Ozzie signals Microsoft's surrender to the cloud

Ozzie signals Microsoft's surrender to the cloud

Summary: Microsoft must reverse its software-plus-services mantra and put services at the forefront of its vision. Even chief strategy officer Ray Ozzie admits cloud computing will be cheaper than on-premise servers. He's already preparing for the painful transition ahead.


Publicly, Microsoft talks up the merits of its 'software-plus-services' strategy. In my view the message is bunkum, even though it reflects the reality of Microsoft's business today: mostly software, with a few early-stage service offerings. But Microsoft has its message back-to-front. Until Microsoft reverses the software-plus-services mantra and puts services at the forefront of its vision, it will continue to disappoint.

I know many people want to believe Microsoft still remains in charge of its destiny and won't let cloud rivals walk all over it. But time after time, history shows that it's fresh startups, not incumbent giants, that gain leadership in new technologies and markets. I guess we're just wired to expect those who wield power to stay in place. But the truth is that, at times of change, it takes a change of leader to adapt to the new circumstances.

Recent pronouncements by chief strategy officer Ray Ozzie suggest that, despite the public bluster, Microsoft's top brass already secretly realize that they must put services, not software, at the center of their worldview (the world of the mesh, Ozzie calls it). Parse, for example, these excerpts (with my emphasis added) from a recent interview by GigaOm's Om Malik, and you'll find some surprising takeaways.

The desktop is no longer central:

"There are things that the web is good for, but that doesn’t necessarily mean that for all those things that the desktop is not good anymore. What I think is important is to re-pivot the center of what we are trying to accomplish."

Enterprise software has to be re-architected for the services era:

"...if you look at the innards of a Yahoo or a Microsoft, an MSN, or a Google, you will see the people who have designed the systems and have taken a number of the things we’ve learned in the enterprise space. We have to throw them them away, because the way that we did it in the enterprise space was more tightly coupled. We need to be more loosely coupled ... We need to develop more and better application design patterns that we give to developers that let them develop mesh-oriented apps at birth, horizontal apps that can suffer massive failures of certain aspects of their infrastructure, while still surviving."

Microsoft is now playing catch-up in cloud computing:

"I think that you'll see is over the course of this year, to 18 months, you'll see the incumbents and startups, both, do their first big volleys of services platform, apps tools, runtimes, various things. It really isn't being taken seriously right now by anybody except Amazon."

It'll be cheaper to put apps in the cloud than to run them on your own servers:

"It's an inevitable business. The higher levels in the app stack require that this infrastructure exists, and the margins are probably going to be higher in the stack than they are down at the bottom ... Somebody who is selling [business] apps is going to build in, more than likely, the underlying utility costs within their higher-level service. It will still be cheaper to do those things on a service infrastructure than it is on a server infrastructure."

Taken together, these statements — by the company's chief strategy officer, no less — add up to a huge strategic shift under way within Microsoft. They suggest that, in five years' time, the company will be unrecognizable compared to today, with services revenues taking a significant share while licence revenues dwindle.

As fellow ZDNet blogger Josh Greenbaum concludes, "Microsoft-in-the-cloud is already happening" — but he's got it wrong when he writes about "building applications that can exist in a hybrid on-premise and cloud model, and can be moved freely between the two deployment modes pretty much at will." The traffic is going to be one-way only, from on-premise to cloud, and the only reason Microsoft has to pursue a hybrid strategy at all is so that it can give its developers, partners and product lines an on-ramp to the cloud.

Dan Farber, writing about Ray Ozzie bringing 'syncromesh' to the Web, fills out some of the detail:

"From what I can gather, Ozzie and team are working on the plumbing required to create a seamless mesh that can synchronize content, services and applications across a variety of devices and user scenarios via the Web as a hub.

"Ultimately, the 'mesh' requires an overhaul of the back end to support utility computing on a grand scale. In addition, applications need to be 'refactored,' ..."

"The 'seamless mesh' concept is part of Microsoft's next-generation software platform. Of course, Microsoft cannot abandon its lucrative client/server software franchises, such as Office or Windows Vista, but Ozzie is taking a practical and measured approach to building bridges that span the client-server and services worlds. Synchronization is a key for working online as well as online in the loosely coupled, collaborative Web."

