Microsoft's Ozzie defends Microsoft's aggressive online spending

Microsoft Chief Software Architect Ray Ozzie defended Microsoft's continued heavy investments in the online-systems arena, claiming the flowing trail of red ink from Microsoft's Online Systems Business (OSB) doesn't tell the whole story.

Microsoft Chief Software Architect Ray Ozzie defended Microsoft's continued heavy investments in the online-systems arena, claiming the flowing trail of red ink from Microsoft's Online Systems Business (OSB)  doesn't tell the whole story.

Speaking at the J.P. Morgan Technology, Media and Telecom Conference on May 20, Ozzie touched on his favorite topics -- software plus services, Microsoft's "three screens and a cloud" (mobile devices, PCs and TV) vision; and the need for Microsoft to field consumer services as a way to show off its cloud-computing prowess.

But a question from one audience member on why Microsoft continues to pour so much money into its still-unprofitable online services division got Ozzie to deviate a bit from his script.

(For its FY 2009 Q3, Microsoft's OSB lost $575 million. Its latest round of layoffs allegedly included some OSB personnel, but relatively few, according to company scuttlebutt.)

The benefit of continued research and investment in Microsoft's consumer-facing Live services -- everything from Windows Live Hotmail, to the soon-to-be-rebranded Live Search -- "is bigger than the numbers indicate," Ozzie said.

Microsoft's growing family of enterprise-focused services -- Exchange Online, SharePoint Online, etc. -- have taught the company a lot about cloud requirements. Its investments in consumer services  have taught the company important lessons about scale, Ozzie said.

The underlying infrastructure Microsoft has built to deploy and run its consumer services is now being extended to support other services throughout the company, he said. Ozzie pointed to "Cosmos," the high-scale file system that is part of Microsoft's Azure cloud platform, as ultimately supporting and aiding every consumer, enterprise and developer property at Microsoft. He noted that the management systems for Microsoft's current and existing cloud services are all derived from the learnings Microsoft has gleaned from managing its consumer online services.

Ozzie said he believed one of Microsoft's main advantages vis-a-vis its cloud competitors is "the fact we build both platforms and applications." (How the world has changed. In the 1990s, Microsoft officials, hoping to head off more antitrust suits, claimed Microsoft maintained a strict wall between its operating systems and applications business.)

The Azure operating system and services platform, which Microsoft is slated to make available in final form this fall, is another place where Microsoft has been sinking substantial funds for the past couple of years.

Ozzie said Microsoft's focus on building a cloud operating system differentiates it from other cloud vendors. Azure is Microsoft's "20 or 30 year vision," he said.

Speaking of Microsoft's online services, Microsoft is starting to turn up the hype-meter for its new search release, codenamed "Kumo." At next week's "All Things D" conference, Microsoft officials are going to show off Kumo to show attendees. But the actual commencement of the rollout isn't likely to start until early June.

As search expert Danny Sullivan notes, there's a difference between a demo and an actual debut. And all signs are pointing to Kumo/Bing/or whatever the new release eventually is called, as being made widely available to consumers starting around June 2.