By Eric Auchard
Web services, delivered alongside classic software, will complement
rather than replace the existing software industry, Microsoft Corp.'s
chief technologist said on Thursday.
Chief Software Architect Ray Ozzie told investors and reporters
attending the annual financial analyst meeting at Microsoft's
headquarters that the company is looking to convert its existing
software franchises into Web-delivered services.
"The overall services opportunity is largely additive, increasing
revenue opportunities for both our existing software licensing model
as well as our services business model," Ozzie said.
Microsoft's strategy is to connect a wide range of devices onto
various networks to allow consumers to enjoy the same information and
entertainment not only on their computers but also via mobile phones,
televisions and gaming systems.
"It's not unreasonable to think we'll catalyze some level of
additional PC and device purchases," he said.
Last month, Ozzie stepped into the top technical post at Microsoft,
replacing co-founder Bill Gates and spearheading an important
transition for the $44 billion company to extend its reach beyond the
Gates remains chairman, but Ozzie is the up-and-coming visionary with
a track record of ground-breaking software including Lotus Notes and
wide respect among industry rivals.
Ozzie took issue with technology purists who say Web-delivered
services will completely replace traditional computer-installed
"Software as service" advocates include Microsoft competitors in
business and consumer markets, including Salesforce.com, Google
Inc. and thousands of Web start-ups who are focused on market niches.
Instead, Ozzie and other Microsoft executives see the emerging
industry model as "software plus services."
Windows Live, Microsoft's newly introduced Internet services platform,
will act as the centralized services center, linking its portfolio of
business software, consumer services and entertainment systems, he
"Our 'Live' efforts will have a natural side effect of increasing the
use of genuine software," Ozzie said of how the security and
personalization features built into Windows Live can act as a gateway
to Microsoft's existing businesses.
Far-larger rivals such as IBM, Oracle Corp., SAP AG are racing along
with Microsoft to allow many of their existing businesses to be
delivered over networks as services rather than as products.
"A fundamental transformational shift toward services is a necessary
move for all technology companies now," Ozzie said.
IBM, the world's largest technology company, has been perhaps the most
aggressive in this transformation, reducing its focus on building its
own hardware and software to the point where it now depends on
services for most of its revenue.
In response to a question, Ozzie declined to say how much revenue per
user could come from new Web services or how these might compare to
license revenue streams from Windows and Office software that generate
the bulk of Microsoft revenue.
(Additional reporting by Daisuke Wakabayashi in Redmond)
Copyright 2006 Reuters Limited.
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