So am I saying that Ozzie is Microsoft's new leader? (Perhaps even in line to replace Steve Ballmer as CEO?)

Actually, no. What I'm saying is that the emerging services era will have a new leader, and Microsoft will lose its dominant position in computing. Just as in the case of IBM in the 90s, the best survival strategy for Microsoft at this time of change is to adjust to not being top dog anymore and instead work out how to thrive as a loyal lieutenant to the next generation.

Interestingly, Ozzie, with his Lotus and IBM background, is as well qualified for that transition as he is through his subsequent Groove role to lead the march into mesh computing. Perhaps he is the right person to manage Microsoft's inevitable but noble decline.

Topics: Servers, CXO, Hardware, Microsoft, Software, IT Employment

Phil Wainewright

About Phil Wainewright

Since 1998, Phil Wainewright has been a thought leader in cloud computing as a blogger, analyst and consultant.

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  • Microsoft?s inevitable but noble decline

    Is such a scenario possible once Penelope and Rupert have taken fright?
  • Surrender to the cloud? Nonsense! Co-exist with? Yes!

    I am sorry to burst the latest marketing buzz-word balloon, but cloud-computing does not fulfill everyone's needs. No one single solution answers all possible needs, despite the bright-blue kool-aide so many have clearly been drinking.

    There are numerous functions for which we will find the cloud to be immensely beneficial, but there are many others which will not.

    There are serious business issues concerning availability when running applications over a network environment rather than on the local desktop. There are also huge security issues with offloading data storage to providers rather than maintaining them locally.

    I think that you will find that many users will prefer local application processing to network applications and that most companies will not trust others with their proprietary data.

    Yes, cloud-computing offers great promise, but we must also acknowledge that it is not the be-all:end-all of computing anymore than the mainframe was, or the mini-computer was, or the micro-computer was, or the client:server format was, or peer-to-peer is now.

    There are differing needs, and many of these are best fulfilled by the local desktop application. Could-computing will take it's place among the other solutions, no doubt, but it is unlikely to eliminate them. The desktop will be with us for a long time yet -- just as those big-iron mainframe dinosaurs persist to this very day.

    As always, this is just my $0.02 USD based on 30+ years of experience in computing. Your opinion may vary.

    • The breadline is inline for a realign with the online/offline pipeline ...

      ... pretty much whichever way you cut it.

      Sure, if Microsoft came out with something SERIOUSLY good there could be a position for them to remain on the desktop and sell their servers, but that would be limited to the sales successes of those fronting an army of developers that only know Windows technologies.

      The idea that businesses will capitulate to *complete* lock-in to Microsoft is really just Microsoft's own wet dream, and Vista has seriously dented those chances even further. If they still can't get the desktop right with all of their resources, how on earth are we supposed to believe for one moment that their "new vision" is anything more than Longhorn lock-in vapourware?

      With businesses opting to go for local data with online mirroring, FOSS will have a SERIOUS TCO advantage, plus, of course, offering better security.

      Do you still wonder why Microsoft is finally pretending to play nice with FOSS?
    • Sure, one method of delevery may not suit everybody, but that does not mean

      that one method of deliver will not be dominant. The cost of delivering Software on the cloud is much, much cheaper than boxed software sold at Best Buy. With solutions for the offline problem coming to market, and the internet getting faster and more reliable all the time, and all of the other advantages of cloud computing, the cloud model is set to become the dominant form of software delivery. Could MS still satisfy a small percentage of customers with desktop software? Yes. Would they be happy letting somebody else have the vast majority of the market? NO.
    • agree

      These 'cloud' services are more like smoke than a real fire ready to burn M$ down.
      It is a merely 'distributed computing' concept promoted by M$ in the 1990s and picked up by a few startups eager to make money where M$ failed before...good luck to them!
      The real M$ surrender can be to FOSS only!
      Linux Geek
    • Well Said! (NT)

      P. Douglas
    • Apps already hosted

      I'm not one to believe in these buzz trends until I see them. But I have seen many people claim that companies won't trust their data to another company...especially once Google Docs went live. But many companies do currently have hosted email solutions. Companies are using SugarCRM and SalesForce. Basecamp seems to have attracted alot of customers as well. This trend seems to have gotten underway before the buzzwords came out. Actually the trend has been underway for quite some time with the use of web based applications coming into the mainstream.

