Ray Ozzie Speaks Out

Ozzie answered questions, many of them leading, at the Goldman Sachs Technology Investment Symposium.

There's a saying about talking much but saying little. While Ozzie shed some light on Microsoft's services—or software-as-a-service—strategy, he offered more vagaries than specifics. Still, by piecing together the little he said with the much we know about Microsoft, the hour-long Q&A illuminates Microsoft's services direction. Unfortunately, there is little apparent change in that direction from when Ozzie spoke to financial analysts last July.

Services Platform
"One of the things I've been working on is driving a services vision throughout the company," Ozzie said.

The big difference is what's happening inside of Microsoft—infrastructure changes within not yet taken to the outside market.

"The opportunity is only really fulfilled if we have a services platform," Ozzie said. "We've been building the services platform that we use inside the company."

Ozzie said his role has been one of helping different Microsoft groups adopt a single services platform; the less desirable option would be for each group to build out separate platforms.

If he accomplished nothing else at Microsoft, the single services platform would be a success. For too long, different products have built out their own technologies, sometimes conflicting with work done by other Microsoft divisions.

A services platform is a sensible approach for a platform company. Ozzie gave absolutely no indication what that platform is. Unless Microsoft has built something brand-spanking new, which is unlikely, the services platform is merely an extension of what the company already pushes, particularly SharePoint Server, Windows Server and supporting server software along with Office on the desktop.

What Ozzie rightly recognizes is the importance of bringing enterprise-class products to the Web. Like Web services, enterprise software is heavily managed and requires constant uptime. The similarities he sees are sensible.

Ozzie made clear, in somewhat fuzzy fashion, that Microsoft had no plans to abandon its core business of developing software. He also dismissed the relevance of the fundamental Web platform approach.

With the early Web, "the pendulum swung ... to let's try to deploy everything in a browser," Ozzie said. "It's a great mechanism to reach the broadest possible audience." But there are "trade-offs" with a browser-based model. One big trade-off is offline access.

Ozzie described Microsoft's approach as leveraging software on the desktop, services in the cloud and delivery to a device. "You end up with a different result," he said.

Ozzie gave the example of streaming a PowerPoint presentation over the Web to laptops in business meetings—or making better use of other portable devices.

"We should be using cell phones to augment meetings," Ozzie asserted. A camera phone could be used to capture images presented on a whiteboard and uploaded to a SharePoint site.

Neither example is trendy, as existing services already exist, such as Web conferencing.

Microsoft's new chief software architect has made the same pitch before about software, Web services and gadgets. It's part of Microsoft's broader push into "connected entertainment, connected productivity [and] connected business," Ozzie said.

There he makes sense. The roles between professional and personal behavior increasingly is nebulous. "The boundary is kind of blurring—where we work at home [and] we shop at work," Ozzie said. There is overlap of behavior and need for software and services, he explained.

The Microsoft executive seemed to really be trying to articulate a clear vision, but he's no storyteller. He has got the vision of, say, Apple CEO Steve Jobs, but nowhere near the articulation. But one example Ozzie gave just might encapsulate Microsoft's whole approach to Web services—and it was simply stated.

Xbox and Xbox Live is "a seamless experience centered in the service," he said. Ozzie described an advance to "software plus service," which again extends from Microsoft's core competency.

What About Google
Ozzie was surprisingly evasive in discussing Google. When asked to assess Google's strengths and weakness, he gave a marginally related answer.

Rather than focus on what Google might do or is doing, Ozzie said he's more focused on Microsoft. "For the history of the company, it has had many strong competitors," he said.

Ozzie said that Microsoft's focused competition often has secondary benefits, such as Xbox competition to PlayStation 2. He said that effort led to Microsoft's whole connected entertainment strategy, which is a fairly dramatic assertion but probably true.

Two results from Google competition: recognition of the revenue opportunity from advertising and emphasis on services-based infrastructure. In a surprising admission, Ozzie said that because of Google competition, it "made sense for the company to go back to its platform roots."

In a brash stance, Ozzie praised Google's success, only to dismiss its long-term relevance. He described Google search as the "command line of the Internet." But he said that starting point is not true for everyone. For many business end users, their primary tool, their starting place is Outlook. The inference is that Outlook could be a starting place for Web search.

He continued, emphasizing the importance of multiple entry points for search from different domains, such as Webstory, which Microsoft acquired yesterday. Similarly, other entry points could be from software.

"There is plenty of opportunity now that we're [moving] beyond the first generation of search," Ozzie asserted.

It's a bold proclamation from a company trailing so far behind the "command line of the Internet." According to Comscore, in January, "Google sites captured 47.5 percent of the U.S. search market"—or 3.3 billion searches.

With respect to the larger business model, particularly online advertising, "Google's success caused an inflection point within the industry and within Microsoft," Ozzie said. "It was a wakeup call within Microsoft. It might open some significant new markets to us."

He conceded little, with respect to software, particularly because "advertiisng isn't going to work for all enterprises," he said. For consumers it's clearly advertising. Small businesses, it's somewhere in between."

Earlier today, Corel jumped in between, with the beta release of WordPerfect Lightning. Corel's approach is hybrid, with desktop software combined with Web services.

From Here to There
Ozzie went to Microsoft with the acquisition of Groove Networks, which was announced in March 2005. While Groove has taken an important role in Microsoft's collaboration strategy—software comes with some Office 2007 versions—Ozzie was perhaps the more significant acquisition. The technology heavyweight, known for creating two category-defining products—Lotus Notes is the other—initially came on board as Microsoft chief technology officer.

Today's presentation was important for other reasons. Ozzie's chief Microsoft ally is Chairman Bill Gates. Ozzie reports to Gates and not Ballmer, but Microsoft's Chairman is planning to retire in less than 16 months. What Ozzie accomplishes before Gates goes could determine his future at Microsoft—or if he even has a long one.

Ozzie will be among the last of Microsoft's technical vanguard in a company that increasingly is run by a sales-and-marketing leadership. I sometimes wonder if he might, in some respects, be the most unpopular executive at Microsoft. His role represents change. He's the man charged with carving out the new Microsoft, the company that will successfully compete against Google and other Web platform companies. But how can he sell his vision to executives who see the Office and Windows cash cows continue to reap so much revenue?

During today's presentation, Ozzie rebuffed any concern that services would cannibalize Microsoft product sales, which is a case he probably has made previously to other Microsoft executives.

"At the fringes, there will be some substitution of one thing for another," he conceded, however. For example, a small business might use Office Live rather than adopt Small Business Server. He acknowledged potential lost sales to the channel.

Ozzie also explained his technical role alongside Craig Mundie, Microsoft's chief research and strategy officer. Mundie's role is working with Microsoft Research to look to the far future. Ozzie works with Live Labs.

"Live Labs does what I call applied research," Ozzie said. He explained about "incubation groups" that look more at the customer need and developing products that will go to market. Office Live came from an incubation group from with within the Office group, he said.

Ozzie simply summed up his objectives for services and what it means for Microsoft software. "I view the Internet as a market-expansion opportunity," he said.