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This guest post was written by Aaron Levie, CEO and co-founder of Box.net. Box.net was founded in 2005 with the goal of helping people and businesses easily access and share information from anywhere.  He has a few suggestions for how Microsoft can better embrace the cloud.

In the coming days, weeks, and months, Microsoft will articulate and evangelize its cloud strategy. It will unveil its Office 2010 product line, and we’ll see if Steve Ballmer can stand behind his claim that Microsoft is truly “betting our company” on cloud computing. Honestly, I hope he can. Yes, my small company, Box.net, competes with Microsoft’s SharePoint product, but I believe that a more innovative, open, and user-centric Microsoft benefits the technology industry at large, not to mention its massive customer base. By rethinking its entrenched but rather stagnant product line and embracing the cloud, Microsoft has an immense opportunity for reinvention. And because the cloud becomes more compelling to businesses as mature platforms and meaningful integrations proliferate, Microsoft’s entry can be a boon for other vendors, partners, resellers and developers. But in order for its move to be a force for good, Microsoft needs to be serious about going “all in.” And if it is, there are some major challenges ahead:

Designing software for the web.

I’m going to make a blanket comparison here. In just over a decade, Google has amassed an army of web engineers and evangelists. In over 20 years, Microsoft has built a closed culture around a software model that is fast becoming extinct.  They haven’t commercialized a single major web technology innovation that I can think of in the past decade (okay, maybe Bing, but even that is more evolutionary than revolutionary). Apple brought us a new generation of connected devices with the iPhone and iPad; Google brought us open mobile operating systems, a new breed of apps, and a scalable business model for the web; Facebook made social the underlying fabric of software; Salesforce.com commercialized SaaS.

Microsoft has some major catching up to do if it wants to stay relevant amidst the massive cultural and technological shifts underway. The company has a solid Enterprise brand, no doubt, but their users aren’t happy with the experience, nor are they drawn in by the story that Microsoft has been telling. Customers have been leaving for Google Apps, Salesforce,and other cloud-based alternatives in droves, and to prevent further exodus, Microsoft won’t have the luxury of their standard three-attempt approach. Nor does it own the underlying distribution channel anymore (the operating system). The web has produced a market that is highly democratic in how it decides the future, leaving Microsoft without any unfair advantages.

Suggestion: Design software specifically for the web, rather than retrofitting old single-tenant software to the cloud. Steve Ballmer insisted that “the goal can’t be to throw out all the world’s software and start again,” but in some cases, it will be necessary to start from scratch. Make your services more usable, social and people-centric, like you’ve done with Docs.com, and address long-standing problems with release cycles, operating system delays, and enterprise limitations. Redmond can be an insulating place. Encourage your latest generation of employees—and push on all those who’ve been around since Windows 95—to be scrappy, entrepreneurial, and up-to-date.

Courting developers with an open platform.

When was the last time you went to a website that was in some way powered by an open Microsoft service? For that matter, when was the last time you saw any meaningful web integration being supported or championed by Microsoft? I’ve seen one implementation of Silverlight (Netflix), but beyond that I probably don’t encounter a single Microsoft service in an average week of using the web.

Microsoft’s lagging web presence is a serious hurdle for its competitiveness in the cloud. It didn’t have to be this way: two years ago, the tech community rallied around the launch of Live Mesh. It was going to be the greatest way to support data convergence and parity across a variety of platforms, and at Box.net, we were thrilled about having an easier way to plug into the Microsoft file system. Where is the Mesh Developer ecosystem today? Non-existent. Developers for the past decade have been burned by Microsoft’s lagging support for web standards, and forced to maintain custom versions of their site just to support IE5 and IE6.

Suggestion: Show the developer community some love by offering APIs for products like Microsoft Office Live on Day One. Let developers pull data in and out of the rich applications that you’re bringing to the cloud. There are thousands of applications on the web that could be aided by launching cloud versions of Word, Excel, or Powerpoint directly from their sites. Make these services usable, and don’t make the terms onerous.

