Analysts Say Microsoft Lacks Web 2.0 Savvy

Though the powers that be at Microsoft Corp. seem to have finally grasped the impact of the Internet on the future of packaged software, industry observers and a key rival said the company still must prove that its plan to compete in the Web 2.0 marketplace is more than just hype.

Web 2.0 is a name given to the Web’s transition from a collection of static Web sites to a computing platform providing Internet-based applications, or services, to end users. Richard MacManus, a freelance Web analyst and writer, acknowledged that Microsoft may always lag behind in its move to embrace this new era of the Internet. But now, with its Live Software plan and executive memos that herald the adoption of new services model to combat Google Inc., the company at least is talking the talk when it comes to the new wave of Internet-based services, he said.

Still, Microsoft has a long way to go to make its services strategy successful, he said. “I think they are making the right noises about Web 2.0 technologies, but there’s a difference between what they announced and what they’ve actually developed,” said MacManus, who writes the popular Read/Write Web log, in an e-mail Thursday.

He used a new service announced at Microsoft’s Live Software launch last week as an example. Live Software is Microsoft’s plan to offer a set of Web-based services, built on Microsoft software, that users can access no matter what Internet-enabled device they use. One of the first services is Office Live, which Microsoft said will integrate collaborative services such as document sharing with CRM (customer relationship management) and business analytics for consumers and small businesses. But the service “is simply vaporware at the moment,” MacManus said.

Though Microsoft plans to release Office Live in beta in early 2006, a company memo by Microsoft Chief Technical Officer Ray Ozzie, made public in various news outlets Tuesday, implies Microsoft still does not know what final shape Office Live will take, MacManus said. “Ray Ozzie’s memo indicates that Microsoft is still internally questioning the approach for Office Live,” he said.

The way Microsoft made public Ozzie’s memo outlining the company’s comprehensive software-to-services shift also shows that Microsoft is behind the times on Web 2.0, said software guru and blogger Dave Winer.

Winer, who writes the Scripting News blog, hinted that the way Microsoft provided Ozzie’s memo to the print media first rather than to bloggers shows it still may not fully understand the impact of the Web. He chided Microsoft in a blog entry Wednesday for tipping off The Wall Street Journal and The New York Times first about the memo rather than letting more Internet news sources break the story.

“Microsoft is talking about getting in the loop on the Web, and they’re feeding the story to print people?” Winer wrote. “Surely there was one person inside Microsoft who felt that it was just a bit too ironic to try to get the new message out through the old guys.”

Frank Shaw, a spokesman for Microsoft’s public relations firm Waggener Edstrom Inc., said Wednesday that he did not know who within Microsoft revealed the memo to the press.

Another pioneer of Web-based services, Salesforce.com Inc. Chairman and Chief Executive Officer Marc Benioff, blasted what he views as the elephantine pace at which Microsoft has embraced the next generation of the Web marketplace. Salesforce.com, which offers a hosted CRM service and platform, has built its business over the last several years on the notion that hosted services would eventually replace packaged software.

In a memo viewed by the IDG News Service and sent to Salesforce.com employees Wednesday, Benioff said Microsoft’s recent realization that Web-based services will eventually replace a traditional software business model is too little, too late.

“The era of the traditional software ’load, update and upgrade’ business and technology model is over,” Benioff wrote. “It is time for ’The Business Web.’ … Just as mainframe companies struggled for relevance in the client-server era, Microsoft finds itself in a worse position today, facing not just the obsolescence of a technology model, but a business model as well.”

By Elizabeth Montalbano – IDG News Service (San Francisco Bureau)