As Xmas nears upon us, so does Windows Vista, the latest operating system from Microsoft. Wether Vista is a good OS or not is irrelevant at this point… at least it seems to be the WSJ perspective. The following article stresses the impact the Internet has had on traditional software vendors and the resulting shift in Microsoft’s business model in particular. In my opinion it raises crucial questions not only about Microsoft’s future offerings but also on an entire industry on the verge of unprecedented change.
It is indeed an interesting time to wok in this industry… maybe they were right to call it “Web 2.0” after all. Not because of all the bells and whistles of user-generated content but rather because of underlying tectonic shifts and their overall impact on the economy as a whole.
Life After Vista: Can Microsoft Retool for Web?
By Robert A. Guth
November, 27th 2006 – (c) 2006 – The Wall Street Journal
MICROSOFT CORP. on Thursday will begin offering large companies a long-awaited version of Windows, pitching the operating system as the start of a new generation of software. Now the question is: Will Windows Vista be the last rollout of its kind?
Windows Vista is a critically important upgrade to the software that runs hundreds of millions of PCs world-wide, intended to deliver greater protection from viruses and other Internet-borne attacks and includes features Microsoft says will make PCs easier to use. Expected to filter into businesses and homes over the next year — it will be offered to consumers in January priced from $199 to $399 — Vista is a central pillar for Microsoft’s overall growth and an engine of the $200 billion PC industry.
But the company’s developers are already facing a tricky challenge over what to do for an encore. The crux of the issue is how Microsoft’s signature Windows product should adapt to the Internet, and to rivals such as Google Inc. that are using the Net to deliver competing offerings at unprecedented speed.
Microsoft contended with that greater agility during the lengthy development of Vista, which is coming out five years after its predecessor, Windows XP. In that lag, a series of software and service innovations planned for Vista were rolled out first by Google, Apple Computer Inc. and the Mozilla Foundation, the nonprofit that makes the Firefox Web browser. Google, for instance, in 2004 pumped out a free “desktop search” tool for finding information on a PC. Mozilla’s Firefox browser included a feature called “tabbed browsing” for displaying multiple Web pages at the same time.
Microsoft couldn’t keep pace, though it believes it has now matched those technologies. Vista, for instance, includes a series of features to help users find and organize files and use a mouse to quickly flip through open windows of information. The new version of Internet Explorer has tabbed browsing.
“A five-year gap will not happen again,”vowed Steve Ballmer, Microsoft’s chief executive, in an interview last week. The company is working on new development processes so “we can add things with greater and greater agility,” he said.
The fundamental question Microsoft faces is whether the PC will continue to play a central role in tasks people now use it for, from storing music to watching videos and writing documents. In recent years, the spread of high-speed broadband Internet access and a host of new technologies have made it easier than in the past for people to use the Internet for such tasks. Consumers tap services like Flickr, an online photo site, and YouTube, the huge online video-sharing site, to store pictures and videos online — not on their PCs. Increasingly, applications such as email and word-processing are offered as Internet services that don’t require much, if any, software running on a PC. They also don’t require the companies to release whole new versions of software as Microsoft does in its Windows and its Office line of programs. Google regularly updates its search and email services with little fanfare.
Microsoft executives are tight-lipped about how Windows will change, but it’s likely a major redesign of Windows is in store. That means a delicate dance for the company as it tries to retool its software for the fast-changing Internet while trying to preserve one of the richest cash cows in business history. How that balance is handled in the next few years is of interest to thousands of Microsoft customers and the vast industry of Dell Inc., Hewlett-Packard Co., Adobe Systems Inc., Symantec Corp. and others that build their own businesses around the software. For Microsoft, Windows is still its largest business unit, contributing $13 billion in revenue and profits of $10 billion in its most recent full fiscal year.
Mr. Ballmer insisted that there has never been a greater need for software that gives rich capabilities to PCs and other devices used to get online — even though those programs may increasingly collaborate with software that resides on a server somewhere on the Internet. Windows “has a bright and healthy future,” he said.
Microsoft has been adjusting to the Internet since the mid-1990s. The rise of browser software and Web sites prompted predictions that Internet services would become the primary way to store data and handle day-to-day chores for businesses and consumers. Some companies, such as Oracle Corp. and Sun Microsystems Inc., predicted that PCs would be replaced by simpler terminals that just ran Web browsers.
As it turned out, the Internet provided another big reason to buy PCs, as consumers bought them in order to access the Web — and Microsoft benefited. But Google proved that, for companies, the combination of Web services and online advertising could be at least as lucrative as PC software.
Mr. Ballmer was quick to note that Internet offerings increasingly don’t depend on the Web alone. For instance, companies like Google are increasingly developing software to allow work to be done when a user isn’t connected online. Playing to its strength in software, Microsoft has been laying the technical foundations for its own combinations of software and Internet services, he said.
Under the brand name Windows Live, for example, Microsoft plans to offer online services that complement Windows. A separate set of services called Office Live will be aimed at small businesses. Those services are still taking shape, though Microsoft already has an online service called Windows Update that allows users to automatically receive software fixes, security enhancements and other features.
In another shift, the company is trying to make its software more flexible by breaking it into individual components, work that started while developing Vista. After two years of development, the software became so big and unwieldy that in 2004 Microsoft started the effort over, trying to rework Windows so it could be structured as individual pieces that could be changed or removed without disturbing the rest of the software.
Microsoft is likely to offer more components in the future. To try to stay in step with Google, for example, Microsoft could release search software for finding data on a PC over the Web without having to wait until the next major release of Windows. “We still have more opportunities to be even more componentized,”Mr. Ballmer says. Another area of focus, he said, will be to continue to enhance Microsoft’s Internet Explorer browser so it can handle more sophisticated graphics, video and application programs that are delivered over the Web.
Few of these details have been decided, Microsoft insiders say, but how the Windows development is carried out will be largely up to Steven Sinofsky, a senior vice president that Mr. Ballmer tapped this year to manage Windows development. Mr. Sinofsky, a former technical assistant to Microsoft Chairman Bill Gates, is noted for his work with Microsoft Office, the suite of programs that is Microsoft’s second-largest business. Mr. Sinofsky so far has largely focused on finishing Vista and preparing supplemental software for Vista expected next year.
But he has already put his stamp on the division, last summer quietly cleaning house of an old guard that managed the troubled Vista project. Mr. Ballmer has given Mr. Sinofsky wide latitude in choosing how to structure Windows in the future, say people familiar with the situation. Microsoft declined to make Mr. Sinofsky available for this article.
Meanwhile, a cadre of respected Microsoft computer scientists and programmers formed a group under Chief Software Architect Ray Ozzie to start building software that could be a critical piece of what Windows might become, say people familiar with the work. That group, says a person familiar with the matter, sees the future of Windows as much more as an Internet service than software that runs on a PC.
Mr. Ozzie has discussed ways of simultaneously exploiting PC software and the huge data centers full of server systems that Microsoft is building to deliver Internet services. For example, a feature in Office 2007 — a suite of programs arriving along with Vista — allows users to publish their calendars to a centralized service, allowing other authorized Windows Live users on the Web to view the entries.
Some people familiar with the situation see the possibility of tensions between Mr. Sinofsky’s group and efforts like the one under Mr. Ozzie. In a similar tug of war in the late 1990s, one internal faction lobbied to use Microsoft’s Internet browser software to radically retool Windows for the Internet. But that faction lost out to a more PC-centric view of the Windows mission — an outcome that some Microsoft insiders say is one reason the company fell behind in the Internet services Google and others now lead.