Microsoft's Cloud Future: Maker of Devices and Services

Microsoft's Cloud Future: Maker of Devices and Services

With the launch season for Windows 8, Windows Server 2012, Windows Phone 8, and Microsoft Surface finally behind us, I’m looking ahead to 2013 and the next steps in Microsoft’s bold transformation from software giant to, in its words, a maker of devices and services. The firm is often derided for not moving quickly enough—to be honest, I’ve taken a few spins on that bandwagon myself—but that’s certainly not the case now. Indeed, I’m wondering whether Microsoft’s customers are moving in the same direction, let alone at the same speed.

To recap, Microsoft’s traditional approach to delivering software platforms is no more, or at least is on the way out. Although it will continue to offer on-premises and hybrid solutions until enough of its customer base has moved to the cloud, make no mistake: The future, as Microsoft sees it, is in the cloud, in online services. And it's racing to get to that future.

The year 2012 was a time of great transition, and those recently launched products all play a role in getting from the past (software) to the future (services). The year 2013, with the coming release of Office 2013 and, as important, the next Xbox, will seal the deal and mark the inflection point after which all of Microsoft’s major platforms, moving forward, will be online services–based. Are you ready for this transition?

Microsoft as a Provider of Devices and Services

To understand the depth of this change, let’s examine what it is that Microsoft says it is, and how its products today and in the near future match its aspirations. The firm spelled out its plans in an October 2012 letter to shareholders, customers, partners, and employees. In the letter, CEO Steve Ballmer plainly stated that Microsoft was now a devices and services company and that this “fundamental and significant shift” would be its greatest opportunity for the future.

Both halves of this identity are somewhat confusing. Microsoft makes very little in the way of devices today, obviously, and it only recently launched its first-ever computer device, the Surface line of tablets. And although Microsoft certainly has a long history of offering services, this is one of the few areas of the company that has never taken off financially: Its Online Service division has pretty much always posted a quarterly operating loss. Clearly a plan for the future doesn’t involving emulating that level of success elsewhere in the company.

Microsoft’s Devices

From a devices perspective, Microsoft today makes the Xbox 360 console; it will replace that with what's expected to be a mobile device–like new Xbox in late 2013. That next Xbox will bring the extensibility of the Windows Store and Windows Phone Store to the living room and connect to an ever-widening array of online services, hints of which can be seen today in the current console.

Microsoft entered the PC market in 2012 with its Surface with Windows RT device and a second model, Surface with Windows 8 Pro, which launch in very late January 2013. Ballmer said that Microsoft plans to expand the line with more Surface devices through 2013, and although some recently rumored Surface devices are a bit farfetched, it wouldn’t surprise me to see Microsoft expand into Surface-branded touch-based Ultrabooks and all-in-one PCs next year.

The Surface mission is important, I think, to Microsoft’s future. This isn’t about Microsoft competing with its partners—it’s about Microsoft reclaiming Windows for itself and offering a purer version of its platform to customers than its partners were willing or able to do. Surface will, one hopes, inspire a change in these partners, and the underlying vision—simplicity, modeled on what Apple has been doing for years—is a good one. And Microsoft is clearly willing to go it alone if the partners don’t get the message.

These simpler device types are a hallmark of the “devices and services” mantra at Microsoft, and there’s a reason they use the word “devices” and not “PCs.” PCs are, of course, a type of device, but the future that Microsoft believes will unfold is one in which the hardware is much simpler, with a smaller on-disk footprint and much more reliance on online services. It is, in other words, a future that’s much more like the smartphones and tablets of the past few years and a lot less like traditional PCs.

This vision is why we now have Windows RT—an ARM-based version of Windows 8 that foregoes compatibility with classic desktop applications and much hardware—and Windows Phone 8, a platform that could just as easily have been called Windows 8 Phone. Indeed, Windows Phone 8 and Windows RT have as much in common as do Windows 8 and RT; both are designed to run on the efficient ARM chipsets used by devices, not PCs.

