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Microsoft's forecast: cloudy

July 27, 2007

In a talk before Wall Street analysts yesterday, Microsoft's coder-in-chief, Ray Ozzie, described in broad strokes the software giant's plans to build its utility computing business as more and more computing functions and software applications turn into services supplied through the "cloud" of the Internet. The "services transformation," he said, is "a very, very big deal for our company." Ozzie made no concrete product announcements, however, offering only a vague promise that "over the course of the next 12 to 18 months, we are going to begin introducing a number of new and very key components both at the platform layer and at the app layer."

Microsoft, Ozzie said, is constructing its utility computing business in three layers. First is the "physical layer" of data centers, which are "of massive scale." As with Google, Microsoft is building its data centers out of huge numbers of cheap servers and other "commodity components," both to keep costs down and to "achieve reliability through redundancy." Over the last year, Ozzie said, Microsoft has doubled the number of servers installed in its utility plants "and we will keep investing."

The second level is "our cloud infrastructure services layer" which forms the "utility computing fabric upon which all of our online services run." This is essentially the operating system for the data centers, or the "cloud OS," as it's sometimes called. It consists of the software that manages the assembly of the overall computing capacity into discrete virtual computing machines and the automated deployment of those machines to run various web services. It also coordinates the other two crucial infrastructure elements: storage and networking.

The third layer - what Ozzie calls "the Live platform services layer" - consists of a set of shared services, such as identity management, contact databases, and advertising, that the company's online applications will draw on. These applications, which Ozzie, evidencing a surprisingly conservative vision, says will "target individuals and very small businesses," are "generally ad-monetized applications, and because of that, there's synergy in sharing data and features among the apps at this level."

Ozzie describes five separate target customers for its web services. First are consumers, who will be offered entertainment, commerce, and communication. Second are "information workers," who will be offered collaboration tools: "Seamless Office scenarios that span the PC, the Web and even the phone. Documents that go wherever you want them, news scenarios, sharing scenarios, meeting scenarios, note-taking, presentation scenarios that use PCs for what they're really good for: for document creation and editing and review. That use the Web for what it's really good for: publishing and sharing and universal access."

Third are IT staffs, whose main benefit from the shift to utility computing will be cost savings, says Ozzie: "For enterprise IT in the short term, this is mostly going to be about moving IT infrastructure to the cloud, either in whole or in part. Things like e-mail or content management, information sharing, and so on." The fourth target customer group consists of business managers, who will gain greater speed and flexibility in deploying IT resources as applications turn into services. Finally, there are the software developers, who by drawing on the utility computing grid will be able "to run applications and store data at very, very low cost [and], for all practical purposes, with infinite capacity that's shared with other people like themselves."

Ozzie closed his talk with an attempt to position Microsoft as the company best suited to dominate the cloud, as it's dominated the desktop, through a combination of "software plus services":

We're building a platform to support our own apps and solutions, and to support our partners' applications and solutions, and to support enterprise solutions and enterprise infrastructure. We are the only company in the industry that has the breadth of reach from consumer to enterprises to understand and deliver and to take full advantage of the services opportunity in all of these markets. I believe we're the only company with the platform DNA that's necessarily to viably deliver this highly leveragable platform approach to services. And we're certainly one of the few companies that has the financial capacity to capitalize on this sea change, this services transformation.

I remember, back when the computing industry was going through its last great sea change, with the arrival of the personal computer, IBM assumed it was the "only company in the industry" with the customer base, the capabilities, and the cash to dominate the next generation of computing. But as a small upstart named Microsoft showed Big Blue, that ain't necessarily so. Microsoft and Ozzie have been talking a good game about cloud computing for the past two years. But we're still waiting for the Redmond team to take the field.

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