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Workgroup Strategic Services regularly conducts primary Market Research for our clients in the information industry. These U.S. based end-users surveys measure and track key issues such as Vendor Brand Equity, Asset Management, Satisfaction Ratings for both hardware and software suppliers in critical areas - such as Service, Support and Professional Integration Services.

There have been several dynamic changes in the user community since the preceding quarter responses. Most notably, these include the following (all responses are on a 1 - 10 scale - 1:Poor & 10:Excellent):

We have only released publicly two important software trends among the users. While there are over 22 categories of software evaluation criteria in the original research, these two demonstrated severe shifts from the preceding quarter results:

• Compaq Computer continues to show positive ratings across the board. It will be interesting to note whether Compaq's rating changes in future quarter's as they merge the Digital PC products. However, the Compaq plans to invest in Customer Support and Service appear to be making industry inroads. Another noteworthy finding is that Compaq is second only to IBM as the respondents' most favored Strategic Supplier.

• Of particular note about IBM is the diversity of the responses - excellent service & support and the most favored strategic supplier while, at the same time, lackluster Price/Performance results. While there have been sporadic attempts by IBM in the Aptiva and corporate lines to become the Price/Performance leader, either the messages have been off target or they haven't had the consistency in the marketplace. In the meantime, both IBM's Server and ThinkPad product lines achieved characteristically high ratings.

• Hewlett-Packard continues to leverage both Brand Equity and Service and Support into a strategic advantage. Respondents were particularly positive about the H-P NetServers and Vectras. However, the absence of marketing/strategy in their portable product detracted from their "Strategic PC supplier" ratings - attaining just 50% of the respondents - well behind other "full line suppliers" like both IBM and Compaq.

• Both Packard Bell/NEC and AST lost in almost all-relevant areas including distribution, reputation, service and support, and reliability rating. These two vendors exhibited the largest aggregate losses in this quarter.

The next generation of Windows NT, NT 5.0, is a complete make-over of the NT OS environment and is being positioned as closing the gap between Microsoft and its UNIX rivals in the Enterprise space. When the final version of 5.0 is released in the first half of 1998, it will contain 27 million lines of code. Much of that is due to enterprise-capable features such as a multi-domain directory. Eventually NT will become the base platform for all Windows environments, offering a common infrastructure on which other OS's in the Windows family are built.

NT 5.0 will include limited Plug and Play functionality; Microsoft Management Console; Internet Information Server 4.0; OnNow power management facilities; broadcast media extensions; support for ATM, ADSL and other network streaming technologies; and support for the Win32 driver model, ActiveX and DirectX. Other features include client data replication called IntelliMirror. This technology would allow users to make replications of their data at the operating system level. Other features include a new distributed file system, support for more processors in an SMP (symmetric multiprocessing) configuration, 64-bit very large memory (VLM) support for increased storage locally, and storage management enhancements. Microsoft is also planning on including the Active Desktop; however, the U.S. DOJ and the judge overseeing the 1995 consent decree may alter this plan. In addition to a Workstation and Server edition, there are plans for an enterprise edition with clustering, transaction, and message-queuing capabilities as well as a multi-user version.

Capabilities alone will not guarantee 5.0's success, so in order to increase NT's penetration into the enterprise market, Microsoft has formed alliances with several consulting firms. One of these is KPMG Peat Marwick, a Big Six accounting firm, who is creating a consulting group specifically geared towards selling Windows NT. Another Microsoft consulting alliance includes an arrangement with Arthur Andersen on promoting the Windows NT platform for mid-sized businesses. Under the terms of the agreement, Microsoft and Arthur Andersen will build a "solution center" in Dallas to demonstrate systems using software from Microsoft and German software giant SAP AG. Arthur Andersen will also expand its number of SAP professionals to 350 and will make sure that at least 100 of its consultants become Microsoft Certified Professionals.

In addition to partnerships with Big Six accounting and consulting firms, Microsoft will promote its Total Cost of Ownership and Zero Administration strategies to increase the predominance of Windows NT. The underlying message is that Windows NT will reduce the cost of running a computer by 50%; however, the catch is that the savings will only apply to environments using NT 5.0 servers and workstations. Although NT 5.0 will provide complementary technology with Windows 98, an NT 5.0 and Windows 98 environment will not experience a 50% reduction because the Zero Administration Windows initiative will not be available in Windows 98 when it ships. Although Microsoft is talking about Total Cost of Ownership and even has introduced the Zero Administration Kit for Windows 95, it won’t be until Windows NT 5.0 is released that the full value of TCO will be realized.

Microsoft is positioning Windows 98 as the consumer upgrade of Windows 95. Windows 98 is on schedule to be released in the second quarter of 1998, and unlike Windows 95, which was a complete overhaul of Windows 3.11, Windows 98 simply builds on Windows 95's existing capabilities. Windows 98 contains new capabilities and support for older Windows applications and technologies. Additionally, it is being positioned as a vehicle to integrate the PC, TV, and games together. Lastly, Windows 98 is designed to make computing easier, more reliable, and faster, and will be positioned as the fastest platform for running the new Microsoft Internet Explorer 4.0.

Microsoft is designing Windows 98 to accommodate a broad array of users, from new systems users to users only wanting to upgrade their OS. For the home user upgrading, Microsoft has modified the user interface with single-click opening, icon highlighting, and forward/backward buttons in order to make navigation easier. New wizards and utilities like System File Checker have been added as well. Also, Windows 98 can be integrated with Internet Explorer 4.0, Outlook Express, and NetMeeting software, turning the OS into a communication device as well.

