We recently covered Microsoft has had to maintain its Windows and Office empires, building ever more features into them to keep existing customers coming back for more. At the same time, new businesses emerged on the Web, threatening the relevance of those monopolies. As companies such as Google and Salesforce.com grew, Microsoft had to respond. Still, the new generation of Web services is designed to augment its traditional products, not supplant them.
In a confidential Oct. 30 message to Microsoft's top executives, Gates made it clear that he considered the new Windows Live and Office Live online services, unveiled two days later, only the start of a fundamental shift in the company's business. The messages indicate a new level of seriousness and urgency in Microsoft's embrace of online services. Ozzie finds microsoft's "end-to-end execution of key scenarios has often been uneven" and points to "a set of very strong and determined competitors," such as Google, Yahoo! and Apple, that are "laser-focused on internet services and service-enabled software," much of it centered on ad revenue. Gates and Ozzie also described Microsoft as uniquely positioned for the new era - citing significant opportunities if units across the company can successfully expand beyond traditional businesses and into new online services. We must recognize this change as an opportunity to take our offerings to the next level, compete in a manner commensurate with our industry responsibilities, and utilize our assets and our broad reach to reshape our business for the benefit of the users of our products, our customers, our partners and ourselves."
Ozzie wrote that Microsoft leaders will work with him to assess the company's product plans - making changes if necessary to embrace the new online services strategy. Technological advances are allowing rivals to offer, through online services, many of the same features previously limited to the PC-based software that is Microsoft's specialty. The broad and rich foundation of the internet will unleash a 'services wave' of applications and experiences available instantly over the internet to millions of users.
The three "key tenets" cited by Microsoft's Ray Ozzie as driving the changes at the company:
- "The power of the advertising-supported economic model. Online advertising has emerged as a significant new means by which to directly and indirectly fund the creation and delivery of software and services."
- "The effectiveness of a new delivery and adoption model. A grass-roots technology adoption pattern has emerged on the internet largely in parallel to the classic methods of selling software to the enterprise."
- "The demand for compelling, integrated user experiences that 'just work.' The PC has morphed into new form factors and new roles, and we increasingly have more than one in our lives - at work, at home, laptops, tablets, even in the living room."