10 Things Microsoft Did Right in July

I've picked 10 of the most important things Microsoft has done in July. I am focusing mostly on product announcements and acquisitions in the list. Not to be overlooked: Microsoft's annual financial analyst and partner conferences and the company's attendance at Comic-Con and E3. Microsoft had a busy July.

The 10 things are listed from most to least important, IMHO:

1. Netflix content streaming. The exclusive agreement means that Xbox users can stream movies and TV shows from Live accounts to their game consoles. Netflix has long offered streaming to Windows PCs, and recently started offering the facility through $100 Roku boxes connected to TVs.

Netflix streaming and the upcoming Xbox Live UI updates are turning the Xbox 360 into more than just a game console. Microsoft may have bet wrong on the HD DVD format, but, otherwise, it's well positioning the Xbox console and online service to take over the living room.

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I'll need to get a new one sometime soon. My 360 disappeared between Washington and San Diego, during last year's move. A few months back, I bought a PlayStation 3 for the Blu-ray player. I've never played a game on it.

2. DATAllegro acquisition. The deal is timely. Microsoft is close to releasing SQL Server 2008, which, while a promising product, still has limited scale. DATAllegro will give Microsoft huge scale—hundreds of terabytes of data for SQL Server and Windows Server.

Make no mistake: This acquisition is about more than just customers. Microsoft is looking out for its own interests. The company is building out huge data center infrastructure to support its hosted services and forthcoming services platform. Microsoft also is going to need scalable storage; better to use it and sell it than to buy it.

3. Professional Photography Summit. A couple times a month, somebody asks me what Microsoft's pro photography strategy is. I'm not convinced the company has one, but it's slowly formulating. The big photo push was supposed to come with Vista and its hooks supporting RAW files from Canon, Nikon and other camera manufacturers. But the strategy collapsed even before Vista shipped.

This month's summit opened a dialogue with pro photographers. While I see the dialogue as being hugely important, there are questions about whether Microsoft is doing too little too late. Adobe's Photoshop Lightroom 2.0 (released July 29) and Apple's Aperture 2.1 (updated July 28) are among the best photo-editing products available. Lightroom runs on Macs and Windows PCs and Aperture just on Macs.

Photography should be a killer application for Windows, but Microsoft hasn't got much to offer. The right acquisition could propel Microsoft forward. My pick: Phase One, which already has a close business relationship with Microsoft and makes one of the better RAW workflow applications, Capture One.

4. Apache Software Foundation sponsorship. Effectively, Microsoft put a shade over LAMP (Linux, Apache, MySQL and PHP/Python/Perl). In January, Sun Microsystems bought MySQL for $1 billion, staking its claim on one of LAMP's two most important components—the other being Apache. Microsoft didn't buy anything, but its Platinum membership gets the company some clout.

Microsoft gains both competitive and customer benefits. Competitively, Apache has hampered Microsoft's Web server software strategy since the late 1990s. Microsoft's recent strategy of selectively licensing technologies in an open-source-like—but necessarily GPL—way has slowed down open source's competitive advances.

Microsoft can better ensure interoperability with its software and Apache, which would be good for the company's customers. Still, the major beneficiary of interoperability is Microsoft, because of its market share. Analogy: The United States cuts a trade deal to sell goods to a small country that exports one or two major products. Economic interoperability would better benefit the larger U.S. market, which has more goods to export.

5. Powerset acquisition. I'm convinced that the company's search technology is overhyped. But its people and patents are well worth whatever Microsoft paid for the company. Natural language is going to be the killer search app for the mobile phone, which is destined to replace the PC as most people's primary computing device. The Powerset team should accelerate Microsoft's push into natural language search and development efforts around natural user interfaces.

6. Games for Windows Live. Microsoft announced July 22 that Live would be free for Games for Windows users. This seemingly innocuous announcement is anything but. Because of Microsoft's U.S. antitrust case and changes in the marketplace, application bundling into Windows is no longer an effective competitive strategy. But services bundling is very promising, even when discreetly done.

From Windows competitive and customer benefit perspectives, Microsoft made a smart choice for reinvigorating Windows as a gaming platform and extending some Xbox Live gaming capabilities to customers using Windows (and that's probably most of them).

7. Facebook search deal. I don't doubt that Google (with MySpace) and Microsoft (with Facebook) are finding social networkers to be a poor audience for search advertising. Do you really notice billboards when driving down the highway? Neither do social networkers speeding down the Information Highway.

But right now, Microsoft can use all the searches and eyeballs it can get. It's better for Microsoft that Windows Live serve up Facebook searches and search ads than Google. Granted, Facebook and Microsoft are expanding an existing deal, but it's an important one to keep.

8. Live Mesh Preview expansion. Microsoft chose the right time, five days after the iPhone 3G launch, to allow more people to use Live Mesh. MobileMe and iPhone 3G are looking like potentially rugged synchronization service and device competition, assuming Apple can resolve ongoing problems with its cloud computing service.

Live Mesh slowly moves along, ever with glimmers of brilliance. Besides expanding the Technical Preview to U.S. users, Microsoft has now made mobile support available for some devices. Rumors of Mac support spread across gadget and Apple blogs yesterday. But the Mac client disappeared almost as quickly as the first bloggers posted links. Live Mesh will define Microsoft's services strategy and foreshadow what follows. What's defined or foreshadowed depends on how well Mesh meshes.

9. Windows Search 4.0. Microsoft released the software in June, but it became available on Windows Update last week. Search isn't just the killer application for the Web. It's vital on the desktop, too. Microsoft can cede desktop search to Google or provide a utility. The biggest beneficiaries are Windows XP users, who have yet another reason to skip Vista.

10. Windows Live OneCare bundling agreements. Microsoft announced July 29 that 11 OEMs, including Sony and Toshiba, would offer 90-day OneCare trials. The deals make OneCare available in 20 countries, up from eight.

What's that phrase? Distribution, distribution, distribution. OneCare simply cannot subsist on retail sales. Microsoft needs to get out the software on hardware to increase its share against established security software developers like McAfee, Symantec and Trend Micro.

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