites, if AOL chose to participate. Microsoft says Passport already has 165 million users, though analysts say most of those users probably don't know they've signed up for it.

Nonetheless, with that jump, Microsoft claims Sun and its buddies are late to the game.

"This announcement is a strong, if belated, validation of Microsoft's vision of user-centric services. If Sun et al. were really interested in universal authentication, it would federate with Passport's 165 million accounts as opposed to trying to build a new island of authentication some time in the future," Microsoft said in an email statement sent to TheStreet.com. "This announcement is long on rhetoric and short on deliverables. This is standard Sun operating procedure: demonize Microsoft to distract from Sun's own agenda and the fact it has absolutely nothing to deliver to customers and will not have anything any time soon."

The unstated and underlying motivation of the statement is that Microsoft was trying to create a single sign-on standard for the Internet, and that Sun has now stepped in to block that initiative.

Sun and Microsoft, of course, got in a legendary battle over modifications Microsoft allegedly made to Sun's Java software. Sun designed the software to allow programs to run on any system. It was viewed largely as an attempt to thwart Microsoft's Windows operating-system monopoly.

"It is a little ironic: The Passport and the Alliance are trying to solve the single sign-on problem, and we haven't even gotten to market yet, and we already have two standards," says Avivah Litan, an analyst at consultant Gartner Group. "It does seem to be a war between Sun and Microsoft." (The firm counts both Microsoft and Sun as clients.)

America Online's Magic Carpet initiative could be a third "single sign-on" initiative.

Aaron Scott, an analyst at Tucker Anthony Capital Markets who rates Microsoft a buy, says companies wishing to make things easy for their customers will likely choose to participate in both programs. eBay(EBAY Quote), for instance, has signed on for both Passport and the Liberty Alliance.

But he also notes it will be difficult for Sun to pull its own initiative off, if only because of the dynamics of group ventures.

"Typically, you run into political problems," Scott says. "The real question is, how many joint ventures actually ever work the way they're supposed to?" (His firm hasn't done banking for Microsoft.)

Given the level of rhetoric on Wednesday, the problems of a true single sign-on to the Internet have only just begun.