Microsoft's castle in the clouds?

If you happen to be somewhere and the subject of Microsoft and its software strategy comes up, don't be surprised if you hear the word "cloud" a lot.
It's not necessarily a comment on how the future of the software giant's business is under a cloud, but more likely a reference to the growing market for Web-based software, which Microsoft is trying to adapt to.
In discussions of Web-based software — also called "software as a service" or SaaS — the services that are being used (for example, Google's document-editing or spreadsheet-editing services) are often said to exist out "in the cloud," i.e., on the Internet somewhere, or in a company's server farm.
The king of the cloud at the moment is Google. Although CEO Eric Schmidt has repeatedly said that the company isn't interested in competing with Microsoft, the fact remains that the search behemoth now has what amounts to a Web-based competitor for every part of the software company's Office suite.
There's Gmail, Google Calendar, the document-editing service (known as Google Docs), and the more recent addition of presentation software similar to PowerPoint. Documents can be accessed from anywhere with Internet access, and shared easily.
Other companies, including Zoho and ThinkFree, also offer online Office-style suites, and some small and medium-sized companies seem more than happy to use such services instead of paying thousands of dollars for Microsoft Office.
At a recent analysts' meeting, Microsoft executives tried to give a sense of how they intend to respond to this Web-based threat to their business model. Among other things, chief software architect Ray Ozzie said that "the transformation toward services is the most significant one in the software industry."
At the same time, however, CEO Steve Ballmer threw some cold water on the idea that software and services based on the Web will somehow replace the kinds of functions currently performed by desktop software.
"People tend to get weird and extreme about this," Mr. Ballmer told the assembled analysts. "Does everything move to the cloud? I think that is wrong-minded."
What Microsoft has in mind instead, he said, is a gradual process of adding a variety of Web-based services to existing Microsoft software, so that the two work together. Mr. Ballmer said virtually every Microsoft application will have a Web-services component added to it in the next three to 10 years.
In effect, Microsoft isn't offering software as a service, but software plus services. That makes sense from the software company's point of view, since it would maintain the existing businesses that produce so much of the software giant's cash flow.
But will simply adding a few Web-based bells and whistles be enough to prevent users from moving away from Microsoft's installed software? That remains to be seen.
At this point, it's not clear whether those users are being attracted simply by the features of Web-based software — the ability to reach your documents from anywhere, and to share and collaborate on information easily — or by the prospect of being released from Microsoft's clutches.
If it's the former, then the addition of features such as remote storage, collaboration and so on to Microsoft products might fill a need that Google and others are currently filling. If it's the latter, Microsoft may find that adding the same features doesn't really accomplish all that much.
Microsoft's approach to the Web is also a typically dense and ponderous strategic offensive, not unlike a military campaign, complete with impenetrable jargon.
For example, at the analysts' presentation, the company talked about building what it called a "foundation services" layer, which would include the servers in various Microsoft data centres around the world that would store data for Web software.
On top of that would be something called "cloud infrastructure services," which Mr. Ozzie described as a kind of "utility computing fabric" of virtualized services, application frameworks and management infrastructure.
While that sort of vision might appeal to corporate IT departments that are concerned about security and other issues on the Web, it's probably not the kind of thing that is likely to appeal to users and businesses who are choosing Web-based services because they are faster, cheaper and easier to use.
If Microsoft isn't careful, it may spend the next three to 10 years adding Web features to its software, only to find that the train has already left the station.