Microsoft Chief's Battle Plan: Vaporize Google's Cloud

That's no surprise. Before joining Microsoft, Ozzie built a career on the concept that a PC and a network together are greater than the sum of their parts. In the mid-1980s, Ozzie and his company Iris Associates developed the networked groupware platform that became Lotus Notes. He then went on to found Groove Networks, a maker of peer-to-peer collaboration software, after Lotus was acquired by IBM in 1994. When Microsoft acquired Groove in 2005, Ozzie came along for the ride.

Today, Ozzie is leading Microsoft's 36,000 developers in a multipronged effort to reboot Redmond for the cloud computing era. His plan includes free, ad-supported services for consumers; hosted software as a service (SaaS) for businesses; tight integration of services with desktop software; and new platforms to allow Microsoft's vast developer community to build Web applications and services of their own.

The plan got off to a slow start. For much of Ozzie's early tenure, Microsoft's developers were embroiled with Office 2007, Windows Vista, and Windows 7. But behind the scenes, Microsoft was restructuring its product groups and assembling teams to put Ozzie's services-oriented vision in motion. As a result, Office 2010, due later this year, will be a milestone for two reasons: Alongside Windows 7, it will complete the upgrade cycle of Microsoft's flagship products. More important, it will be the first major salvo in Ray Ozzie's "software plus services" assault against Google.

Taking Office to the Web

Office 2010's most innovative feature -- and its most direct challenge to Google -- is the highly anticipated Office Web Apps: Web-based versions of Word, Excel, PowerPoint, and OneNote that allow viewing and editing of Office documents using any standards-compliant browser. On the surface, Office Web Apps are Microsoft's answer to Google Docs, but the two differ in strategically important ways.

Google Docs is meant to be a revolutionary product that disrupts the traditional software paradigm. Rather than replicating the familiar files-and-folders metaphor used by most desktop operating systems, it stores documents in a chronological queue, similar to an email inbox. The applications' text formatting and graphics capabilities are minimal compared with Office's, and imported documents lose much of their formatting. Instead, Google Docs emphasizes the innovative collaboration and Web publishing capabilities inherent in the cloud computing model.

Microsoft's offerings are arguably more technologically advanced than Google's, yet their aim is less ambitious. SkyDrive, the Microsoft online storage service that plays host to Office Web Apps documents, mimics the Windows desktop. Users who have Office 2010 installed on their own machines can choose to open SkyDrive-hosted documents in the desktop versions of the applications at the click of a button. Sharing and collaboration over the Web are just as easy as with Google Docs, but the Office Web Apps are clearly meant to complement their desktop siblings, rather than rendering them obsolete.

Underscoring this distinction is the Office Web Apps' ability to display Office file formats with total fidelity. In stark contrast to Google Docs, even complex page layouts are preserved. This has advantages: For customers, it means the Office Web Apps can be used with documents created by past or present versions Office without corrupting their formatting. For Microsoft, it emphasizes the importance of not just Microsoft's Office file formats, but the concept of a file itself -- and by extension, the importance of desktop software.

Microsoft has taken this approach to Web apps before. Just as the Outlook Web Access (OWA) component that ships with Exchange Server is not meant to replace the desktop Outlook client, the Office Web Apps provide a subset of the desktop suite's features in a convenient, Web-based form. What is new, however, is that Microsoft will offer the Office Web Apps in three configurations: an ad-supported version available free of charge to anyone, an ad-free hosted service for businesses, and an enterprise version that can be hosted on-premises.

All Roads Lead to SharePoint

Customers who insist on hosting their own servers, of course, have long been Microsoft's bread and butter. Such customers can choose to deploy the Office Web Apps on SharePoint Server 2010, the forthcoming version of Microsoft's "Swiss Army knife" solution for intranet applications; this method has other advantages, as well.

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