Microsoft Shift Puts Networking Front And Center

Ray Ozzie's new gig as Microsoft Chief Software Architect exemplifies the company's reset course in a Software-as-a-Service world.

Ozzie takes on the title from company co-founder and Chairman Bill Gates as part of a two-year transition that will give Gates more time for philanthropic work. Craig Mundie is now chief research and strategy officer. Both Ozzie and Mundie had been chief technology officers.

"My role will be changing and expanding," Ozzie told CRN last Thursday night.

But the software services effort, which Ozzie already leads, will continue full speed ahead. Ozzie is known as the father of Notes, a client/server collaboration tool now owned by IBM. "The services push will continue to be central because it touches most of the products and services around here," he said.

Solution providers that are flexible and adapt to change will flourish, even while facing the threat of disintermediation in a SaaS world."If the value that the partner is adding is purely infrastructural, you have to pay attention to what infrastructure changes are happening. In this particular case, Microsoft itself is being impacted by infrastructure changes in terms of moving things to services," Ozzie said.

The broad, horizontal nature of initial Windows Live and Office Live services will provide plenty of partner opportunity in value-added features, he added.

"Solution partners can use their SharePoint expertise and connection to customers to build solutions on our back-end infrastructure," he said.

Partners and vendors alike in the SaaS realm worry about losing account control, a point Ozzie acknowledged. "My simple rule of thumb, it goes back to Notes, is that the more a partner is bonded to the customer through domain expertise, the more it'll be a solid, sustainable relationship. Partners can offer customers new solutions whenever the technology changes."

Over time, Ozzie will take on more product reviews. "I already lead reviews on things in the area of services stuff, and Bill does a lot. As we move forward, Bill will still do some reviews alone in areas he cares about," he said."Some we'll do jointly. The reality, though, is by the end of two years, reviews will be done differently."

Asked to clarify, Ozzie said, "I tend to be deeper in product design than Bill. Because of our backgrounds, he has much broader average impact and we'll take advantage of this to restructure."

On last Thursday's call to announce the shift, Gates said he decided to reveal his plan two years in advance to give the business the "time to make a strong transition."

One cynical observer called this a "slow-mo transition." Last year, the company was segmented into three divisions with Windows under co-presidents Jim Allchin and Kevin Johnson; consumer technologies under Robbie Bach; and business software under Jeff Raikes. Gates said that when he and Paul Allen started Microsoft 31 years ago, he never imagined "what an incredibly important company" it would become. But despite overflowing coffers, Microsoft is seen as struggling against newer, more service-oriented rivals. Wall Street is increasingly anxious about a lagging stock price, and many see the SaaS push as one that will cannibalize Microsoft's cash cows. The company makes billions on its Office and Windows franchises, both of which are seen as aging, and both are slated for upgrades next year after many delays.

Microsoft's typical 36-month upgrade cycles are viewed by many as a relic of the PC stone age. Google, on the other hand, posts new offerings all the time, many of which never seem to make it out of "beta" stage. Most of Google's offerings are free Web-based services for consumers. The money is in online ads.Some partners say Ozzie has the credibility to engineer real change.

Martin Tarr, CEO of Tiburon Technologies, an Independence, Ohio, Microsoft partner, said the company is in good hands. "Ozzie has a reputation for being one of the best programmers and technology people in the business," he said. "I think he was specifically recruited by Microsoft to take over for Gates. It's my guess this plan was put in place over a year ago."

Others say the company, despite repeated claims of innovation, has struggled lately to come up with compelling products and suffers in comparison to Google, Apple and others.

"The problem is there has been no software innovation at Microsoft in the last decade," said Joe Balsarotti, CEO of Software To Go, a Clayton, Mo., solution provider who has sold Microsoft software for 25 years. "The entrepreneurial spirit is long since gone at Microsoft. They grow now through acquisitions and trying to wring as much money as they can out of existing products."

Balsarotti said when he started selling Microsoft software he looked forward to the next product. "Now it's new versions of old products with enhancements that, quite frankly, most people don't need," he said.STACY COWLEY & PAULA ROONEY contributed to this story.