What Is Microsoft's Services Platform?

There has been a presumption that Microsoft's incoming chief software architect would bring a services revolution to the company. However, based on the strategy he articulated on Tuesday, there doesn't appear to be a course correction coming.

"If I were to choose someone for a services businesses, Ozzie's got nothing in his resume for that," said Paul DeGroot, an analyst with Directions on Microsoft. "Actually, most of his programs are rather obtuse."

DeGroot didn't mean that Ozzie's role at Microsoft isn't important, just different from what has been the general expectation. I agree. Microsoft's services strategy is much closer to the desktop or server than it is to the Web.

During his Goldman Sachs Technology Investment Symposium presentation on Tuesday, Ozzie did use the words "service" or "services" about twice as much as "software." But in the context of Microsoft's plans, he more often emphasized software's role over services as the essential core of delivering Web services.

For example, Ozzie said Microsoft would "weave together software, services and in some cases hardware to bring some of these connected entertainment visions out very, very, very broadly."

Ozzie's software-as-a-service vision, as articulated on Tuesday, is consistent with his presentation given last July at Microsoft's financial analysts meeting. (Our provided transcript of Ozzie's Goldman Sachs presentation is a PDF conversion of the Word version made available by Microsoft.) When it comes to services, Microsoft appears to be staying the course it set years ago.

That continued course may well define Microsoft's "services platform" that Ozzie described on Tuesday. "This connected entertainment, connected productivity, connected business ... the opportunity really is only fulfilled if we have a services platform upon which to build these services at dramatic scale," he said.

"We've been building this services platform that will be used within the company," Ozzie explained. "Ultimately, the economies of scale that we gain internally are going to be available to third-party developers and enterprises who don't deploy things at anywhere near that scale."

He then failed to give any indication what that services platform would be or how Microsoft partners and developers could tap into it.

Building Blocks
However, in private briefings with partners and analysts, Microsoft executives have articulated three areas of services opportunities:

• Building blocks for developers to extend
• Services that complement a software client
• Finished, end-to-end services that operate out in the cloud

Directionally, there remains some uncertainty within Microsoft about how to best embrace the three services opportunities, sources said. Some company executives worry that Microsoft could inadvertently put cash cows Office and Windows in the barn.

During its fiscal 2007 second quarter, ended Dec. 31, 2006, the company reported record revenue of more than $12.5 billion, with the bulk of profits coming from Office and Windows. With revenue so high from software, the case for a push into services is hard to make.

Microsoft's strongest commitment would seem to be to the first two services opportunities, with increasing priority on building blocks. Such an approach resonates with what Microsoft already does well. But it also suggests that the big services announcement anticipated by Wall Street and some partners isn't coming.

If that is the case, the services platform would likely have .Net Framework 3 at the core tightly woven with existing Microsoft development tools and software, some of which would reach out to connected services, whether Internet, Intranet, telephony network or other.

Such an approach would mean that for developers hearing the call of Web 2.0 and developing for the Web platform, Microsoft would holler for them to come back. But the choice may be Microsoft's way or the Information Highway—that there will be no easy option of both.

Microsoft's Web services strategy would be what it's been, building blocks closely tied to the company's software products. While other companies build for the Web platform and there expose APIs, Microsoft's approach would remain more tethered to its own development tools and technologies.

Office Live is directionally revealing. Microsoft built the service around SharePoint technologies, with tight integration with other Microsoft products. For example, Internet Explorer is the required browser and Windows Live Mail, which runs on Microsoft server software, is the e-mail service. Office Live subscribers can create their Web sites using Microsoft's SharePoint Designer, while SharePoint developers can extend site capabilities.