Microsoft's chief software architect, Ray Ozzie, fielded questions from financial analysts at the J.P. Morgan Technology, Media and Telecom Conference on Wednesday.
Ozzie's job intersects between the business and technical sides at Microsoft. He also steers the company's overall vision. He provided the number-crunching crowd with a lot of the vision part, but few specific details on how Microsoft actually plans to monetize its strategies.
In general, Ozzie predicts that it will be a "Software plus Services" world, where customers will adopt a hybrid approach of using both on-premises and hosted software. This shift is possible because of technology and high-bandwidth availability. Still, business users will have to assess their requirements. For instance, they may decide to outsource some elements, such as the management of their phone systems, especially if it can be done more efficiently by someone else.
Eventually, every enterprise is going to have some blend of software and services, Ozzie predicted, "and Microsoft is in an extremely good position for this shift," he added. For instance, Microsoft got its engineers together to develop an operating system in the cloud to support these services and Windows Azure is the result, he said.
The opportunities on the enterprise side with services will increase as companies get more comfortable with using hosted applications, Ozzie said. He pointed to Exchange Online and SharePoint Online as the most important elements in supporting this shift. Companies will want to see a choice among competitors before they will buy into a services model, he added.
The Web has also brought about a consumer shift toward using services, he added. Microsoft's connected devices vision includes the integration of "three screens with the cloud," including the phone, PC and TV. While there are "big differences" between providing services to consumers and businesses, Ozzie defended Microsoft's predominant consumer-side investments in online services, which has been a money loser for the company so far. He said that the investments in services technologies on the consumer side are transferring over to the business side.
One example is datacenter investments, where Microsoft has worked to reduce costs through modularization of the datacenter components. Microsoft is currently working on its fourth-generation server technology for datacenters. Some elements, such as power and cooling, can be swapped in or out, as needed, based on this gen-4 design, Ozzie explained.
In response to a question about how Microsoft plans to monetize its vision, Ozzie said that consumer services are really driving the transformation at Microsoft. He pointed to a cloud-based storage system, code-named "Cosmos," as one example. Cosmos is the basis of Windows Azure, Ozzie said. Azure, in turn, helps to enable Microsoft's Exchange Online and SharePoint Online services for business users.
Ozzie didn't elaborate on Cosmos, but long-time Microsoft watcher Mary-Jo Foley has speculated that Cosmos is a "storage/processing framework for Live Search."
Microsoft will heavily depend on its partners to help build out the infrastructure to support its services vision. Redmond cannot build an Internet cloud in every country around the world, Ozzie said. Instead, the company will rely on its partners for some cloud support. About 90 percent to 95 percent of Microsoft's revenues come through its partners, Ozzie explained.
Finally, in response to a question, Ozzie provided a Microsoft mea culpa explanation about the lessons learned with Windows Vista. He said that Microsoft had a vision with Vista that was "larger than we could achieve." Microsoft also failed in communicating with its partners, resulting in drivers that weren't ready for market at the time of Vista's release. In the future, the company needs to give clear dates and milestones to avoid such problems, Ozzie said.