As widely expected, Microsoft has unveiled its software-as-a-service strategy, an effort to provide a more seamless connection between customers and their business and personal data by offering a range of services accessed over the web by various devices.
Calling the plan "Live Software," Microsoft founder Bill Gates also unveiled new services for both Microsoft Windows OS and Office productivity suite, respectively called Windows Live and Office Live, that provide web-based services separate from the software products to Microsoft customers.
Speaking with Gates at an event in San Francisco, Ray Ozzie, Microsoft chief technical officer, said that with Live Software, Microsoft plans to offer an entire range of web-based services that customers can use in conjunction with Microsoft software or on a stand-alone basis.
"Microsoft's intent is to offer a general services platform," he says. "It will have a tremendous number of services within it, such as storage services, communication services, peer-to-peer connectivity and an identity mechanism."
Live Software also will include software for various devices that will enable customers to take advantage of the portability of web-based services, Ozzie says.
Windows Live and Office Live will start with a web portal that will provide both existing web-based services for Windows and Office, as well as new services that are currently in development and some services currently being offered by Microsoft's MSN portal, Ozzie says.
Windows Live includes an email service and Windows Messenger, which is similar to MSN Messenger but includes more robust ways for users to sort and maintain email, phone and instant-messaging contact information. It also includes enhanced local and internet search technology, as well as collaboration technology for file sharing through a peer-to-peer network that Microsoft acquired from Groove Networks in March.
More services will be rolled out for the Windows Live beta in the next few weeks. Microsoft plans to eventually transition all its MSN and Hotmail email users to its Windows Live email service but will continue to evolve the services provided on the MSN portal, says David Cole, a senior vice president in Microsoft's Windows group.
Office Live will be in beta in the first quarter of 2006, and users can sign up for the beta.The software integrates collaborative services, such as document sharing, with CRM (customer relationship management) and other business-analysis services for small businesses.
With its CRM component, Office Live potentially will compete with hosted CRM service provided by Salesforce.com. In an email comment, Marc Benioff, Salesforce.com chief executive officer, seemed unfazed by this possibility, and called Microsoft's Live Software announcement "a terrific thing for on-demand."
“It's looking like software is an endangered species at Microsoft," Benioff says. "The implication of 'Windows Live' is that their existing offering is 'Windows Dead.' We've been writing that epitaph for years now. It's called 'The end of software.' "
Advertising sales are a major component of Microsoft's LiveSoftware strategy, a plan that takes a page out of Google's book. Gates says both Windows Live and Office Live will have basic, free services driven by advertising revenue, along with subscription-based services.
Ozzie acknowledged that Microsoft competitor Google has demonstrated how online advertising can be an opportunity for significant revenue.
"Google has done an amazing job at making that ad engine click on all eight cylinders," he says. But Ozzie says he believes Google has only shown the tip of the iceberg in how much revenue there is to gain from online ad sales, and Microsoft plans to capitalise on online ad sales in a big way.
"We currently have a 10% share of online ad market today," Ozzie says. "We fully intend to grow this share and as the market itself grows through innovation and partnership."
The main way Microsoft plans to drive its share of online ad revenue is through AdCenter, a system for selling online advertising. Microsoft will be including AdCenter as an engine in a host of products and services, including Microsoft Mobile devices, LiveSoftware services and others, Ozzie says. AdCenter is already up and running in France and Singapore, and a test version was recently launched in the US.
In his presentation Gates describes Live Software as software that works with many devices so user data and services are more portable. In this scenario, users do not have to sync up or reload personal information or services onto each device they use, but can access what they need whenever they want it, he says.
"One of the key principals of Live Software is it works with many devices," Gates says. "Instead of the device being central as it has been in the past, forcing the user to move the data round, the kind of software we're talking about today remembers what the user wants and then when the user shows up on any device, the services are brought down on any device."
The vision Gates presented sounds similar to "the-network-is-the-computer" vision Sun Microsystems has been painting for some time, a vision in which myriad devices are linked to the internet and can provide services to users as they travel and access the web from different devices.
Indeed, providing software as a service hosted through a network is hardly new, as application service providers during the internet boom of the late 1990s capitalised on this strategy before the dot-com bubble burst. Currently, companies such as Salesforce.com have an entire business model around providing hosted services.
Gates acknowledged that Microsoft has been trying to figure out a viable way to provide software as a service since 1999. The company has been moving in this direction gradually with services such as LiveMeeting, which provides online web conferencing; Xbox Live, which allows gamers to play Xbox games in real time with users through the internet and Microsoft update services that allow users to download software patches and updates online, he says.
The reason the industry is ready for hosted software again is due to technology advancements, such as the ubiquity of broadband internet service and more powerful, 64-bit commodity hardware that can provide the kind of networking needed for hosted services for lower prices.