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Microsoft's Cloudy Future

It's so hard letting go. All the money, all the memories, all the good times -- it's hard to think of them as things of the past. Just look at Microsoft. Cloud computing is here, and the old operating system and productivity suite are becoming less and less relevant all the time. But Microsoft just can't let them go.

OK, most of that last sentence was a massive overstatement -- but we got your attention, right? We know that Windows isn't going to be obsolete any time soon, if ever. And Office is likely to be the suite of choice for the masses for at least a few more years to come.

Plus, there's no guarantee that SaaS, cloud computing or whatever you want to call it will ever unseat the old-fashioned desktop computing model, much less bump it off within the next few years. (After all, ASPs never ruled the world, and they were really just early SaaS providers.)

Still, SaaS is looking more like a viable alternative every day, and companies like Google, NetSuite and especially Salesforce.com are building nice little (actually, pretty darn big) businesses around it. So we're intrigued by some of the comments Steve Ballmer made this week when he dropped a few hints about a forthcoming "Windows Cloud" OS that will be aimed at developers of SaaS applications.

Never mind, first off, that some startup seems to have beaten Microsoft to the Windows Cloud punch. What we're interested in is Ballmer's attitude toward SaaS -- or Software Plus Services, as Microsoft calls it -- more than the scant details the Microsoft CEO released on Windows Cloud.

Let's check some quotes from the PC World article linked above:

"Ballmer was quick to point out that Microsoft doesn't envision products such as the Office productivity suite to move entirely off desktop PCs and onto the Internet.

But Microsoft is working on a service that would let people do 'light editing' of Office documents at places such as a public Internet kiosk, Ballmer said."

Ballmer doesn't envision Office moving entirely onto the Internet? At all? Ever? Why not? We're not saying that a SaaS-model Office would outsell the traditional offering. But as cloud computing gains acceptance, why wouldn't Microsoft at least offer a hosted option for Office? Would it cannibalize desktop revenues that much? Is the model just too difficult to put into action, and too risky financially?

If so, then Microsoft really might be in trouble. Again, we're not flying a flag for a SaaS revolution here, but we do acknowledge -- who doesn't? -- that it's an attractive model for customers and partners alike who know what they're doing. It's growing now and seems likely to continue growing, and, unlike the ASPs of the '90s, companies such as Salesforce.com seem to have the confidence of small-business and maybe even some enterprise customers.

In a tightening economy, with midsize companies increasingly looking to save costs and dump off IT management on somebody else, Ballmer is talking about Office being on the desktop for at least the foreseeable future. And, in doing so, he's kind of dismissing cloud computing (more on that shortly). Those are worrying signs because they seem to point to Microsoft being either unable or unwilling technically and financially to fully embrace the increasingly popular cloud computing model with its core products.

And then there was this:

"Ballmer was dismissive of Google, saying Docs and Spreadsheets has 'relatively low usage' and that users want richer features in an office software package.

'We want software more powerful than software that runs in a browser,' Ballmer said."

Whoa. OK, he's right about the first part. Google Docs and Spreadsheets is a pretty weak offering thus far, both in terms of functionality (compared to Office, anyway) and in terms of market share. But the second part of the quote above is the kicker. If Ballmer's just talking about Office being more powerful than Google's apps, fine. But -- and this could come down to how the reporter wrote the story, we'll admit -- it sounds as though he's suggesting that cloud applications aren't as powerful as their on-premises cousins.

Salesforce.com, its users and partners will likely beg to disagree. And if Microsoft's attitude is that desktop apps will always trump SaaS offerings in terms of functionality, there would seem to be a serious lack of vision in Redmond. Surely that's not the case...right?

We'd like to think that Microsoft is moving toward fully embracing cloud computing and bringing partners along for the ride. And, to be fair, there have been lots of signals to that effect. But Ballmer's comments seem to be those of a CEO who doesn't want to see the old-school OS and desktop productivity suite -- his company's moneymakers -- become less and less relevant all the time. We know it's hard letting go -- but everybody, even Microsoft, has got to move forward.

Does Microsoft get cloud computing? Let us know at lpender@rcpmag.com.

Posted by Lee Pender on 10/02/2008 at 1:22 PM


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