Microsoft Corp. is dispelling many doubts about its ability to muscle its way into the smart card industry.
Six months after offering its Windows operating system to the smart card world, Microsoft says that responses from technology companies and from potential users in financial services and other industries are exceeding expectations.
This indicates that the smart-card-centered extension of Microsoft's ubiquitous Windows "can fulfill its potential to be a low-cost, high- performance platform that will broaden the interest in, and application of, smart cards," said Philippe Goetschel, director of the Smart Card for Windows program.
The history of Smart Card for Windows is bookended by the card technology industry's top two conventions: Cartes '98 last October in Paris, where the operating-system extension was announced, and Cardtech/Securtech '99 last week in Chicago.
Smart Card for Windows was one of the stars of the Chicago event. Within Cardtech, Microsoft sponsored a two-day training session for system developers that attracted some of the conference's largest and most intensely interested audiences.
Though the first full-fledged release of Smart Card for Windows has been pushed back until late summer, several pilot projects point toward a considerable range of uses. Among the participants are Merrill Lynch & Co. and the Department of Veterans Affairs, which are expected to begin trials within two months.
Merrill wants to use smart cards to improve employee log-on security and user authentication, an example of enterprise information technology, or IT, security.
A VA hospital in Charleston, S.C., will use the cards for private storage of patient health records. MedAssure, a unit of DataCard group, will supply the SmartRec system in a 100-patient test.
Microsoft is initially focusing on the corporate IT, medical, and travel and entertainment markets, though Mr. Goetschel emphasized that the technology will probably have far broader application.
"We will have many more (pilots) on-line as we move closer to a full beta (pre-market) release," Mr. Goetschel said. "We will see a range of IT, personal, and medical identification, electronic cash, and loyalty applications in the coming months."
Mr. Goetschel's pitch for Smart Card for Windows could be read as a challenge to the two other major, openly available alternatives for writing chip card programs: Java Card from Sun Microsystems Inc., which Visa International supports, and Multos, which originated within the Mondex International program of MasterCard International.
Those platforms have been years in development and on the market, making Smart Card for Windows a relative upstart. Sun says its latest version-Java Card 2.1-is due out this summer. Microsoft is just entering beta testing and will release the smart card system at summer's end, saying Windows card 2.0 should follow in 12 to 18 months.
Among the criticisms Mondex chief executive officer Michael Keegan leveled at the Windows card is that it can easily remove control from card- issuing entities over what services are loaded on multi-application cards.
Mr. Keegan argues against "the PC model," in which buyers pick and choose what to put on personal computers. He said banks will prefer to select and control applications on their smart cards, for security and marketing reasons.
But in terms of functions, such as the ability to load and revise programs on cards via telecommunications connections, Mondex and Sun Microsystems would agree philosophically with what Microsoft is trying to accomplish. Sun and Microsoft are even licensing some of the same smart card specifications, such as Visa Open Platform.
"An increasing amount of business is conducted over corporate networks, the Internet, and by wireless communication," Mr. Goetschel said. "Smart cards provide a completely portable, extremely secure means of storing, encrypting, and decrypting data, making them ideal for providing secure electronic identification."
Michael S. Dusche, director of smart card marketing at Microsoft, predicted corporate information technology "will be the first killer app" for smart cards. Many industry observers, at least in the United States, are looking in the corporate or enterprise direction after disappointments at the consumer level, such as the recently closed Mondex-Visa Cash pilot on New York's Upper West Side.
Merrill Lynch will give Windows cards to 100 to 200 employees who travel frequently. Cryptoflex chips manufactured by Schlumberger will accommodate data encryption and digital signature operations, taking security well beyond what passwords afford.
Mr. Dusche is urging banks to get moving in the smart card market, even on the consumer level, for competitive reasons.
"Banks need to understand that this is a great opportunity and that other people understand that too," Mr. Dusche said in an interview last week. "Just like AT&T was able to enter the (credit) card issuing business, lots of companies can enter the smart card issuing business."
Mr. Dusche cited Blockbuster Entertainment's offering of smart cards that can accrue airline miles. In the future, he said, most large companies will handle their own smart card systems, the way Merrill Lynch is about to do.
Microsoft wants to use Windows to smooth such institutions' path to using smart cards. Mr. Goetschel predicted that by next year all new PCs will have smart card readers, and by 2002 up to two billion chip cards could be programmed to the Windows specification.
Both Merrill and the Department of Veterans Affairs cited familiarity with Windows and the easy loading of applications on cards as reasons for going with the Microsoft offering.
"We don't have to change our code from an application development standpoint in order to work with these cards, once this operating system becomes ubiquitous," said Scott D. Miller, project manager at MedAssure. "Microsoft's operating system gives us a lot more flexibility in terms of file management."
Dean Mazboudi, vice president of private client architecture at Merrill Lynch, said Windows cards can be "integrated within (our) current environment" and are "part of a budgeting strategy allowing us to carry our entire investment over to Windows 2000," the next generation of the Windows NT platform.
Also during Cardtech/ Securtech, Microsoft said it selected Atmel Corp. cryptocontroller integrated circuits for the first release of its Smart Card for Windows software. The Atmel hardware's ability to handle 1,024-bit encryption keys was crucial, Mr. Dusche said. That is "about twice the security of the most secure military applications" and will enable developers to "design smart card products with any level of security to suit an extensive range of applications."
Cardtech/Securtech provided a forum for Mr. Goetschel of Microsoft to spar with Patrice Peyret, director of Sun Microsystems' consumer and embedded division.
Mr. Peyret criticized Microsoft's file system, calling it difficult to manage for multiapplication cards. His opponent countered that Smart Card for Windows is far more flexible than Java Card.
Arguing for Microsoft's industry-friendliness and flexibility, Mr. Dusche said a chip card producer such as Gemplus "doesn't have to put 100 people (to work) on building a way for the card to talk to the PC. We did all that for them," freeing personnel to do more complicated and strategically important tasks.
About 300 programmers were trained on Microsoft's system last week, and the Redmond, Wash., company predicts that 2,000 will attend its developers' session at the fall Comdex show in Miami.
"A year from now, I expect we'll have millions of people building software for our platform," Mr. Dusche said. "That is our real focus."
SAN JOSE, Calif.-Semiconductor maker Atmel Corp. said it has completed its purchase of smart card chip operations from Motorola Inc.
The unit has been renamed Atmel Smart Card IC Ltd. About 80 people from the former Motorola Smart Information Transfer business, most in East Kilbride, Scotland, have been transferred to the new company.
As a result, Atmel has established itself as "one of the world leaders in the smart card IC (integrated circuit) industry," said Atmel president and chief executive officer George Perlegos.
He said Atmel, now No. 3 in smart card IC production, is the only "key player" in the market to be offering both flash and read-only memory products.
Atmel plans to make the chips in Colorado Springs and Rousset, France, but will rely on Motorola facilities during a 15-month transition period as those factories get up to speed.