Ozzie: Desktop Legacy Will Help Microsoft's Services Push

Ray Ozzie, Microsoft's chief software architect, argues that the overall services revenue opportunity for the company "is largely additive."

The view expressed by Microsoft rivals is that the software giant is hamstrung by its reliance on the sale of software licenses and the on-premise software model that drove it to fame and fortune.

Ozzie and other Microsoft executives have disputed that contention, and on Thursday at the company's annual financial analyst meeting, Ozzie went further in defending the company's blended delivery model, positioning it as a plus.

"From my standpoint I believe Microsoft offerings across its divisions touch many people and [we] understand their requirements. I believe Microsoft is in a very good position with respect to understanding many markets and our experience in multiple delivery platforms. I do not believe the Web is the be-all-and-end-all of service delivery."

Ozzie said the PC remains "amazingly important," while small-form factor devices, set-top devices and consoles will also be important going forward.

"I believe the right model is to holistically connect them all [and offer] frameworks for developers to deliver experiences across devices," he told press and analysts at the event, which was also Webcast.

He positioned the company's nascent Windows Live — basically an expanded MSN — as a hub bringing together desktop and server offerings.

An advertising-supported model, which Microsoft will use in Windows Live and facilitate with its AdCenter platform, is probably more suited for consumers. The subscription model has been embraced by enterprises. And the transaction model will also remain viable.

The company is making its way carefully into the new software-as-a-service (SaaS) realm pioneered by Salesforce.com and other younger, leaner companies.

Its huge investment there has unsettled many of the analysts meeting in Redmond, Wash., who worry that the move will cannibalize Microsoft cash cows Windows and Office, which very clearly run in the traditional on-premises, on-PC model.

But Ozzie said Microsoft and all technology companies must make this "transformational shift towards services." He said it was "a necessary and appropriate course of action at this juncture."

Ozzie told press and analysts that the company can garner valuable data about how all types of customers use their PCs and devices and use that data to better tailor services and software for their needs. The use of that knowledge to optimize the Windows Live platform, while "always respecting users' privacy," will be a key advantage for the company, he said.

Some observers believe Microsoft will need to use that knowledge to catch up with Google in the advertising-supported Internet search realm. Google itself is clearly building its own treasure trove of user data on which to build non-search-related offerings. And Google has already come into Microsoft's backyard with its own Web-based word processor and spreadsheet and hosted e-mail.

"The larger the number of PCs connected to the platform, the more behavioral data is available. The larger the number of Web and desktop applications connected, the better the optimizations and the more profitable they will be for us and our partners," Ozzie said.

When Microsoft rolled out its Windows Live and Office Live game plans last fall, the partner opportunity appeared nebulous at best. Since that time, company executives have sketched in how Microsoft partners of different types will be able to play in that world. Company CEO Steve Ballmer first delineated his partner plan to CRN last month.

Ozzie and other company luminaries, including CEO Steve Ballmer and COO Kevin Turner, were featured speakers at Thursday's event. Company Chairman Bill Gates, however, missed his first analyst meeting. He is on vacation in Africa, Ballmer told attendees.