2008: The Year that Microsoft Embraced the Cloud

While the current view of 2008 is one of financial misery, what with the slumping economy and stagnant PC industry growth, this year will likely be remembered in tech circles for far more meaningful reasons. Microsoft, which jumpstarted and then led the current PC industry since its beginnings, finally began to abandon its traditional business model at last and compete fully in the Internet cloud this past year.

The move to so-called cloud computing may seem like an obvious one for the software giant. But when you've dominated an industry as obviously as has the software giant, change is very hard indeed. So hard, in fact, that major portions of the company still aren't on board.

Microsoft's cloud computing moves can be seen most clearly in its decision to host all of its enterprise server products for customers on a subscription basis. Currently, only a small and obvious portion of these products are available through what's known as Microsoft Online Services (MOS)--Exchange, SharePoint, and a few others--but more are on the way. And Microsoft is eschewing its traditional partner approach for these services, choosing to self-host them at its own datacenters.

On the consumer end, Microsoft in 2008 dramatically expanded the capabilities of its Windows Live product line, which encompasses both cloud-based services as well as native applications that run on both Windows PCs and smart phones. The integration between these products is laudable, but the future of Microsoft can be seen most clearly in a recent marketing tagline that reads, "Windows on the PC, on the Web, and on the phone." The point here, of course, is that the software giant's products are rapidly moving outside of the traditional PC ecosystem and into markets that, ultimately, could prove to be both far bigger and more lucrative.

Those days, of course, are far off: Today, Microsoft's Web and mobile offerings trail the competition, sometimes by a wide margin. And the software giant's cloud computing ambitions can arguably be viewed through a prism of its latest major competitor, Google, which has released a tidal wave of Internet-based products and services over the past few years. Google dominates the Internet search market, but has also made strong inroads with its email, contacts management, and calendaring services.

Also problematic is the fact that parts of Microsoft still seem stuck in the past. The recently released Windows Small Business Server 2008 is an excellent revision to the popular SBS line, for example, but requires businesses to install and manage expensive and complex software locally. Meanwhile, many small businesses, educational institutions, and other businesses are seeking instead to offload such capabilities to the cloud, using services that are much less expensive and complex, and are managed by others.

For the foreseeable future, Microsoft will need to answer to two divergent markets, one for traditional, locally installed software and one for solutions that live up in the cloud. But make no mistake, the balance is shifting in favor of cloud computing. Just ask Microsoft.

Note: In preparing this story, I considered some other trends that I think were relevant and interesting in 2008. These included...

Microsoft Finally Fights Back By Embracing Diversity of the PC

Netbooks More Damaging to Microsoft Revenues than Mac OS X or Linux

An End to the Microsoft Antitrust Era

Windows 7 and the Veil of Secrecy

Windows Vista: The Fastest Selling Windows ... And Apparently the Most Unloved

And, of course...

2008: The Year of Desktop Linux

Happy Holidays, --Paul

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