      Very large companies may stray away from SaaS but they aren't the ones that would benefit from it anyway. However I believe large companies may consider SaaS appliances for the document sharing and backup benefits. Wiki style collaboration is picking up in the enterprise and before anyone denies it think Sharepoint. I have not heard much about adoption of IBM's QEDWiki but its definitely in the right position at the right time. I make my living developing in house web apps so I could see SaaS applicances as a natural progression. If that happens the importance of the OS on desktops will be diminished and MS would need to maneuver to deal with that.
      • Well put. Very few people trusted electricity deliverd on the grid.

        But, as electricity on the grid got more reliable, and the word spread . . . . . .
  • The cloud dissipates...

    ... and Microsoft keeps what's useful and discards the fads and excessive reliance.

    Weakness or strength, Microsoft does not respond to outside events or ideas, but continues as if it were the only software company in the world. Just as Windows becomes more elaborate as hardware improves, so the availability of new resources causes the company to extend its existing software to take advantage.

    Reliance on the internet is a weak trend when few have heard of what might be done and fewer still have made any use of the capabilities. Microsoft may be credited for being in advance of the market and providing more than cusotmers thought is available at present. The company could set the context in which most people encounter the newly available functionality.

    Any market leader has commercial advantages beyond a large accumulation of cash. Call it leveraging, but Microsoft knows how to use these advantages.
    Anton Philidor
  • Yes and NO

    Big piece missing here is the corporations that also take time to shift their thinking. Most corporations do not trust their ISPs to provide full service and that's why they keep things in-house. Moreover you're talking about cultural shifts within organizations, job security, information control etc... It isn't technology that is the driver, its the business and how businesses adapt. Microsoft is moving in alignment with what companies want and as the market shifts, Microsoft shifts as well. Just like one version of an OS doesn't fit all, neither will cloud computing.
  • Microsoft's surrender to the cloud

    This was inevitable - but we don't quite agree that Microsoft will lose its dominant position in computing, Phil.

    Think about that for a moment..
    The giant MS has (our HO) far too much talent and -far- too much money in the war chest to let this happen..

    The Team
  • Services Need To Orbit Clients - Not The Other Way Around

    Saying that the cloud is more important than the client, is like saying that communication and services are more important than the individuals who benefit from them. The point of services is to enhance the client. Are utility companies, supermarkets, etc. more important than the people they service? It is companies that recognize that clients must be the foci of the computer industry?s attention, and that services need to orbit them, which will perform the best in the future. I don?t understand how everyone raves about the iPhone and about the rich client software being built on them that access services, yet dismiss the virtually identical strategy being pursued by MS on the PC. I?m telling you, until PCs can render as immersive a user experience as the holodecks on Star Trek, client development has a long, long way to go. It is way far from being over.

    I believe one of MS? greatest challenges, is how to place clients practically everywhere, and how to make them ever more immersive. MS needs to figure out how to place clients on walls, furniture, machinery of all kinds, etc., and have data synchronize among all these client devices within its mesh system. I believe MS and many other companies will make a huge amount of money from services. However people need to recognize that a symbiosis has to take place between software and services, and that opportunities for services can actually be held back by the user experiences provided by software.
    P. Douglas
  • RE: Ozzie signals Microsoft's surrender to the cloud

    I'm just waiting for Comcast to come in and say that hosted apps and SaaS is using up too much bandwidth and starts disconnecting them in the name of 'traffic shaping'.
    • For "only" $9.95 per month ...

      ... and then $50 gets taken from your account, then another $37 dollars ... etc ...

      Didn't you read the small print, they'll say ....
  • As usual, pundits over-react and get it half right

    Journalists are like the rest of us...they like a good story. And a the sexy story of today is that the "cloud" is going to become the center of computing and everything else is on a slow (or fast?) downward spiral.

    In my view that argument misses the boat. There are a lot of ways to refue this theory. Here are a couple.

    First, the idea that one particular type of computing is going to take over everything is nota new thing...it's as old as computing itself. When PC's first started arriving on the scene the hand-wringers immediately started talking about the demise of the mainframe...EVERYTHING was going to move to the PC. Well, mainframes are still around despite an explosion of literally billions of PC's and servers and other computing devices.

