Can Microsoft morph Windows into an Internet service?

Even before Google hired away from Microsoft one of the preeminent developers of Windows last year, speculation over when and whether Google might launch a “GoogleOS” has been rampant. (And is still ongoing, in spite of the Google brass’ attempt to throw cold water on the idea.)

However, I haven’t seen Microsoft observers mull a similar question: What if Microsoft were to do something similar? What might Windows look like if it were available in Internet-service form?

It seems Microsoft itself is considering seriously such a possibility. There’s a nugget buried deep in a November 27 (ever so-dully-titled “Life After Vista: Can Microsoft Retool for Web?”) Wall Street Journal story. Skip to the very end of the article and you’ll find this little gem:

“Meanwhile, a cadre of respected Microsoft computer scientists and programmers formed a group under Chief Software Architect Ray Ozzie to start building software that could be a critical piece of what Windows might become, say people familiar with the work. That group, says a person familiar with the matter, sees the future of Windows as much more as an Internet service than software that runs on a PC.”

Based on those couple of sentences, I’d say there’s some kind of a Microsoft incubated project in the works that may or may not be under Microsoft Live Labs. And if Ozzie is involved, I’d bet we’re talking about more than simply a hosted version of Windows available for “rent.”

One thing’s for sure: Microsoft isn’t about to field a competitor to its desktop-Windows cash cow. (Windows client and Microsoft’s information worker units still generate 90 percent of the company’s profits.) But Microsoft is finding ways to extend its Windows and Office monopolies via ad-funded and/or paid subscription services, like those it has fielded under the Windows Live and Office Live brands.

Based on the hint in the Wall Street Journal, I’d say Ozzie and his gang are thinking about something bigger than simply another Windows Live or Office Live service.

If you think more broadly about the “WebOS” concept – with WebOS defined as “a software platform that interacts with the user through a web browser and does not depend on any particular local operating system” – it’s not far-fetched to believe that Microsoft might be building some kind of Windows- and Office-like front end that users could access from a Web browser. Perhaps it will take the form of an extension to the Windows Presentation Foundation/Everywhere (WPF/e) technology that the company is developing. Or maybe it will look like a whole family of Windows Live and/or Office Live services bundled into a single, subscription-based service?

Another possibility: Microsoft Research has been dabbling with the concept of making users’ desktop environments available via a portable flash drive, via a research project known as “Desktop on Your Keychain.”

“Can we make desktop state available without also carrying the computer hardware?” (where desktop state equals user preferences plus user data plus applications) ask Microsoft Keychain researchers in a recent PowerPoint presentation.

In Windows currently, it is difficult to separate user, application and machine-specific state, the researchers acknowledge. The proposed “Keychain” solution? The host machine runs virtual-machine monitor. The user runs in a virtual machine (like VirtualPC). The virtual disk is a “server in the sky.” A flash device acts as a persistent cache/log of a virtual disk, as well as storage for virtual-machine state. A machine’s local disk serves as a “lookaside” for virtual-disk content.

Anyone else have any guesses about what Ozzie might be cooking up, in terms of making Windows available as a service?