Reading the Ray Ozzie tea leaves

Microsoft silent Chief Software Architect has spoken. But he didn't say much in his first public appearance in ages. Nonetheless, I still found a few of his between-the-lines hints worth noting.
Written by Mary Jo Foley, Senior Contributing Editor

Microsoft's silent Chief Software Architect (CSA) has spoken. But he didn't say much in his first public appearance in ages.

On February 27, Microsoft CSA Ray Ozzie answered questions -- in an unusually (for Ozzie)
Microsoft Chief Software Architect Ozzie
tech-jargon-free way (in comparison to usual Ozzie style) -- from Goldman Sachs analyst Rick Sherlund for an hour as part of the Goldman Sachs Technology Investment Symposium in Las Vegas on Tuesday morning.

(I listened to Ozzie's remarks via a Webcast, the next-best thing to being there.)

Ozzie reiterated Microsoft's message that software plus services -- as opposed to software as services -- ultimately will resonate with consumers, small-business and enterprise users. He emphasized that Microsoft is putting lots of time and money into building out the back-end datacenters required to support the current and future services that the company plans to deliver in the entertainment, productivity and business realms.

Microsoft's role is to "weave together software, services, and in some cases hardware" to make next-generation technologies more palatable to users, Ozzie repeated a few times during the course of his remarks.

Did Ozzie reveal any interesting tidbits? He definitely didn't drop any bombshells like CEO Steve Ballmer did a year ago, when he admitted Microsoft was upping exponentially its spending on people and infrastructure required to support Microsoft's growing services play.

That said, here are a couple of Ozzie-isms that caught my ear from today's talk:

• Why did Microsoft buy medical-Web-search vendor MedStory? Microsoft plans to first integrate its search engine into its MSN Health portal, and later, into its overall MSN Search/Live Search engine. Who needs to bundle stuff into Windows any more? The new place where Microsoft can build momentum for its search platform is by building it into various Web site/portal destinations. Xbox Live and Office Online are other natural venues for this kind of bundling.

• Is Microsoft worried about service-based offerings (from both itself and others) cannibalizing packaged software sales? Sounds like Microsoft is using Office Live as the test case. Ozzie acknowledged that there are some segments of Microsoft Small Business Server (SBS) users who might decide to switch completely to Office Live subscription services to meet their computing needs. But Microsoft also is seeing developers who are building Office Live applications/services on top of SBS. It sounds like Microsoft believes that the additional revenues contributed by Office Live and other services will be higher than the potential lost sales.

• Microsoft is counting on its past track record of being able to take a competitor's product or strategy and one-up it to work in the case of SaaS. The PS/2 galvanized Microsoft to think bigger and develop an entire connected entertainment strategy (which yielded Xbox Live). Linux spurred Microsoft to get competitive not just in the Windows Server space, but in other servers and tools, as well. Competition with Google is pushing Microsoft to think not only about advertising as a potential new economic engine, but also is pushing the company to introduce service-based components for products it otherwise might ignore, Ozzie said.

• Ozzie mentioned a couple of times the detrimental impact of software piracy on Microsoft product sales. Microsoft CEO Steve Ballmer recently told financial analysts that he believes curtailing Windows and Office piracy will have a substantial positive impact on Microsoft revenues in the next three years. My guess? Genuine Advantage authentication checks are going to be made a part of every current and future software and service offering from Microsoft in the not-too-distant future.

What do you think of Ozzie's predictions and contentions? Is he sticking his head in the SaaS sands? Or is he right in his caution about throwing out the shrink-wrapped software baby with the services bathwater?

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