Microsoft details online software service strategy

Microsoft Services Platform at heart of software plan

Nearly two years removed from the introduction of Microsoft's services dream, Chief Software Architect Ray Ozzie last week said the next 12 to18 months will be filled with the release of services and technology that will fit into an online platform for software plus services.

Ozzie did not announce any specific services, but for the first time outlined the platform Microsoft intends to build in the cloud. He said the model will help partners and users alike understand where the coming rush of services fit and how they plug together.

The services will be targeted at consumers, corporations and developers but all will feed off what Microsoft is presenting as a multi-purpose infrastructure in the cloud called Microsoft Services Platform (MSP).

Ozzie, tasked with no less than developing the architectural underpinnings that will lead the company into the future, showed an MSP mimics the current Windows platform from physical servers to applications.

The platform model is made up of four layers, starting with foundation services he compared to networking's physical layer. The foundation services include massive data centers, racks of computers built from commodity components and network gear. He also said there would be cloud infrastructure services such as storage; platform services such as identity, presence and advertising; and an application layer for consumers, information workers, IT pros, business managers and developers.

"The services transformation from software to software plus services is a very, very big deal for our company," said Ozzie, who was one of the handful of executive presenters at Microsoft's annual Financial Analyst meeting July 26. "We're taking a platform approach to services, giving each of our products the common benefits of cost, speed, scale and monetization that a platform approach offers." He said the platform would support Microsoft's and its partner's general applications, enterprise applications and enterprise infrastructure.

Google activated Microsoft's mojo

"This is not strictly a defensive move," said Peter O'Kelly, an analyst with the Burton Group. "Ray is playing offense. He has assets that others can't replicate."

O'Kelly said competitors have lit a fire in Microsoft not seen since Netscape mocked the software giant from what is now its Silicon Valley grave site.

"Google has galvanized focus within Microsoft and Microsoft is accelerating investments in areas, that left to their own devices in a world without Google, Microsoft probably would not have been as aggressive," O'Kelly said.

Those investments can be seen across product divisions and most clearly in Microsoft's data center build out, including the upcoming ground breaking on a US$550 million, 470,000 square foot location in San Antonio and a similar yet-to-be announced facility in an undisclosed location outside of the United States, according to company insiders. Microsoft recently opened a 75-acre facility in Quincy, Wash., and paid $200 million for two facilities in Santa Clara.

The investment also is evident in the recent 2007 fiscal-year earnings report on the Online Services Business, which primarily draws revenue from online advertising and other services. The business unit showed a $732 million operating loss, up from $74 million in 2006, due in part to increased data center costs, online content expenses and a 30 percent increase in headcount costs, including a 12 percent gain in staffing.

"We are the only company in the industry that has the breadth of reach from consumer to enterprise to understand, deliver and take full advantage of the service opportunity in all of those markets," said Ozzie showing an uncharacteristic public display of bravado. "We are the only company with the platform DNA that is necessary to viably deliver on this highly leverage-able platform approach to services and we are one of the few companies that has the financial capability to capitalize on this sea change."

The Ballmer factor

While Ozzie did not detail the services coming over the next 12 to 18 months, CEO Steve Ballmer told partners in early July that Microsoft would deliver the same sorts of capabilities it delivers today in packaged software such as Windows Server, Active Directory and Microsoft Operations Manager. He said the rollout would include personal services for individuals such as Windows Live and Office Live, business services such as today's hosted Exchange, communications and collaboration services, and online services such as Dynamics CRM.

And Ballmer said the first version of the cloud infrastructure services in Ozzie's model would be unveiled later this year.

Ozzie called those infrastructure services the "most fundamental software level of the services infrastructure" and described it as a "utility computing fabric" on which everything will run. It will include a virtualized computation capability, application frameworks and management for automatic deployment, load balancing, application performance optimization and storage.

He said the Live Platform layer would serve ad-supported applications for individuals and small businesses and would include shared-services like identity, contact lists, presence and communication services. It also will be where Microsoft hosts its advertising platform.

The Application and Solutions layer would target services at IT pros, information workers, business managers and offer developers a place to host their applications.

This is the layer where Microsoft will marry PC-based applications such as Office with online services, where IT pros can find hosted services such as Exchange, and where business managers can find ERP and CRM services.

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