The crux of Gates' email is the following, which reads like a Microsoft version of a Web 2.0 manifesto:
"The broad and rich foundation of the internet will unleash a "services wave" of applications and experiences available instantly over the internet to millions of users. Advertising has emerged as a powerful new means by which to directly and indirectly fund the creation and delivery of software and services along with subscriptions and license fees. Services designed to scale to tens or hundreds of millions will dramatically change the nature and cost of solutions deliverable to enterprises or small businesses.
We will build our strategies around Internet services and we will provide a broad set of service APIs and use them in all of our key applications.
This coming "services wave" will be very disruptive. We have competitors who will seize on these approaches and challenge us – still, the opportunity for us to lead is very clear. More than any other company, we have the vision, assets, experience, and aspirations to deliver experiences and solutions across the entire range of digital workstyle & digital lifestyle scenarios, and to do so at scale, reaching users, developers and businesses across all markets.
But in order to execute on this opportunity, as we've done before we must act quickly and decisively. This next generation of the internet is being shaped by its "grassroots" adoption and popularization model, and the cost-effective "seamless experiences" delivered through the intentional fusion of services, software and sometimes hardware. We must reflect upon what and for whom we are building, how best to deliver new functionality given the internet services model, what kind of a platform in this new context might enable partners to build great profitable businesses, and how our applications might be reshaped to create service-enabled experiences uniquely compelling to both users and businesses alike."
Ozzie's memo is entitled The Internet Services Disruption and is similar to Gates' email in content - but he elaborates a lot more. Here's one part of his memo:
"It is now 2005, and the environment has changed yet again – this time around services. Computing and communications technologies have dramatically and progressively improved to enable the viability of a services-based model. The ubiquity of broadband and wireless networking has changed the nature of how people interact, and they’re increasingly drawn toward the simplicity of services and service-enabled software that ‘just works’. Businesses are increasingly considering what services-based economics of scale might do to help them reduce infrastructure costs or deploy solutions as-needed and on subscription basis.
Most challenging and promising to our business, though, is that a new business model has emerged in the form of advertising-supported services and software. This model has the potential to fundamentally impact how we and other developers build, deliver, and monetize innovations. No one yet knows what kind of software and in which markets this model will be embraced, and there is tremendous revenue potential in those where it ultimately is.
Just as in the past, we must reflect upon what’s going on around us, and reflect upon our strengths, weaknesses and industry leadership responsibilities, and respond. As much as ever, it’s clear that if we fail to do so, our business as we know it is at risk. We must respond quickly and decisively."
Ozzie also talks directly about their competitors, Google, Yahoo and Apple:
"And while we continue to make good progress on these many fronts, a set of very strong and determined competitors is laser-focused on internet services and service-enabled software. Google is obviously the most visible here, although given the hype level it is difficult to ascertain which of their myriad initiatives are simply adjuncts intended to drive scale for their advertising business, or which might ultimately grow to substantively challenge our offerings. Although Yahoo also has significant communications assets that combine software and services, they are more of a media company and – with the notable exception of their advertising platform – they seem to be utilizing their platform capabilities largely as an internal asset. The same is true of Apple, which has done an enviable job integrating hardware, software and services into a seamless experience with dotMac, iPod and iTunes, but seems less focused on enabling developers to build substantial products and businesses."
It's game on folks. One thing about Microsoft is that they may be always slightly behind the times in terms of Web innovation, but when they catch up - boy do they do it in a big way! More on this as I digest it...