Microsoft Memos Reveal On-Demand Anxiety

Opinion: Memos from Bill Gates and Ray Ozzie show just how much Microsoft is worried about catching up with the on-demand software services wave before it passes them by.

It must be tough being Microsoft and believing that you have to dominate every significant software technology sector.

But if you are Bill Gates and you are running the worlds biggest software company, you always have to be paranoid about what might come along and relegate your company to a lower rank or, even worse, to a position of technological irrelevance.

Just how much Microsoft worries about this was demonstrated this week when two internal memos from Gates and Chief Technology Officer Ray Ozzie leaked to Web. Its clear the memos were deliberately leaked to prove that Microsoft really has thought a lot about what it needs to do about on-demand software.

Microsoft apparently felt compelled to do this because industry commentators, including this one, have been asking whether Microsoft really understood the implications of software as a service based on what it has announced so far. Then again, maybe they decided to leak the memos because they felt they were so widely distributed inside the company that somebody was bound to leak them anyway.

/zimages/3/28571.gifClick here to read more about the Gates and Ozzie memos and the reaction to them.

Its clear from reading their memos that Gates and Ozzie have done a thorough job of analyzing what has been happening in on-demand services over the past five years.

But it is also true that Microsoft is such a big and complex organization that it has all it can do just to keep its current product lines on track and making money. It is suffering from a problem that afflicts many enterprises when they become massive, lumbering behemoths that are as hard to turn as the Queen Mary ocean liner—the old one, not the new model.

Even with all its wealth, Microsoft isnt nimble enough to recognize every opportunity that comes along. While it can claim that it has pioneered a number of on-demand information services and Web service APIs, such as .Net and its MapPoint service, it was also in response to what was being done by Sun Microsystems with Java or by Yahoo with its mapping service.

When other companies come along with fresh ideas such as search engines or browsers and turn them into successful business models, that doesnt necessarily mean that Microsoft somehow failed because it didnt recognize the potential of a lucrative new business model before any other software engineer or entrepreneur.

Nor does it mean that Microsoft should automatically respond to these developments as fundamental threats to its existence that have to be matched and if possible crushed in the marketplace. But that is how it has responded in the past, and the memos show that this is how it plans to respond to this latest challenge.

Next Page: Riding the services wave.

John Pallatto

John Pallatto

John Pallatto has been editor in chief of QuinStreet Inc.'s since October 2012. He has more than 40 years of experience as a professional journalist working at a daily newspaper and...