Microsoft Betting on Web Services with Office and Windows

By now, .Net was supposed to be the centerpiece of Redmond’s empire. Yet when Microsoft met with Wall Street analysts this past summer, the company didn’t focus on .Net. Instead, CEO Steve Ballmer concentrated on “anchor businesses,” such as Windows and Office.

But the latest version of Windows was four years ago; the next isn’t due for a year.

Microsoft is facing so much skepticism on Wall Street that in late September the company announced a huge reorganization. The reorganization is “part of driving software-based services in competition with anybody else who thinks they’re going to use that strategy to get ahead in the marketplace,” Ballmer said in a Wall Street Journal interview. “We’re not the only guy who’s going to try to deliver software that has a service-based component. We need to get there aggressively and quickly.”

But Microsoft still has faith that your average businessperson weaned on Excel, Outlook and Word will continue to prefer those applications to anything Web-based. Windows and Office, Microsoft argues, can simply do more than a browser—:better graphics, more complex applications, more immediacy than the click-and-wait world of the Web. CIOs will want to develop Web services for Windows and Office because of these “rich” features. And Microsoft is doing everything it can to encourage Web services development on top of Windows and Office, including creating a development toolset specifically for Office. One product of that would be Mendocino, an effort to use Office as a front end for SAP’s ERP software.

Microsoft is betting that if you try to take Windows and Office away from users—:no matter how much sense it makes financially or from a development point of view—:they’ll revolt. The appeal of Mendocino is that it’s something everyone is comfortable with—:Office—:fronting something everyone is uncomfortable with, ERP. As FedEx Executive VP and CIO Rob Carter says of his decision to integrate his .Net Web service with Office, “The vast majority of the world finds the Microsoft desktop productive and standard. For people who want it, we could provide a browser interface. It just won’t be the same.”

But what if it became the same? Users are comfortable with browsers too. And technologies, such as Ajax, are being developed right now that make browsers quite rich, with the kind of immediate gratification and deep visual and complex transaction capabilities of a desktop application. Front and center with these kinds of Web applications is Google, Microsoft’s new nemesis. (Many observers say it’s this threat—:Google, its applications and the fact that it keeps taking Microsoft developers away—:that spurred the massive reorganization in Redmond.) Google Earth and Google Suggest, among others, are just hints at what Web-biased developers want to do with the Web: Take it out of its click-and-wait heritage and take on Microsoft. -S.B.