Microsoft Tech Chief: Hosted Software Offers Opportunities, But Also Challenges

Rapid advances in computer technology that are transforming the world of consumer software on the Internet are bearing down on businesses, which could realize lower costs and increased productivity by embracing them, Microsoft Chief Technical Officer Ray Ozzie said during a speech in his hometown of Boston Sunday night.

Speaking at Microsoft's TechEd 2006 conference, Ozzie said the computer industry is approaching an era in which Internet services will transform business software by giving companies access to the processing power, data storage, and communications bandwidth resident in large data centers being built by Microsoft and its competitors. That will bring fundamental changes to the way companies manage technology, which IT pros need to be aware of.

So far, the "steady march" of cheaper, more widely available technology has had more influence on consumer markets than in business, he said. "Our latest in hardware and software is more likely to be used by our teenagers rather than ourselves," said Ozzie. Business technology will become more valuable when it's combined with innovation happening on the Internet, he said.

Microsoft is designing software that can let businesses take advantage of remote data centers. Future Microsoft products will give companies the option to run the software on their own computers or as an Internet service, then switch modes at any time. "Microsoft is laying the foundation for this new world," said Ozzie, who joined the company last year when it acquired Groove Networks, which Ozzie founded in the '90s to develop software that combined the processing power of PCs with the collaborative capabilities of the Internet. Ozzie is most famous for creating the Notes e-mail application for Lotus Development in the 1980s.

According to Ozzie, the large data centers that Microsoft and its competitors Google and Yahoo are building in Washington and Oregon will be used mainly to serve up consumer-oriented technology such as search engines, Web-based e-mail, blogging sites, and instant messaging services. Those applications can support hundreds of millions of PC users, Ozzie said, whereas business software is designed to serve at most tens of thousands. By tapping into those data centers, companies could have more powerful tools at their disposal. Microsoft's online business software will complement its ubiquitous Windows and Office products and its customers' own applications, he said, adding that that's counter to the view of "extremists," who believe IT departments will disappear as most software moves to the Net.

But the opportunities also bring challenges for IT departments, said Ozzie. IT managers need to recognize that user-friendly software doesn't need to be unmanageable and that IT departments' goals don't need to conflict with those of end users. Distinctions between what's inside and outside firewalls need to become less black and white. At the same time, IT workers need new options from IT vendors for managing both software outside their firewalls and the personal laptops and PDAs employees use for work.

Ozzie pointed to examples of current Microsoft products reflecting its design principles. The company's Windows Live Search Web site can also comb business data on companies' servers. A new version of Microsoft's Dynamics AX enterprise resource planning software lets customers use Web services to pull data from multiple systems for "business mashups." The Office Live Web site could become an opportunity for Microsoft's customers to create "rapid, maybe even disposable solutions that span enterprise boundaries," he said. Microsoft is even applying investments from its Xbox Live video game network to business technology.

Microsoft is developing a new line of security products called Forefront that can run on PCs, company-owned servers, or servers run by Microsoft, Ozzie said. It's due in about a year.