Jeff seems to like Cringley's statement of "The central point was that paying too much attention to Microsoft simply allows Microsoft to define the game. And when Microsoft gets to define the game, they ALWAYS win."
A nice statement, but nothing more than a nice statement, other than that, its all incorrect.
Microsoft has won in the past due to many factors, and none of them related to `Let them define the game', a couple from a list of many:
In 1993-1994, Linux had the promise of becoming the best desktop system. We had real multi-tasking, real 32-bit OS. Client and Server in the same system: Linux could be used as a server (file sharing, web serving), we could run DOS applications with dosemu. We had X11: could run applications remotely on a large server, and display on small machine. Linux quickly became a vibrant innovative community, and with virtual-desktops in our window managers, we could do things ten times as fast as Windows users! TeX was of course `much better than Windows, since it focuses on the content and the logical layout' and for those who did not like that, there was always the "Andrew" word processor. Tcl/Tk was as good as building apps with QuickBasic.
And then Microsoft released Windows 95.
The concensus at that time? Whatever Microsoft is doing is just a thin layer on top of COM/DCOM/Windows DNA which to most of us means `same old, same old, we are innovating!'.
And then Microsoft comes up with .NET.
Does something like XAML matter? Not really. But it makes it simple to create relatively cute apps, by relatively newby users, in the same way anyone could build web pages with HTML.
Does Avalon really matter? Its a cute toolkit, with tons of widgetry, but nothing that we cant do on a weekend, right?
Does the fact that its built on top of .NET matter? Well, you could argue it has some productivity advantages, security features and get into a long discussion of .NET vs Java, but its besides the point.
Everyone is arguing about tiny bits of the equation `We have done that with Glade before!', `Gtk/Qt are cross-platform!', `We can get the same with good language bindings!', `We already have the widgets!', `Cairo is all we need', `What do users really want?' and of course `Dont let them define the game!'.
They are all fine points of view, but what makes Longhorn dangerous for the viability of Linux on the desktop is that the combination of Microsoft deployment power, XAML, Avalon and .NET is killer. It is what Java wanted to do with the Web, but with the channel to deploy it and the lessons learned from Java mistakes.
The combination means that Longhorn apps get the web-like deployment benefits: develop centrally, deploy centrally, and safely access any content with your browser.
The sandboxed execution in .NET  means that you can visit any web site and run local rich applications as oppposed to web applications without fearing about your data security: spyware, trojans and what have you.
Avalon means also that these new "Web" applications can visually integrate with your OS, that can use native dialogs can use the functionality in the OS (like the local contact picker).
And building fat-clients is arguably easier than building good looking, integrated, secure web applications (notice: applications, not static web pages).
And finally, Longhorn will get deployed, XAML/Avalon applications will be written, and people will consume them. The worst bit: people will expect their desktop to be able to access these "rich" sites. With 90% market share, it seems doable.
Will Avalon only run on Longhorn? Maybe. But do not count on that. Microsoft built IE4 for Windows 98, and later backported it to Windows 95, Windows 3.11 and moved it to HP-UX and Solaris.
The reason people are genuinely concerned and are discussing these issues is because they do not want to be caught sleeping at the wheel again.
Will this be the end of the world for Linux and the Mac? Not likely, many of us will continue using our regular applications, and enjoy our nicely usable and consistent desktops, but it will leave us out of some markets (just like it does today).
Btw, the Mozilla folks realized this already
 Although it was easy to see why .NET supported the Code Access Security (CAS) in .NET 1.0, there was no real use for it. With Longhorn/Avalon/XAML it becomes obvious why it was implemented.
Although some of the discussion has centered around using a native toolkit like Gtk+/XUL to build a competitor that would have ISV sex-appeal, this is not a good foundation as it wont give us Web-like deployment (we need a stack that can be secured to run untrusted applications, and we need to be able to verify the code that is downloaded, which leaves us with Java or .NET).
The time is short, Microsoft will ship Avalon in 2-3 years, and they got a preview of the technology out.
I see two possible options:
I think someone will eventually implement Avalon (with or without the assistance of the Mono team), its just something that developers enjoy doing.
If we choose to go in our own direction, there are certain strengths in open source that we should employ to get to market quickly: requirements, design guidelines, key people who could contribute, compatibility requirements and deployment platforms.
We have been referring internally at Novell to the later approach as the Salvador platform (after a long debate about whether it should be called MiggyLon or Natalon).
We do not know if and when we would staff such an effort but its on the radar.
Are there patents in Avalon? It is likely that Microsoft will try to get some patents on it, but so far there are little or no new inventions on Avalon:
Posted on 24 Apr 2004