Microsoft's Week Involved Cloud Strategy, EU Ballot Screen, Windows 7 Sales

Microsoft announced a substantial bet this week, with CEO Steve Ballmer indicating during a March 4 talk at the University of Washington that his company would henceforth rely on the cloud as inspiration for its upcoming products and services.

"We shipped Windows 7, which had a lot that’s not cloud-based. Our inspiration now starts with the cloud," Ballmer told the assembled students. "Windows Phone, Xbox, Windows Azure and SQL Azure…this is the bet for our company."

Microsoft may be feeling pressure in the cloud space from any number of competitors, including Apple and its App Store, which Ballmer cited as "a very nice job" for its ability to monetize intellectual property such as songs through the cloud. But perhaps the company’s most muscular opponent in that particular space is likely Google, which announced a reported $25 million deal March 5 to acquire DocVerse, which allows groups to collaborate on Microsoft Word, Excel and PowerPoint documents.

That potentially makes Google Apps, Google’s productivity platform, potentially even more robust. Before this point, Web applications such as Google Apps and Microsoft Office did not "play well together," DocVerse founders Shan Sinha and Alex DeNeui wrote in a March 5 posting on the official DocVerse Blog. "Most times, teams choose one product or the other. Google’s acquisition of DocVerse represents a first step to solve these problems."

But for Microsoft, such moves may represent yet more barbarians swarming at the base of its proverbial walls. As its counter-move, Microsoft plans to make a cloud-based, stripped-down version of its upcoming Office 2010 available for free to Windows Live subscribers; however, users wanting to use the full versions of Word, Excel, PowerPoint and OneNote will still need to purchase the desktop-based version.

In addition to a cloud-based office, Ballmer also cited Xbox Live, Bing, and upcoming "smarter devices" as integral parts of Microsoft’s cloud strategy, along with the upcoming Windows Phone 7 Series.

"Earlier [Microsoft] phones were designed for voice and legacy [applications]," Ballmer said, while the company’s take on Windows Phone 7 Series, due for release at some undefined point by the end of 2010, was to create an interface that "put people, places, content, commerce all front and center for the users with a different point of view than some other phones."

Microsoft’s cloud plans extend to business. On Feb. 24, the company announced Business Productivity Online Suite Federal, an online-services cloud for the U.S. government that comes with heightened security. Google plans to challenge in this area, however, with announced plans for a dedicated federal cloud-computing system at some point in 2010.

If Microsoft’s inspiration now begins and ends with the cloud, the question becomes how that will affect the development of future products, particularly the desktop-bound Windows franchise that represents a significant revenue generator for the company as a whole. In a Jan. 31 blog posting on the Microsoft Developer Network, a project manager suggested that development of Windows 8 is already under way, but no details have leaked about the level of cloud integration into the future operating system.

This week, Microsoft also faced a new twist in its long-running saga with the European Union over the bundling of Internet Explorer with Windows. Following discussions over the issue with the European Commission (EC), the antitrust regulatory body for the European Union, Microsoft introduced an automatically downloaded "Web browser choice screen" to European Windows users on March 1, which presented a randomized list of browsers from which to choose in addition to Internet Explorer.

While Microsoft and the EC both indicated March 1 that they believed the whole issue settled, some of the smaller browser vendors included on this browser ballot screen issued a formal petition to the EC on March 3, claiming that the structure of the ballot screen—in which browsers with smaller market-share were only visible if the user scrolled sideways—was fundamentally unfair. Browsers with a larger market share, such as Apple’s Safari, Google Chrome, IE 8 and Mozilla Firefox, are featured prominently.

"It is clear that the final Choice Screen design leaves the vast majority of users unaware that there are more than five browsers to choose from," reads the statement issued by the smaller browsers, which includes Maxthon, SlimBrowser, Avant Force, Flock, Sleipnir and GreenBrowser. "This is inconsistent with the EU Commission’s stated goal for the Choice Screen—to provide European consumers with 'information on the 12 most widely-used Web browsers and to allow users to easily download and install one or more of these Web browsers.;"

The smaller browsers, however, are only seeking relatively minor changes in the design of the ballot screen, such as a text or arrow that would indicate that the user should scroll to the right in order to view more browser options.  

But Microsoft deferred to the EC as the ultimate arbiter of the ballot screen’s look.

"The reality is that Microsoft cannot make changes unilaterally to a browser choice screen that follows considerable industry comment and Commission consideration of the specific balance between vendors with large market share and those with very small market share," Kevin Kutz, Microsoft’s director of public affairs, explained in an e-mail to eWEEK March 2. "The final version of the browser choice screen reflects the Commission’s strong point of view about striking the right balance as they saw it."

The EC’s decision, released to the public Dec. 16, 2009, and viewable here, contains paragraphs explaining the rationale behind the ballot screen’s current configuration.

To wit, the document reads, "If the choice screen presented too many Web browsers, users would be overwhelmed and as a consequence would be more likely not to exercise a choice at all, but rather dismiss the entire choice screen."

But if the smaller browsers continue to press, the chances are that the ballot-screen issue may not be dismissed at all.

Microsoft’s issues within the cloud come at a time when the company seems to be recovering, in certain respects, from the declines in revenue that came with the global recession of 2009. Chief Financial Officer Peter Klein told those assembled at a Morgan Stanley Investor conference March 2 that Microsoft expects enterprise technology spending to perhaps perk up again in fiscal 2011, even as Windows 7 continued to be a strong seller some five months after its release.

Total sales of Windows 7 now stands at 90 million copies since October 2009, a number that represents a substantial spike from January, when the company announced that some 60 million licenses had been sold. Klein had suggested in a Jan. 28 earnings call that strong sales of the operating system were due to heavy consumer demand.

"There will be an enterprise refresh cycle," Klein reportedly told the audience. "It’s not precisely certain when that will happen or how fast it will happen, but we expect it to happen this calendar year and go into next calendar year, and that will be a really good catalyst for growth in the PC business."

As it introduces new products to attempt to fuel growth, Microsoft evidently plans for the cloud to be of prime consideration in their development.