Ray Ozzie is featured in this week's issue of Fortune, and is painted as the white knight riding in to save Castle Redmond from the barbarians at the gate. While this article is certainly a puff piece, it does illustrate the challenges (and potential opportunities) that Ozzie has been tasked with at the world's largest and most influential software company.
I've long been an Ozzie fan, and continue to be. I'm also a Microsoft shareholder and put no small faith in Ozzie's ability to accelerate the kinds of transformative process improvements needed to reinvigorate the company and, in the process, the stock.
For those disinclined to read the entire interview, here are the key talking points as I see them:
- Webifying the entirety of the Microsoft product set will require enormous capital expenditure (Google shareholders have been coming to grips with this very issue of late)
Though he won't get very specific, Ozzie says that he is amazed at the amounts Microsoft is spending, and that the cost of building the physical infrastructure for Web services will be a major barrier limiting the number of players in this business.
"The people who could build a viable services infrastructure of scale," he says, "are companies that have both the will and the capacity to invest staggering amounts of money - staggering amounts." Think billions, many billions.
He goes on, "Who has the will and the capacity? Exxon could do it, but do they have the stuff to use it for?" Microsoft, says Ozzie, will have a very large number of applications to make the investments justifiable.
- Microsoft is serious about capitalizing on the advertising model, far beyond as a means to support MSN
MSN's Blake Irving calculates that annual worldwide advertising spending amounts to about half-a-trillion dollars, vs. total software industry revenue of about $120 billion.
"Only 3.6 percent of that half-a-trillion today is being spent online," he says with relish, "even though 20 percent of all media viewership - including instant messaging, et cetera - is online now. So just assume that 3.6 percent grows to match the media opportunity. We want to be part of as much of that 20 points as we can."
- Microsoft is going to leverage its infrastructure on a new web-based personal storage service, rivaling similar plans by Google
Microsoft is planning to use its server farms to offer anyone huge amounts of online storage of digital data. It even has a name for that future service: Live Drive. With Live Drive, all your information - movies, music, tax information, a high-definition videoconference you had with your grandmother, whatever - could be accessible from anywhere, on any device.
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Note: At the time of this writing I, and/or funds I maintain discretionary control over, maintained a long equity position in MSFT but did not maintain a position in GOOG.
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