Microsoft is plugging Windows 98 for consumers, while convincing corporate customers to go with Windows NT Workstation. However, Microsoft does expect Windows 98 to be found in the corporate world, especially since NT Workstation will not support plug-and-play and advanced power management for notebook computers until Windows NT 5.0 ships. Therefore, to accommodate corporate environments, Windows 98 will be designed with policy-based, central management guidelines and features outlined in Microsoft’s Zero Administration Initiative for Windows. Additionally, utilities like Dr. Watson and System Information Utility will be included to make it easier to diagnose and correct problems. Lastly, Windows 98 provides an Upgrade Wizard to help users upgrade from Windows 95 and Windows 3.11.

Windows 98 will be most beneficial in new system purchases. Support for the newest generation of hardware gives new users access to OnNow, which instantly starts a PC, making it more like turning on a stereo or TV. Also, there will be support for the Universal Serial Bus enabling the next generation of Plug and Play hardware. Support for the industry standard IEEE 1394 Bus allows users to control VCRs, stereos, and other consumer electronics from their PCs. Additionally, Windows 98 helps redefine the PC’s role as an entertainment center by combining previously separate components, such as television, DVD and the Internet, and integrating them with the powerful processing and communications capabilities of the PC.

Within the first two weeks of the launch of Internet Explorer 4.0, 2 million copies were downloaded from Microsoft's website. Additionally, within the first days of IE 4.0's release over 2,000 corporations including Fortune 500 and Fortune 100 companies licensed the Internet Explorer Administration Kit 4.0. Microsoft reports that this is 20 times higher than the demand for IE 3.0 in its first week of availability. According to Microsoft these some 2,000 corporations will deploy IE 4.0 on an estimated 1.6 million desktops in organizations ranging from financial to pharmaceutical companies. Company support includes Toyota Motor Sales, General Mills and Merrill Lynch.

In addition to its immediate success, IE 4.0 has created an extraordinary amount of controversy. The Department of Justice (DOJ) is charging Microsoft with violating a 1996 court order. It is alleged that Microsoft has been anti-competitive by licensing and distributing Internet Explorer as a condition of licensing Windows 95. This concerns the government, as well as many people in the industry, because the Windows platform has such an unprecedented market share.

Microsoft was ordered by Judge Thomas Penfield Jackson to offer an alternate "browser-less" version of Windows 95 to computer vendors who request it. In response to this, Microsoft offered older versions of Windows 95 that did not include the browser. This also upset the court because the older versions of Windows are outdated and forcing computer makers to license them would not allow them to embrace the newest technology. At this point, Microsoft is held in contempt of court for not complying with the court order. Microsoft has maintained since the beginning of the investigation that IE 4.0 is an essential part of the Windows platform. They have also tried to convince the court that their newest version of Windows 95 will simply not work without the Internet Explorer capabilities. However, an expert court witness demonstrated how they successfully removed IE 4.0 from the system without any harm to Windows 95.

Microsoft has stated that software manufacturers, not the government, should have the most power when it comes to shaping the future of technology. With more than 50-60 million people online worldwide, they feel that no operating system can be competitive if it does not offer the most convenient route to the Internet. They claim that including their Web browser in their operating system is essential to the evolution of their products. However, the Department of Justice, fueled by Microsoft competitors who are concerned about Windows dominance, are showing few signs of backing down.

Despite these allegations the motto of IE 4.0 remains: "The Web the way you want it." It also represents yet another step in Microsoft's vision of the "Web lifestyle", i.e. the Internet is taken for granted like the telephone, TV, car, etc. The goals of IE 4.0, in order to attract millions of users, are simplicity, content and a platform that can be built upon.

Although Microsoft holds the vision of the "Web lifestyle", IE 4.0's immediate focus is on three issues: desktop browsing, collaboration and Webcasting. IE 4.0's desktop browsing features the Explorer Bar for finding information. The Security Zone relieves user concerns regarding security issues and collaboration aspects and includes Microsoft's entry-level mail client, Outlook Express, that allows people to send Web pages. Lastly, Webcasting, sometimes-called push technology, is the ability to have Web sites delivered to the desktop. Integration is another area of focus, for example, Internet Explorer 4.0 can not only be integrated with Windows, but America Online and Lotus Notes as well.

Most recently, Microsoft released its 4.01 browser, which includes disability accessibility features. The browser offers full keyboard accessibility for users who have difficulty using a mouse and is compatible with third-party aids such as blind-access utilities. This version also allows users to control the colors, font sizes, font styles and other characteristics of all Web pages. The company said version 4.01 also offers improved product setup and security. Microsoft recommends that users who need accessible features or who have experienced installation problems should download Internet Explorer 4.01. The company said all other users should download the security patch.

IE 4.0 is being positioned as Microsoft’s next generation Internet Access tool. Internet Explorer 4.0 is comprised of a suite of products comprised of an Internet browser, the Outlook Express Mail, NetMeeting videoconferencing, and Wallet, a utility for financial transactions. IE 4.0 is geared to turn the Internet into not only a source of information and basic communication, i.e. e-mail, but into an advanced means of communication, i.e. videoconferencing and secured banking.