Ozzie Predicts Customer Cost Savings In Web-Based Software

Microsoft is planning Internet services that enhance the value of its desktop software and that potentially encourage consumers to replace older PCs or buy additional ones.

Speaking at a meeting with financial analysts in Redmond, Wash., on Thursday, chief software architect Ray Ozzie said Microsoft's software-as-service effort, called "Live software," will include development tools that let programmers build Web applications that scale to many users. Microsoft also intends to measure in new ways how Internet people consume online software.

"Some may view what we're doing here as a big, bold bet, but it's a very natural bet for us as a platform company," said Ozzie, who assumed the chief software architect title after chairman Bill Gates split his technical responsibilities between two deputies last month. Gates said he would leave his daily role at the company in two years.

Microsoft may bring to market online software that lets Outlook users publish their calendars to the Web so other PC users can view them, and a version of its OneNote note-taking application that uses Web components to let users take notes with a handheld computer, then transfer them to a PC. Such online tools would "make Office a more valuable product" and could even encourage consumers to buy new PCs and devices capable of supporting the new services, said Ozzie.

Online software should be "largely additive" to Microsoft's traditional PC and server software, not compete with them, he said. For businesses, CIOs will need to make choices about "cost vs. control" when deciding whether to use Microsoft's Web products. Over time, however, the cost benefits of Web-based software may be difficult to ignore, Ozzie added.

"This is more of an additive model than it is a replacement," said Ozzie. "I do not believe the Web is the be-all and end-all of experience delivery." As part of its online effort, Microsoft will start tracking more data about consumption of online software, in a way that respects PC users' privacy, Ozzie said.

Other Microsoft executives discussed plans for additional Internet software. Robbie Bach, president of Microsoft's entertainment and devices division, said the company will spend hundreds of millions of dollars on the newly hatched Zune digital music player and Internet music store over the next three to five years. Zune will launch as a single product in the United States this fall, with the company expanding into additional markets and related products next year.

Kevin Johnson, co-president of Microsoft's platforms and services division, discussed how Microsoft is serving more ads into its Xbox Live Internet service, including from Coca-Cola and The Progressive Corp. He also showed prototype software developed in Microsoft's research labs that involved moving a mouse over the actress Sarah Jessica Parker's outfit in a video clip from "Sex And The City," displaying the name of the clothing manufacturer and how much it cost.

Microsoft's online services business will grow by 7% to 11% in the current fiscal year which began July 1, to $2.5 billion to $2.6 billion in revenues, Johnson said.