Strategyless? No. Clueless? Maybe

Strategyless in Seattle?Not really.If you were looking for fireworks and knock-your-eyes-out announcements from Microsoft on its latest relaunch of MSN.

Strategyless in Seattle?

Not really.

If you were looking for fireworks and knock-your-eyes-out announcements from Microsoft on its latest relaunch of MSN.com, you're going to be disappointed.

In this incarnation, Microsoft has decided to focus on three core services that any viable portal service already provides: communications, shopping and search.

But if that qualifies as a lack of vision, the man in charge of Microsoft's online efforts for all of the last two weeks, Richard Belluzzo, will take it.

Because what he and co-conspirators Jon DeVaan and Brad Chase have really launched is a direction for the company that plays to its strengths. No longer will Microsoft pretend to be a media company. No longer will it try to create episodic programming for the Web.

Guess what?

It wants to be a software company.

Which, of course, it already has had some success at.

At long last, Microsoft is realizing that what really drives the Web, provides functionality and creates great-or poor-experiences is software. It is just going to be a software company that applies its programming expertise to the Internet in creative ways.

It's a blocking and tackling approach that is long overdue. For instance, you could see where Microsoft is headed in communications by paying close attention to what Brad Chase and Yusef Mehdi demonstrated in Seattle Thursday.

Is Microsoft going to beat America Online at the instant messaging game? Not if it defines the game that narrowly. But it isn't. It's looking at instant messaging as a component of a broader approach to interpersonal, text-based communications. It is marrying instant messaging with electronic mail. Now, when you want to send a message to someone in its Outlook mail program, you can see whether the person is already online and send the message instantly, or, if not, send it by conventional e-mail. In the future? You'll probably write your message first, designate who you want to send it to, and Outlook will figure out which way will get it to the intended target the fastest.

Similarly, with searching, Microsoft is not looking at the process of finding things on the Net as a matter of combing through Internet addresses, hypertext code and site descriptions for specific words.

Microsoft is overlaying a host of unusual factors, such as the seasonality of the search and a "social barometer" of what other people are looking for, to make its results more relevant to users. And it is marrying shopping and search along the way.

Looking for a digital camera? Just type in "digital camera" and you don 't get a listing of Web sites that might have something to do with cameras. At the top of the results list is a link that lets you go immediately to a page that lets you compare cameras based on your choice of price and other factors. Search, then shop, in one quick click.

Sound familiar? Microsoft is merely doing what it does best, absorbing and assimilating new features into an operating system. When "integration" is the name of the game, Microsoft always has a shot at winning.

Of course, Microsoft's "operating system" this go-round is MSN.com, which is only one of many Web portals. It does not dominate the Webtop, like it does the desktop. So it must do a lot of blocking and tackling - and a lot of selling - to hope to catch up to the likes of Yahoo! Or even AOL.com.

And it must pursue its "software as service" strategy without upsetting the apple cart that made it the most valuable company in the world and Bill Gates a $100 billion man. This, after all, is a company which takes 34 cents of every $1 of sales to the bottom line.

Microsoft still has to figure out how to start moving its most critical applications - from word processing to spreadsheets to games - onto the Web without cratering its packaged software business.

It'll be hard-pressed to provide Microsoft Office for free on the Net, a la Sun and Star Office. But it can be done. Imagine converting all apps to a monthly subscription model. You get to store Word or Excel on your hard drive. You get to use Word or Excel on MSN.com, without your computer, when you log on remotely. And when you log on from home, you get automatic updates, and online monitoring.

Can they pull this off?

Belluzzo appears committed to it. Software delivery over the Web, as services to consumers or businesses, is the way of the future.

"When you a say software services environment, that 's what we think about," says Belluzzo, the new group vice president of Microsoft's consumer and commerce business. "It's delivering more software applications."

But while Microsoft has, in a fashion, returned to its roots as a software company, it has yet to figure out whether it can give away applications on its Web site and make its money on advertising; or, what kind of tiering of user charges will really be necessary. In pricing, it's entering uncharted turf.

Which may mean it finally knows how to best apply its intrinsic programming skills to the Web - but not how to change its basic economic model - selling software by the package or seat -- to reflect that shift.

"Any time they get too far from their roots of their trees," says Soft 'Letter publisher and editor Jeffrey Tarter, "they start showing their incompetence."

For Belluzzo and friends, the question is not whether they are strategyless. The question is whether or not they are clueless about how the "software as services" strategy also translates into the kind of monumental profits to which its employees, executives and shareholders have become so accustomed.

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