Let the great Microsoft mash-up begin

Today's announcement of Microsoft's "live era" is a holding operation. It's just like in 1995, when Bill Gates ripped up Microsoft's intended Internet strategy and had it rewritten with barely minutes to spare before the scheduled launch of what became known as 'embrace and extend.'

Now in 2005, Gates and his lieutenants, recognizing the need to pull something out of a hat, have had a quick look around and hurriedly cobbled together whatever they could find to at least give the appearance that Microsoft has something to offer in the on-demand arena. They know that Microsoft has to look as though it has a credible strategy, otherwise investors and employees will start wondering whether they should move their allegiance elsewhere (those that haven't already). This is a classic ploy in the software industry — Oracle infamously used it to great effect in the early 80s when it announced its SQL database product many months before it actually existed. Announcing an offering that doesn't exist yet buys valuable time while the vendor brings it into being. And just like in 1995, what finally emerges will be substantially different from what Bill Gates and Ray Ozzie have described in today's opening gambit:

• First of all, we have Windows Live, a laundry list of on-demand services represented at today's launch by a warmed-over rehash of start.com, a pared-down, Web 2.0-style portal template that's been in a somewhat pointless beta for several months already. Now at least it has a point, but few of the promised services actually exist, and most of those that do are already accessible via MSN, so we're not talking many man-hours of development to run that up.
• Then there's Office Live, which will be available as an invitation-only beta restricted to US resident users sometime in 2006, so there's plenty of time still left to get that coded and tested. At first glance, though, it seems to have a lot in common with the existing Small Business Center (formerly called bCentral), whose track record is such that a more accurate name (and appropriate, given the season) would be 'Office — Back From The Dead.'

Meanwhile, the only successful 'live' offering that Microsoft has actually got fully operational and in production is Microsoft Office Live Meeting, which it acquired when it bought online conferencing provider Placeware in 2003. Expect a whole lot more acquisitions as Microsoft seeks to flesh out its new-found ambitions in the on-demand world. Given its preference for vendors that use .NET rather than Java as an on-demand platform (such as Placeware and indeed more recently Ray Ozzie's Groove Networks), the field of potential candidates is relatively narrow and excludes sector leaders such as salesforce.com and RightNow. Maybe Microsoft will buy up every one of them.

One thing I don't believe is that Microsoft seriously thinks all of this can be funded by advertising. In my view, the praise we've heard of Google's business model today from Microsoft is deliberate flattery-to-deceive. Microsoft knows there isn't enough advertising revenue in the world to sustain its ambitions. Its on-demand business model is going to involve a lot more subscription fees than Google's.

Most intriguing of all, though, is the mention of open APIs for the Live platforms. Perhaps I misheard this. Can Microsoft be seriously suggesting that partners and customers will be able to connect to these services from any platform, and mash them up however they like (subject to paying the required subscription fees or accepting the obligatory advertising, whichever applies)? I'm not sure that Microsoft really does have the nerve to carry this through, but it should: its consummate expertise at fostering developer ecosystems could really light a fire under its on-demand platform if it gets the API offering right. That would make today's announcement one of those landmark dawn-of-a-new-era moments: the day the great Microsoft mash-up began.