Beyond Vista

No company has as much to lose from this shift as Microsoft, which dominated the client/server era on the strength of its Windows operating system. Microsoft is currently enjoying a moment in the spotlight thanks to Vista (the latest version of Windows), the fruit of five-plus years of development and what Microsoft COO Kevin Turner calls the "biggest R&D investment in the history of Microsoft and arguably the history of business." But Vista isn’t a part of the software-as-a-service trend, and all the pomp and circumstance around its release mask a growing concern inside the company, one that comes through in executives’ demeanor, internal communications and candid conversations about what the IT world will look like five years from now: Software as a service is a threat unlike any the company has faced before, and Microsoft must make dramatic changes if it wants to remain the most important technology company in the world.

Microsoft has started to develop a software-as-a-service strategy over the past year. Its initial offerings—Windows Live and Office Live programs—provide Web-based mini-applications. But those services are only a small part of the grand vision that CEO Steve Ballmer, COO Kevin Turner, Chief Software Architect Ray Ozzie and others hope will make Microsoft as indispensable to the Web 2.0 enterprise as it was to the client/server one. In a series of exclusive interviews with CIO, Microsoft executives explain that Web-based applications are just the beginning, and that the company’s future lies in developing the tools CIOs will need to manage the software-as-a-service environment. "It’s easy to whip up a Web app, throw it online, and say it’s for businesses," says Ozzie. "But that’s a naive view of what CIOs have to go through."

To Microsoft’s way of thinking, the Web services world will make a CIO’s life messy and difficult. While each software service that a company subscribes to will be cheaper and easier to operate than its client/server counterpart, collectively they will make the enterprise exponentially more complicated, unless CIOs have tools to provision and manage those services as a suite. Microsoft vows to develop those management tools and make them the centerpiece of its enterprise business.