Bill Gates pushing Microsoft toward software-as-a-service

The Wall Street Journal has released excerpts from internal Microsoft correspondence in which Bill Gates is calling on Microsoft to jump with both feet into the trend toward software applications being delivered as a service over the Internet.

Whether referred to as Internet services, software-as-a-service (SaaS), or software on-demand, the idea is the same: instead of buying and installing software applications, users simply access such apps over a network. There's no software to buy. Instead, the application is either paid for on a subscription basis or supported by a third party, such as advertisers.

Analysts are comparing Gates's memo to his call in the 1990's for Microsoft to embrace the Internet (leading to Microsoft's Internet Explorer browser and MSN online services), and to his call earlier this decade to embrace web services (leading to Microsoft's .NET framework).

Interestingly, Gates quotes heavily from an internal memo by Ray Ozzie, Microsoft's CTO, who has been on board only a few months. Ozzie is a big name in information technology. He is best known as the inventor of Lotus Notes, which was later acquired by IBM. Microsoft's catch of Ozzie was a big scoop, and Gates's memo shows how influential he is within Microsoft in a short time.

Whether Microsoft can make this transition will be interesting. Microsoft's core business--make no mistake, Windows and Office--is the antithesis of software as a service. The previous two "call to arms" by Gates were easily layered on top of that core business. But to truly embrace Internet services will require a willingness to cannibalize sales of Windows and Office--not something that is going to come easily to Microsoft shareholders, or to Microsoft decision makers whose compensation is tied to Microsoft earnings.

The technology press is all over this story. So rather than cover it further, I'll just point to the Wall Street Journal article (free access this week) and this Computerworld article that gives a good summary.

Update, Nov. 11. Bob Cringley thinks that Gates' email and Ozzie's memo were written as PR documents, and planned to be leaked. The fact that at least three news organizations all received them at the same moment is suspicious.

While ostensibly written solely for internal discussion, the documents from Bill Gates and new Microsoft CTO Ray Ozzie were clearly supposed to be leaked. These are external marketing documents -- the equivalent of those ubiquitous white papers -- only Microsoft is pretending they aren't. We won't see any witch hunt at Microsoft trying to find the leaker, because I'm sure he or she was just following orders.

Here is a copy of Bill Gate's full email. And here is a full copy of Ray Ozzie's memo.

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