Microsoft at 30 turns to services, not software

The Windows operating system may have defined Microsoft since its inception, but it will be services, not software that give the world's largest software company its claim to fame in the future, according to analysts.

Microsoft, which celebrated its 30-year anniversary with a party at SafeCo Field in Seattle Friday, fundamentally changed the computer industry with an operating system that now runs more than 90 percent of PCs in the market.

But that ubiquity itself poses a problem for Microsoft, said Joe Wilcox, analyst with Jupiter Research, because it means the company currently is facing the difficult task of trying to outdo itself. "Microsoft is at this juncture where it's the victim of its own success," he said.

Exacerbating this issue is the fact that conditions in the technology industry have changed drastically since 1975, thanks in large part to Windows. Today it is much harder for a comparable product to become as pervasive as Microsoft's operating system, said Rob Helm, an analyst with Directions on Microsoft.

Helm said the reason Windows was so successful is that it rode the wave of two events -- the invention of the PC and the arrival of the Internet. That subsequent chain of events "is not necessarily going to repeat itself in the next 30 years," he said.

"The days of the killer application are long gone," agreed Dan Kusnetzky, vice president of system software research at research firm IDC. He said that the packaged software that helped Microsoft rise to such a position of dominance is on its way to becoming obsolete, giving way to subscription models for services that customers buy to run the software they need.

So as Microsoft tries to carve out a niche for itself in a host of new markets it will need to come up with new tricks in order to surpass the success of Windows, Kusnetzky said.

"What we're going to see Microsoft attempt to do is move away from a packaged software model and sell everything as a service," he said. "Microsoft wants to make sure people pay Microsoft for any use of computers anywhere. It's a very clever, intricate strategy based upon control and ownership of low-level things like APIs (application programming interfaces), tools, communications protocols, and file formats."

The company's restructuring this week into three divisions whose services strategy will be overseen by former Lotus guru turned Microsoft chief technology officer Ray Ozzie clearly shows that services are now a major focus for the vendor.

Microsoft also last week mandated that enterprise customers buy its Software Assurance service along with the next version of Windows, Windows Vista -- another move that proves Microsoft plans to drive a model where customers pay regularly for access to a network of software updates rather than a packaged product, Kusnetzky said.

One of the key services that might help Microsoft create a legacy beyond Windows in its next 30 years is Voice over Internet Protocol (VOIP), an emerging market ripe for domination by a large software company, Helm said. Microsoft has been "gradually getting the pieces in place" to provide VoIP service, a technology with the potential to be as disruptive as the Internet was 10 years ago, he said.

Earlier this week Microsoft unveiled its first telecommunications customer, Qwest Communications International, to develop services using its new VOIP software platform. And last month, Microsoft acquired Teleo, a developer of services and technology that allows users to make and receive voice phone calls on their PCs via the Internet. The company plans to incorporate Teleo's VOIP technology into its own software to upgrade online services from its MSN division.

"If [Microsoft] could make the same economics of the PC apply to telephony -- a small number of dominant hardware standards, a large number of hardware players and one big software company -- it could yield returns [for the company] commensurate to the PC [market]," Helm said.

Join the newsletter!


Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.
Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Elizabeth Montalbano

IDG News Service
Show Comments

Brand Post

Shining a light on creativity

MSI has long pushed the boundaries of invention with its ever-evolving range of laptops but it has now pulled off a world first with the new MSI Creative 17.

Most Popular Reviews

Latest Articles


PCW Evaluation Team

Tom Pope

Dynabook Portégé X30L-G

Ultimately this laptop has achieved everything I would hope for in a laptop for work, while fitting that into a form factor and weight that is remarkable.

Tom Sellers


This smart laptop was enjoyable to use and great to work on – creating content was super simple.

Lolita Wang


It really doesn’t get more “gaming laptop” than this.

Jack Jeffries


As the Maserati or BMW of laptops, it would fit perfectly in the hands of a professional needing firepower under the hood, sophistication and class on the surface, and gaming prowess (sports mode if you will) in between.

Taylor Carr


The MSI PS63 is an amazing laptop and I would definitely consider buying one in the future.

Christopher Low

Brother RJ-4230B

This small mobile printer is exactly what I need for invoicing and other jobs such as sending fellow tradesman details or step-by-step instructions that I can easily print off from my phone or the Web.

Featured Content

Product Launch Showcase

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?