The Minus in Software Plus Services

Microsoft's software plus services strategy is minus something. It's another plus that Microsoft could more easily add than Web 2.0 platform companies such as Google. In fact, if Microsoft can understand what is that other plus and seriously add it, the company would have three pillars upon which to build a formidable Web services strategy.

Whether Microsoft wins or loses against the Web 2.0 platform will depend on how it embraces hardware as another plus. The winning strategy isn't software plus services—or even Google's services plus software—but software plus hardware plus services. Based on its actions, Microsoft appears to be moving in the right direction but hasn't articulated a software plus hardware plus services strategy, nor has it fully formed one.

This year's CES is very much about software plus hardware plus services. Some examples:

• Microsoft's MSN Direct now provides location-based information for navigation systems, such as Garmin. Microsoft provides the back-end software and service that works with the navigation system's GPS service and hardware.
• Xbox Live will add content from ABC, Disney and MGM. Microsoft delivers the content, software, service and hardware. Same applies to Zune, which will soon be available in Canada.
• Microsoft's Mediaroom, again, is software plus hardware plus services. Microsoft touted Mediaroom DVR streaming during CES.
• Motorola, Nokia and Sony Ericsson all announced new cell phones at CES. Cell phones are all the same: software plus hardware plus services.
• Sling Media unveiled SlingPlayer 2.0, which uses software plus hardware plus services to let consumers watch live or recorded TV content almost anywhere.

The list could be much longer, but the point is made.

The Web has long been about software plus hardware plus services, but the main hardware was the PC. Other devices consumed Web content, but their number and capacity is now on a Moore's Law growth curve. I predict that in 2008, bandwidth, processing power, storage and content will reach an inflection point, where numerous Web and services enabled devices burst into mainstream consumer adoption.

Microsoft is positioned to make the transition. Google is not. Google is trying to be ready, as the company extends services to the cellular market. But Microsoft is much better prepared.

Hitherfore, the Web 2.0 platform presented a quandary for Microsoft as computing and informational relevance shifted from the PC to the cloud, much the same way as from the mainframe to the PC more than two-and-a-half decades ago. Microsoft had resisted the shifting relevance, with software plus services being an anchor pulling computing and informational relevance back to the PC. Microsoft's competitive problem was—and really still is—the non-PC device, like the cell phone, which can grab information from the Web with no need for Windows.

But in 2007, particularly from second quarter onwards, Microsoft made numerous catch-up moves (most through acquisitions) that pretty well positioned the company to deliver content and services across multiple channels or devices. Microsoft enters 2008 in position to leapfrog Google by early 2009 or 2010, depending on how both companies execute. The company that best delivers software plus hardware plus services will best the other. Yes, that's a prediction.

Google doesn't have much of a hardware strategy, beyond the PC and more recently the cell phone. By contrast, Microsoft is a tenacious deal maker. No company partners like Microsoft, when there is market need to competitively advance. Microsoft has an unstated software plus hardware plus services strategy. The Windows business is software plus hardware. Live and Microsoft's forthcoming services platform are software plus services. Microsoft needs to conceptually and strategically unite software plus hardware plus services, then articulate a plan for partners and the means for them to participate. Microsoft has the right Lego pieces, they're just not assembled. Google needs more building blocks.

Software plus hardware plus services isn't a single business model. Xbox or Zune is one approach—the end-to-end solution ala iTunes/iPod. There are many reasons for Apple's resurgence. But one reason often overlooked: How well Apple delivers end-to-end software plus hardware plus services. The iPhone or iTunes/iPod are outstanding examples of software plus hardware plus services done well.

MSN Direct-enabled navigation devices or IPTV systems are other software plus hardware plus services models. With the navigation device, Microsoft's main contribution is some software and some service. The navigation system manufacturer also provides service and the hardware. With IPTV, Microsoft provides software but not the service or hardware. But Microsoft could provide search or advertising services in both models, reaching into device areas beyond Google's massive Web reach.

It's still early days 2008, and Microsoft is still a long way from being where it needs to be. But Microsoft could get ahead of Google, and on multiple fronts, with a broader services vision: Take away the minus and add the plus.

[Editor's Note: I will be in Las Vegas for the day at CES.]

Related Posts:

• 2008: Definitive, Unsolicited Advice for Microsoft, Microsoft Watch, Dec. 28, 2007
• The Google Monopoly Begins, Microsoft Watch, Dec. 20, 2007
• FTC Blesses Google's DoubleClick Deal, Google Watch, Dec. 20, 2007
• Microsoft Parties Like It's 1995, Microsoft Watch, Dec. 19, 2007
• Android, 'Can You Hear Me Now?', Microsoft Watch, Nov. 27, 2007
• Lessons iPhone Should Teach Microsoft, Microsoft Watch, June 25, 2007
• Why Google Succeeds, Part 2, Microsoft Watch, June 15, 2007
• Why Google Succeeds, Part 1, Microsoft Watch, June 15, 2007
• Who Pays for Software Plus Services, Microsoft Watch, March 15, 2007
• Why Google Matters to Microsoft, Microsoft Watch, Feb. 22, 2007
• Google and Long Tail Computing, Microsoft Watch, Feb. 22, 2007