Some of the biggest firms in the technology sector have been increasingly staking their futures on Web services, a model which seeks to go beyond the traditional client-server operating system to define a workable distributed computing framework for the Internet. One of the firms with the most to gain (or lose) from this future is Microsoft Corp., whose .NET initiative holds significant advantages in the space but faces difficult challenges as well. In a July report, "Deciphering Microsoft .NET," Gary Hein, analyst with research firm The Burton Group, found that though Microsoft is facing off with serious competitors like AOL Time Warner, IBM, Sun Microsystems, Hewlett-Packard, Bowstreet and BEA, Microsoft's biggest obstacle in the Web services arena may be itself.

"Microsoft is aggressively pursuing the Web services model with its .NET Framework and, with HailStorm, is building both a platform for services and specific services that leverage the .NET Framework," Hein said in the report. "The combination of these two efforts represents nothing less than Microsoft's attempt to ensure it will dominate the Internet market as thoroughly as it dominates the desktop OS. Given the company's current lock on developers and the desktop, Microsoft has some clear advantages. But its insistence on running all Web services on Windows, along with privacy and security issues, presents significant challenges. Perhaps Microsoft's biggest challenge will be to balance efforts to protect its past while building the future. Considering the substantial changes that Web services will wreak on Microsoft's business model, that's no small task."