    Then along came the Web and the hand-wringers started proclaiming that the Web would take over the world and PC applications were dead...soon to be replaced with Web-based applications. Well, that was 10 years ago and the PC continues to sell like hot-cakes and, perhaps as important, people and businesses are buying an ever increasing array of other computing devices.

    The irony of all this is that in many respects the Web IS the new mainframe. It's the gigantic distributed mainframe and all we need is the dumb terminal (aka Web browser) to access data and applications. Well, just as the mainframe wasn't the single answer for all computing needs, neither if the Web. I for one like to have the superior experience I get running applications on my Mac, PC or smart phone. Those applications can be made immesurably better when they're connected up to services. Duh. But that's far different than saying all one needs is services. People and businesses have spent TRILLIONS of dollars on local processing power and storage...maybe they'd like use it?

    This is not to say that Microsoft and Google and other companies won't find interesting ways to build "native" service-based applications and "cloud" platforms that enable them. But those "cloud" platforms will often be used to build components of applications that run locally on PC's and Mac's and other smart devices. It's a classic best of both worlds approach where neither side will "win."

    What's so hard about this to understand?
    • Whats so hard to understand about the cloud being the dominant platform?

      Sure, you need a browser or other software on the client side to authenticate and run cloud applications in a sandbox, and provide offline capabilities, synchronization, etc, but, after that, for the majority of the users, it can be done much cheaper and easier on the cloud. The future is the cloud being the dominant platform, with, of course, a small percentage of standard desktop applications lingering for some time.

      Microsoft's best defense here is to make it all depend on Windows on the client and on the server, leveraging the current monopoly, and the fact that desktop applications are still king right now. That appears to be the strategy, releasing a lot of FREE Windows only technology bundled with Windows and/or Office, If you can get a good percentage of cloud applications requiring Windows and/or Office . . . . . .
  • RE: Ozzie signals Microsoft's surrender to the cloud

    I remember a time when computers heralded the dawn of the paperless office - with email, who needs paper anymore? Yeah, right.

    Over ten years ago, I met a guy who had ditched his landline and used his cellphone as his main - and only - telephone. I thought "makes sense to me, why do I need a phone at home when I'm so often not home?" To-date, however, there are still organizations that not only expect but nearly require that one has a "home phone".

    Others have already presented the mainframe vs "thin client" architecture that was sure to eliminate PCs from the work place...didn't happen.

    I've been using an electronic PDA for 8 years, but people still buy paper organizers. Paper, that dog-ears, gets beverages spilled on it, blows away on a windy day, is hard to find where that name/number was written when...must be stored in bankers boxes in my basement and is a pain to search for some tidbit of information I wrote six months ago...

    And now we are expected to believe that we can depend on the web to deliver our user experience? Even if I don't have web access in my hamlet, village or town? Or if my service provider will price data transfer to the hilt?

    C',mon folks, paradigm shifts don't happen with a snap of the fingers. Cloud computing may come onstream, and if it does, it will be gradual.
    • Well, if you are arguing that it will take time and that it is not for

      everybody, as it will be a long time before we all have internet access, that is ok. That does not mean it will not slowly become the dominant model for application delivery. The same arguments you are making were made for electricity, and, for many rural areas, it was years after the cities had electricity that they finally were able to ditch the unreliable, expensive, noisy generators, etc.

      But, that does not mean that the cloud will not be the dominant form of application delivery in the future.
  • Variety is good

    Not everyone wants to compute in "the cloud". The larger an organization and the more sensitive their documents the more likely they will want to keep stuff on their own servers rather than the cloud. What it will mean, though, is that they will use similar technology, browsers and web applications. This means they do not need thick clients, nor M$. GNU/Linux will do very well. Thin clients will do very well. Server chips, servers, RAM, storage will do very well. We will all be better off.
  • RE: Ozzie signals Microsoft's surrender to the cloud

    How many times has a pundit said "Microsoft is Loosing", "Microsoft is in decline" and Microsoft is doomed", over the years and two years later that pundit has disappeared into the woodwork and Microsoft is still there going strong.

    You seem to be just the latest "industry" person to fall into this point of view.

    The question is how long will Microsoft outlast you.. Decline HA! Why is it Microsoft always is the one left..