Happy developers will lead to more meaningful integrations with the products your customers want or already use. And push for better browser support immediately. Microsoft still has the No. 1 browser market share; use this penetration to be a force for good, pushing the web to a better place. Help your customers keep pace, encouraging them to upgrade their systems so that developers don’t have to maintain legacy code.

Embracing a new business model

Every $1 a customer spends on Microsoft’s enterprise licensing is accompanied by another $8 spent on consultants and channel vendors. Think about that for a second. Customers ranging from SMBs to Fortune 100 businesses spend billions of dollars each year with Microsoft Certified Partners to develop deeper integrations, implement new Microsoft tools, connect disparate systems and maintain infrastructure. Many large businesses exist primarily to facilitate sales, support and servicing for Microsoft customers. This all makes for a rich but highly structured ecosystem—one that works especially well with an on-premise model that requires physical management of systems.

But can this ecosystem thrive when Microsoft moves to the cloud? Now take a look at the successful cloud vendors. Their services are available over the web and on-demand, with deployment times that are measured in minutes, not months. And as a general rule, they sell directly to their customers. This is not a model Microsoft has perfected. In moving its products to the cloud, Microsoft is going to have to navigate a very different world—one that is often diametrically opposed in both incentive and purpose to the on-premise paradigm it knows so well. And in many cases, this new world will force Microsoft to compete directly with its partners.

Suggestion: Make your software available directly to customers, rather than sending them to partners to get started. Granted, this will shake up your ecosystem, and it also means that your online products need to be intuitive and easy to implement. But the long-term benefits will outweigh the short-term upheaval. By removing the barriers to purchasing and implementation, you’ll see organic growth of your solutions within organizations.

The balance of power has shifted: bottom-up adoption of services by users is driving deployment at the company level. Yes, some partners will lose money in the near term, but those that join you in adopting this new model by leveraging opportunities for easier, deeper integrations will ultimately be successful. Overall, the potential for more strategic consulting and a new era of services built on cloud platforms will open up tremendous opportunities for partners. And for larger enterprises with custom needs, offer the option to go through channel providers and resellers that can add tremendous value and customization to cloud services.

Addressing confusion in the marketplace

Microsoft’s customers are confused. Take file sharing, for example – a problem I’m intimately familiar with. Microsoft has at least eight solutions to address this issue: Groove, Live Folders, Mesh, SkyDrive, Office Online, Docs.com, Live Workspaces, and Sharepoint. I’m probably missing one or two more. When we speak to customers and analysts alike, there’s understandable confusion surrounding the various Live products—how they relate to one another, the billing models, and more. Or look at the company’s mobile strategy. Why would Microsoft launch a new set of phones (Kin 1/2) that don’t run on the Windows 7 operating system that it wants developers to rally around?

Moves like this make developers question whether it’s wise to invest in supporting Microsoft’s platforms, and certainly don’t convey a compelling product narrative to potential or current customers. And the importance of coherent storytelling cannot be overestimated—designing and delivering solutions over the web speeds the pace of innovation exponentially, and customers need a clear view of where a product is heading.

Suggestion: In defining your cloud strategy, there is an immense opportunity to also deliver a clearer message around your product lineup. Explain how these online tools will work together, how they’ll integrate with other solutions and create compelling opportunities for developers. Tell customers what they can expect in the coming weeks, months and years—because with cloud-based solutions, you can deliver continuous and seamless feature updates rather than waiting for the next big (and cumbersome) upgrade. Kill off properties, align visions, and get people behind a few core sets of products or suites. Bing is actually a consolidation success story for Microsoft because it channels nearly all services to a single destination. With the cloud, there’s an opportunity to replicate this coherence on a broader scale.

Conclusion

Microsoft certainly has the resources, manpower and industry knowledge to address these challenges—now we’ll see whether it has the vision and audacity to embrace an entirely new approach to business software. I don’t envy the hurdles Microsoft faces, but I do hope that it’s successful in addressing them. Why? We want businesses to have better experiences with their technology. We want interoperability between business applications, much like what exists today in the social web. The cloud isn’t zero sum, and if Microsoft can be an innovator in this new paradigm, the cloud will tip for the enterprise that much faster. And if Microsoft can’t, the cloud will pass them by.

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