Microsoft Services: Windows Is the Hub

Ray had lots to say during Microsoft's annual Financial Analysts Meeting today. But like past speeches, this one had a disjointed character. He talks about "the mesh"—well that's how I would describe his keynote. A mesh. Maybe smart people don't think linearly.

But through all the miserably winding sentences, something startling emerged. Microsoft's Web services strategy is Windows-centric after all. Whatever "the mesh" is going to be, Windows or Windows Mobile will be required.

Ray started his keynote by speaking about his three years at Microsoft and how in the early days he saw that "a large industry shift was on the way." Part of the shift: "service-enhanced software."

I wouldn't describe the shift that way, but it makes sense that's how Ray sees it. Ray stated the obvious by saying that disconnect devices "would look increasingly isolated and less relevant as we move forward. Teams across Microsoft have begun to reshape their software using services to deliver seamless, cross-device experiences."

GOT A TIP OR RUMOR?

That's why he spoke about "service-enhanced software." Microsoft is extending what it started during the browser wars more than a decade ago: Bake the Web into its software. But there are a few conceptual differences:

• The approach is a way of trying to maintain the relevance of desktop software, even as the computing cloud threatens to wash away the PC model in a thunderstorm.
• Microsoft realizes that all software, all hardware must be IP-network connected to thrive.
• Microsoft can use network connectivity and synchronization to extend its integration strategy into Web services.
• Synchronization is the killer application for the connected world. Microsoft wants to deliver better sync across many devices.

The industry transition now under way would "take us from a world where the dream was a PC on every desk in every home into a world where it won't be uncommon for families and individuals to have many, many PCs in their homes and in their lives as well as many other Net-connected devices, such as mobile phones, set-top boxes, game consoles, digital picture frames and so on," Ray said.

Ugh. The way Ray strings phrases together reminds me of translating Julius Caesar's writings in high school Latin class.

Perhaps the best way to understand Microsoft's future Web services strategy is the one sensible analogy made by Ray: Xbox 360. Ray said that the game console embodies Microsoft's model for delivering software plus services. I disagree. Microsoft goes further: software plus hardware plus services.

Ray spoke about "the seamless Xbox plus Xbox Live experience." He described the approach as creating "tremendous strategic advantage in that space." Strategic, yes; profitable, no. The more Xbox consoles Microsoft sells, the more money the Entertainment & Devices division loses—although the losses dramatically decreased in fiscal 2008 fourth quarter.

But the example makes sense. Microsoft has extended Xbox 360's value through integrated services from Xbox Live and Xbox Live Marketplace. Microsoft is extending the value elsewhere. The recent deal for movie and TV show streaming from Netflix is a tremendous differentiator for Xbox 360. This week's Games for Windows — LIVE announcement is yet another.

"Seamless software plus services experience has relevance to all of our software, including and especially Windows and Office," Ray asserted. "Windows Live acts as a strategic extension to both Windows on the PC and Windows Mobile on the phone. Think of this as the connected OS. Windows beyond the level of a single device or PC."

The approach would enable "synchronization across a mesh of PCs and other devices by Windows," Ray said. The important words are "by Windows." He didn't say "by the server cloud," but by Windows. Windows is the hub. Windows Mobile would be another hub, and a service like Live Mesh would be yet another hub. But unless Ray made a misstatement, synchronization "by Windows" shows were Microsoft plans to keep the relevance.

The approach makes sense in context of the Xbox 360 analogy. The game console is the hub. Sure, Microsoft extends the experience to the cloud through Xbox Live and even Games for Windows — LIVE. But the core experience is tethered to a device.

Ray spoke about the importance of synchronization, and his dream is a good one. "By removing the psychological burden of managing many devices, by making these devices feel more like smart appliances, by removing the worry about setting up a new PC or laptop that you might purchase, I believe that you might ultimately see a significant opportunity for global growth because of multiple PCs."

For Office, Ray spoke about "connected productivity." He called it "productivity beyond the level of a single device. We believe in a future where Office Live acts as a strategic extension to both Office on the PC and Office Mobile on the phone."

Ray emphasized: "This will take Office and Office's relevance well beyond the PC and into scenarios that just wouldn't have been possible without this software-plus-services approach."

Right, but who really wants to use Office on a mobile phone? People's needs on cell phones are about communication and information relevant to where they are. In retail, the saying goes: "Location, location, location." The same could be said about mobiles, which are ideally suited for providing communication and information within select contexts, like finding a restaurant to order pizza.

C`mon, do you really want to work on an Excel spreadsheet on your phone? But telephony. Yes. E-mail. Yes. Texting and IM. Yes. Music. Yes. Web. Yes. Etc. Etc. Synchronization you'll want, and there Microsoft is trying to do something good. As for Office, say, Ray, can we leave it in the office?

[Please send your tips or rumors to watchtips at live.com].