Microsoft’s Ozzie: ‘The PC’s Amazingly Relevant’

Ray Ozzie and Microsoft Windows Azure

PALO ALTO, Calif. — Microsoft’s chief software architect Ray Ozzie forecasts a cloudy future for the technology industry. And that’s a good thing.

Speaking to a large gathering at the Churchill Club in Silicon Valley on Thursday night, Ozzie covered a number of topics but was most animated when talking about the potential for so-called “cloud computing.”

While acknowledging that cloud computing “is nothing new” – he noted that timesharing “utility computing” was all the rage when he first encountered the industry in the late 1960s – Ozzie said the cloud computing coming into vogue today is “fundamentally transformational.”

“We have ubiquitous high bandwidth right now, devices are cheap, we have the storage and the computation and these massive data centers,” he said. “We as architects can imagine a solution, a user experience, which brings all these pieces and experiences together in the cloud.”

Not that Microsoft (NASDAQ: MSFT) always has been pointed in the cloud computing direction. Prior to joining the software behemoth in 2005, Ozzie had created a company called Groove. Moderator and Wired writer Steven Levy described Groove as “very cloudy” and wondered aloud: “Was Microsoft sufficiently cloudy for you?”

Amid audience laughter, Ozzie replied wryly that “the hailstorm had passed” in the months prior to his arrival, referring to the company’s fumbling initial efforts, codenamed hailstorm, to create cloud-based services and was still busily preparing Vista and Office 2007 when he arrived.

The connected PC and the ‘cloud ethos’

“There was a lot of PC thinking” at Microsoft, he said. “The PC was still the center of how most people thought about things, and it was a little scary. By that time I knew there was this transformation happening. I still think the PC is amazingly relevant, but it’s the connected PC, it’s the PC connected to the cloud, connected to other PCs, the PC connected to phones and TVs, that’s what matters.”

So Ozzie, working with Bill Gates and Steve Ballmer, set about a process of change management to accommodate what he calls “the cloud ethos.”

“Those cloud values have, at their core, interoperability and openness of data formats,” he said. “It is the life blood, the DNA, of getting systems to connect with one another.”

After he joined the software giant, Ozzie said he examined how the best of Microsoft’s consumer properties – including Hotmail and Messenger, each with somewhere in the neighborhood of 400 million users at the time – were building systems. “We took that services expertise and asked: If you were designing that system now for the next 30 years, what would it look like? What would the operating systems look like for the client side and the server side moving forward?”

Next page: Where Azure fits in

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The answers helped create a coherent vision that has evolved into Azure, Microsoft’s cloud computing platform, he said.

“This is how you build a program with no single points of failure from Day One with the elastic ability to scale from day one,” he said. “That’s in essence what Azure is.”

And while he expects Azure to thrive, he repeated his belief that profit margins from that side of Microsoft’s business will be lower than what the company has come to expect from software sales.

“The margins at the low level, at the Azure AC2 level, are going to be lower than at the top level where you’re delivering a solution or something like Exchange,” he said. “You’re pricing (top-level software solutions) based on business value more than cost, so the margins are still very, very good there.”

Azure, however, remains “a huge revenue opportunity,” he said.

New memes are required to get a message to spread across a large organization like Microsoft, Ozzie said. The new meme he’s touting? “Three screens and a cloud, three screens and a cloud: Everything we deliver from a user experience perspective will have some aspect of its value delivered across the PC class of device, the phone class of device and the TV class of device. The cloud will bring them all together.”

Ultimately, Ozzie expects that cloud computing will change the way in which the industry looks at operating systems – Microsoft’s bread-and-butter.

‘We’ll always need an OS’

“We’re moving to a world where we have so many different types and number of devices in our lives,” he said. “If you were designing an OS today for the experiences that need to be delivered today you’d design it differently. You’d have the cloud at the center (with) everything connecting to the cloud, and you’d use those devices in rich ways that … leverage that connection to the cloud and to the other devices.”

But that’s not to say that cloud computing changes absolutely everything.

“As long as I’ve been in this industry everybody has got some new technology and touts it as the thing that’s going to kill the previous thing. When it all settles out, it’s the previous thing and the new thing and we do more of both,” he said. “The reality is we’ll always need an OS… But the programming model on top of that OS and the experiences on top of that OS are what’s changing.”

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