In speech after speech, top Microsoft executives reflected on and discussed the company's shift toward a new model that doesn't exclusively rely on the shrink-wrapped software that makes up a large majority of its revenue today.
"The services transformation is a very, very big deal for our company," chief software architect Ray Ozzie said in a rare appearance where he outlined Microsoft's forthcoming services architecture, major components of which he said Microsoft would be announcing in the next year and a half. "From my viewpoint, every one of our software offerings is either a socket for a new attached service or an upgrade or up-sell opportunity to extend a product's value proposition up to the web and potentially through to mobile devices."
There will be five layers to Microsoft's online architecture, beginning with a Global Foundation Services layer that includes the physical data centers from which Microsoft's Internet services will run. This includes an upcoming data center in San Antonio, which Ozzie said would break ground next week. Though it will take a while to get that data center up and running, Ozzie said the number of deployed servers and amount of Microsoft services infrastructure has more than doubled in the last year alone.
At the next level will be Cloud Infrastructure Services. Ozzie called this Microsoft's "utility computing fabric" that will include an isolated, virtualized computation layer, application frameworks to support a variety of application models, management infrastructure, storage and networking services. If that sounds like a potential competitor to services like Amazon's EC2 where companies can rent computing power, maybe it should.
"We believe very heavily in this utility computing fabric concept," Ozzie said. "I think its makes sense to offer those capabilities to developers and to enterprise customers over time."
Microsoft will and is building what it calls Live Platform Services on top of the Cloud Infrastructure services, ranging from identity services like Live ID to contact lists, presence services, rendezvous, communication services, and the company's advertising platform infrastructure. Finally, atop the pyramid would be applications like CRM and a suite of apps to be released this fall as a wave called Windows Live 2.0.
Advertising will clearly play a critical role in the shift, as various announcements in the last few days have shown. Wednesday, the company announced it had won deals to serve advertisements to visitors to social news Web site Digg and in-game advertising for five EA Sports games. Thursday, Microsoft announced it had bought online ad exchange AdECN and opened a new researched group focused on applied advertising research.
As to specifics, Microsoft was short on the product announcements, but execs hinted at more potential products than one could shake a stick at. Execs hinted that as online identities proliferate and people get different online identities for work and home, Microsoft would introduce products to make it easier for them to migrate settings among identities and devices.
CEO Steve Ballmer mentioned giving Web-based "click to run capabilities" to "classic Windows applications." Jeff Raikes, president of Microsoft Business Division, said that there was a place online for "traditional office productivity," though he didn't say whether that meant Web versions of Office apps or lesser collaborative document editing and sharing capabilities. Kevin Johnson, president of the company's platforms and services division, said Microsoft had an aggressive development strategy for search that includes performance and relevance improvements in the next few months.
What will all this mean to knowledge workers, IT shops and line of business employees? "Enterprises come in all shapes and sizes and their requirements vary considerably and they'll think about moving to services in different tempos, but we're in a unique situation because we can offer them a choice, actually three choices," Ozzie said. Products like CRM and Exchange that can be hosted by Microsoft, hosted by partners or on premise foreshadow this change.
For information workers, Ozzie said Microsoft will be looking at extending its software offerings with "connected productivity scenarios" that might include document sharing, note taking, online presentations, and universal access to information. For line of business employees, Ozzie said, think of CRM, lightweight ERP and "issue tracking solutions."