Although the two companies traded roles a long time ago, the widely held belief that Apple innovates whereas Microsoft copies continues to linger. In reality, Apple sat still for most of the late 1990s while Microsoft moved its customer base to a modern OS family, pushed Web-OS integration, then began to replace the tired OS desktop metaphor with a logical task-based approach. Apple has been playing catch-up ever since, and even a casual look at the Mac OS X feature set reveals more than a passing resemblance to features Microsoft first made popular in Windows. Even Apple's high-profile "digital hub" strategy was launched a day after Microsoft Chairman and Chief Software Architect Bill Gates announced a similar push for Windows at the 2001 Consumer Electronics Show (CES).

No matter. Apple's current OS, applications, and services are top-notch and, for the first time in a long time, thoroughly modern. Under CEO Steve Jobs's tutelage, this relatively tiny company has done a great job of keeping up with, and in some cases even surpassing, the Joneses (read "Microsoft"). Last week, at Apple's biannual Macworld trade show, Jobs introduced new initiatives for the Mac user base, including a new Mac OS version (code-named Jaguar), a new iMac version with a 17" wide-screen display, and a new line of iPod portable music players. One of the most interesting announcements centered on a new set of services Apple calls .Mac, a name that even Jobs admitted during his keynote address was "inspired" by .NET.

.Mac delivers features that Microsoft has only been promising to deliver with .NET, including a regular subscription charge. However, Apple's strategy differs from Microsoft's in several important ways. Chief among these is target audience. Whereas Microsoft sees .NET affecting each of its important customer markets (e.g., enterprises, developers, home users), the company's strategy with new products has been to first seed developers, then get businesses to sign on, and finally target consumers. Although Apple's target markets overlap somewhat with Microsoft's, Apple's strategy tends to target consumers first, as well as key markets such as creative professionals and education. Therefore, .Mac is aimed solely at consumers. For $100 a year, .Mac customers receive the following services:

• A Mac.com email address with 15MB of IMAP or POP3-based email storage, virus protection, Web access, and a forwarding service that lets users forward email from other email accounts.
• 100MB of iDisk-based online storage space that users can put to any use, including storing backups, Web sites, photos, videos, and pictures. Apple's iDisk is WWW Distributed Authoring and Versioning (WebDAV)-based, so users can access it from any Windows system or modern Macintosh.
• Access to Apple's Web-based Web site creation tool, HomePage, which provides wizards, site templates, and other tools to simplify the Web publishing process.
• Backup software, an application that backs up files to CD-R disc, DVD-R, or iDisk.
• McAfee Virex, an entry-level antivirus package.
• Access to a .Mac-specific support site with dedicated and responsive support personnel, peer discussion boards, and FAQs.
• Calendar-sharing capabilities with iCal, Apple's new OS X-based calendar application, which will ship in September.

Even for Apple's most loyal customers, the move to subscription services comes as something of a shock. Before .Mac, the company offered a less impressive array of services dubbed iTools for free to anyone who owns a Mac. As of September 30, 2002, however, any iTools customers who haven't upgraded to .Mac will lose their iTools accounts and, more important, any data they might have stored on iDisk. Apple is offering a one-time $50 upgrade to these users to smooth the transition to .Mac.

Cost aside, Apple is delivering on a Web services vision that Microsoft is still only making promises about. ".Mac does what others have tried and failed to do—make Internet Services a seamless extension of your computer," Jobs said during his Macworld keynote address. "It has never been easier to store, publish, share, or communicate on the Internet." And the service is only going to get better. In addition to the iCal sharing feature, Apple plans to add AOL-compatible Instant Messaging (IM) through its iChat application, as well as photo slideshow publishing and sharing functionality in the near future. Users who need more storage space can upgrade: Apple is offering .Mac users additional Mac.com email addresses and iDisk storage space, each with a yearly subscription charge. Smart.

As a Mac user who used Apple's iTools services, I was taken aback when Jobs originally announced .Mac, mostly because the jump from free to $100 a year seemed pretty steep. In contrast, Microsoft has slowly been moving premium MSN Hotmail features into its subscription-based MSN Extra Storage service—a move that, at first glance, seems less grating to users. But in retrospect, Microsoft's slow move to subscription services, particularly with Hotmail (and the soon-to-be-introduced MSN 8 client, which I'll discuss in an upcoming .NET UPDATE), seems a bit underhanded. The gradual changeover induces Hotmail users to wonder what functionality Microsoft will remove from the free service next. And what about 6 months from now: Will the free Hotmail service even exist?

Apple, however, has staked its claim to subscription services in a more upfront fashion; rather than simply ceasing to provide a free service, the company has discovered how to make money by providing valuable services to its customers. So rather than complain about the cost—after all, the $50 upgrade price is reasonable—I've decided to subscribe to .Mac and see how the service works for me. A year from now, I'll base my decision to upgrade on the value I get from the service, as well as on what new features appear in the coming months. If the service and its improvements are compelling enough, I'll keep subscribing.

Most important, perhaps, is that Microsoft might learn something from this surprising turn of events. Maybe the time has come for the company to start looking to Apple for inspiration once again. .NET is a great idea, but if .NET Passport and a continually handicapped email service is all Microsoft can produce after years of talking about its Web services initiative, the company will begin to lose customers in large numbers. And that situation leaves an opening for competitors such as the Liberty Alliance Project, Yahoo! mail, and, yes, Apple.