Disclaimer: I work for Microsoft on their Live Search product. In no way is what I'm blogging about representative of the actual views of Microsoft. I'm much too low level to have any input or insight into Microsoft's thought process.
I see a lot of people on various message boards comment on how Microsoft should stop funding Live Search and Online Services. Many people say that Microsoft should just focus on what they do best (developer tools, operating systems, and office) and ignore this whole "Internet Thing (TM)". Microsoft loses millions of dollars a year competing with the Google Behemouth with very little to show for it in terms of market share. Why not just cut your losses, spin off the division, and let it die a horrible death?
I'll tell you why. Google is Microsoft's biggest threat. Google threatens Microsoft's operating system dominance, their developer tools dominance, and their office dominance. If this were the Civil War, Google would be the North. They are the ones competing on Microsoft's home turf. They are trying to burn Atlanta, and some would say they are succeeding. As a Microsoft employee, I am not at all scared of Apple. They will continue to tinker with their iPhone and Macs and a few hardcore Apple fans will always be there to keep them going. Don't get me wrong, I think the iPhone is a huge improvement. I own one. I like it (but don't love it). However, Apple isn't making inroads into Microsoft's core. Objective C is not the Visual Studio killer and OS X won't kill Windows. Apple wants to produce the "perfect system". And that's fine. They'll end up creating something very beautiful that will be mimiced by others, but it will take them years to do so and they'll do so single mindedly. They won't be diverse enough to kill the Microsoft behemouth. Google, on the other hand, is thinking big. They have a plan that goes after all of Microsoft's core competencies and they are taking the fight to MS.
Let's look at a few examples:
1. Office vs Google Apps for Business - Take a look at a number of business that are evaluating or have switched to Google Apps for Business. Now a few things have to be said. Many of these companies are using Google Aps in addition to MS Office. They are using Office for thier internal communications and confidential emails and Google Aps for less sensitive material. For now, that is the best they can do. In addition, many of the companies are switching from other systems such as sendmail, so that's not a direct gain against MS. Nevertheless, how long is it before Google provides encrypted email and a guarantee of privacy? How long before they win a big MS client and other companies start looking at the cheaper Gmail system with reduced administrative costs? This is an obvious attack and one that is gaining momentum.
2. Visual Studio vs Google Web Toolkit - This is a bit of a misclassification. Really, Google Web Toolkit is more of an attack on Microsoft's Azure Platform than on Visual Studio itself. However, Visual Studio is included in the assault. With Eclipse, Google Web Toolkit, and many libraries such as jUnit, Guice, etc... Google has teamed up with the Open Source community to take on MS. Google wants developers to develop on its "platform" just like Microsfot wants developers to develop on its "platform". That is why Microsoft developed Silverlight. Silverlight allows developers to take their .NET familiarity and transfer it to the browser. This keeps people in the Microsoft environment. Google takes the same approach. They want people to use its services, so they provide the Google Web Toolkit to keep people in their environment. It's also a good testing ground for larger conquests, providing computing power and frameworks for the enterprise. Once developers become comfortable with the Google environment, it will be an easy transition to open up their cloud to businesses and allow them to develop and deploy on it.
3. Windows vs Android - Shouldn't this be Windows Mobile vs Android? No, definitley not. Android is a direct attack on Windows and the desktop. Already many people are speculating that Android will be released on netbooks soon.
See Android notebook coming early next year?, Android netbooks? Wouldn't it be lovely, and Android netbook is a possibility. Google will use their operating system to keep your information and applications in the cloud and you will be able to access them from any computer, especially your Android netbook. You'll log in and immediately see your desktop with your applications that are stored on the cloud. When you click on an application, it will download and begin running immediately (though many applications will still work through the web, like GMail, blogger, etc...). Netbooks are already taking a chunk out of Microsoft's sales and having Google's name on it will only increase sales. Also see this article on how Netbooks sales are killing Microsoft.
I haven't tried to paint bleak picture on purpose. Instead, I was trying to show that Google is taking the battle to Microsoft and Microsoft must respond. Search, in particular Live Search is a key component to that. But, it is not the only component. Windows 7 and Azure are other key components. In the future, people's computers will live on the cloud. Search will go beyond finding web pages. Instead, you'll perform searches for applications that will fit with your current settings. You might even rebuild your OS components in the cloud specifically to fit your library versions. You'll search for a song and not only get an mp3, but also a list of movies that you own that have that song in them. You might, if your search options are set correctly, even get a list of similar songs, or songs you played before or after that song. Search is the backbone of the next generation computer and the next generation HCI. Google, I believe, backed into this and is now expanding it to its inevitable conclusion. Microsoft realized it after the fact and is rushing to catch up. Regardless, we need competition and I believe that Microsoft has the resources and the dedication to provide that competition.
Needless to say, the things I outlined above are not going to happen overnight, but Google is taking a long term view. So is Microsoft. Google is using their advertising revenue to subsidize their desktop pursuits. Microsoft is using their desktop revenue to subsidize thier advertising pursuits. Both are in it for the long haul. It will take years for Google to implement some of the things I discussed above. I expect 8-10 years will pass before all of our data and programs live in the cloud. I expect another 10 years will pass before most businesses data and programs live in the cloud. Both companies will be here after that time has passed, which company will be the dominant one? I have no idea, but it will be exciting to find out!
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