Microsoft is boosting investment in online advertising and consumer electronics devices, and is beginning to see traction with its software plus services strategy, company executives said Thursday.
At Microsoft's annual financial analyst meeting, CEO Steve Ballmer emphasized the need for Microsoft to continue to branch out from desktop and enterprise software into new technologies that fit with software plus services, the vendor's response to the software-as-a-service threat posed by Salesforce and others.
"We're going to try to have multiple competencies and business models living within the same body," Ballmer said.
Microsoft's goal with software plus services is to tailor all of its software to work in three different delivery models: traditional on-premise deployment, partner hosted, and hosted directly by Microsoft, as its forthcoming CRM Live service will be.
"The transformation to enable software plus services is something we are embracing, and any company that thinks their core competency is software had better [get on] this dimension," said Ballmer.
Online advertising is an area into which Microsoft has been channeling significant investment. While Microsoft's strategy has been to build and buy new technologies, the vendor's pending $6 billion purchase of online advertising firm aQuantive underscores its commitment to being a leader in this space, Ballmer said.
"We need to be willing and able to buy companies with innovative ideas," said Ballmer.
Microsoft's adCenter product will be ready for syndication and open to advertisers later this year, Ballmer said. In addition, Microsoft is seeing 'incredible enthusiasm' around Silverlight, the vendor's new technology for delivering online rich-application features such as video and animation, Ballmer said.
These advancements put Microsoft in a position to redefine the online advertising market, according to Ballmer.
"This is our chance to reinvent and rethink the whole business model of online advertising," Ballmer said. "Now we don't just talk about ISVs, we talk about publishers. What's a publisher? It's an ISV in the modern world who also wants to accept advertising."
Microsoft is also embracing the telecom industry, with emphasis on Windows Mobile, Windows Media Center, and MediaRoom IPTV software.
Ballmer acknowledged the questions that some analysts have had about Microsoft's entry into the consumer electronics market, but said the move was necessary in order to maintain the pace of innovation.
"We need to have this business outlet for our software creativity to continue to innovate and be relevant," he said.
But while Microsoft is moving to capture market opportunities in online advertising and consumer devices, its broader strategy combines the best components from multiple different environments, according to Ballmer.
"We're not moving towards the world of thin computing, we're moving towards the world of software plus services. And the software plus service model will bring the best of the desktop, the best of the Web, the best of the enterprise, and the best of devices together," said Ballmer.
Microsoft's developer teams have come together around the software plus services vision, according to Microsoft Chairman Bill Gates.
"This is the future of Microsoft, taking software to the next level, including a platform that lets [hardware and software] partners build on that. All of them will be able to seize the same opportunities," Gates said.