If Microsoft is truly successful in this transition—and, yes, I do think it will be—the mainstream Windows of the future will run on ARM, not Intel, or on ARM as well as an Intel platform that looks suspiciously like ARM and offers the same power management benefits. The recently launched Intel Atom processor Z2760 (formerly codenamed "Clover Trail") chipset is a System on Chip (SoC) design that offers a peek at this coming future.

Microsoft Moves From Software to Services

While devices are getting simpler—or “dumber,” from the critic’s standpoint—the services that will form the true heart of the overreaching platform are getting much more sophisticated. Part of this is simply due to the passage of time: Broadband access is becoming more and more pervasive, and these solutions have evolved to offer elegant device-syncing capabilities for offline use, and more and more of Microsoft’s traditionally delivered software is heading to the cloud in the form of online services. It’s a perfect storm.

What’s interesting about this change is that even Microsoft’s core and most traditional of platforms are increasingly being offered in pure or hybrid cloud services forms, and are being serviced as if they were online services. Consider the differences between Windows 7—the latest and last traditional Windows version, one that can trace its lineage back to the first DOS-based version of Windows from 1985—and Windows 8 and RT.

Users received Windows 7 as they did previous versions, with those not buying new PCs acquiring the software via a traditional retail package and disc. Windows 7 was likewise serviced in the same way as previous Windows versions, using service packs (well, one service pack, since Microsoft switched gears during Windows 7’s lifetime) and various cumulative and standalone updates.

Windows 8 can be acquired in old fashioned ways, since we’re in the beginning stages of a transition. But it can also be acquired via an online service that combined Windows Setup with Upgrade Advisor, Windows Easy Transfer, and other tools, to give users the simplest, fastest, and most reliable upgrade experience yet. And Windows 8 will not be serviced like traditional software was, with service packs and other old-school updates. Instead, it will be updated like an online service, with a regular series of incremental updates that will include both new features as well as bug and security fixes.

Windows RT, meanwhile, is essentially part of an appliance. You can acquire this software only with new, Windows RT–based devices. And as a member of the Windows 8 family, it, too, will be serviced on the same schedule as Windows 8.

I wrote about Windows Server 2012, Windows Azure, and Microsoft’s vision for the Cloud OS last month in "Microsoft's Cloud OS: A Vision of Infrastructure's Future." The basic strategy is the same: to take previously traditionally delivered software solutions and adapt them for the cloud-based future. Microsoft Visual Studio is still a pretty heavy Windows application, one that runs only on traditional Windows versions, but the latest version, Visual Studio 2012, is already being serviced like an online service and will be updated regularly going forward. And I suspect future Visual Studio versions will move to become more service than application, solutions that can be run, perhaps, through a web browser, on any modern device. It’s not hard to imagine a web-based version of Visual Studio that could still target locally attached devices for app testing.

On the Office front, Microsoft will formally launch the next Office 365 and Office versions in very late January (as of this writing), ushering in the same transformation for its most popular software lines ever. Office is making the transition to both online service and subscription service, and thanks to the rise of devices, the software suite will offer far more compelling licensing terms to end users, allowing them to install the applications on up to five devices, which can include Windows PCs and Windows RT devices, of course, but also Android and Apple iPad tablets by mid-2013.

This is where Microsoft’s emphasis on devices and services gets interesting. While the one-time software giant is clearly offering its own trend-setting hardware designs, it is also racing to adapt its most relevant platforms to the most successful hardware platforms—Apple’s iOS and Google’s Android—made by competitors. So you’re going to see such things as Office and Office servers interacting natively with these devices courtesy of Microsoft-made apps. The SharePoint team has two iPad apps coming out soon, for example. And we’re already seeing explicit support on iOS and Android for Xbox interactivity (Xbox SmartGlass), Xbox Music and Video, SkyDrive, Hotmail and, Skype, Bing, and MSN. Much of Microsoft’s platform stack is heading to whatever devices make the most sense to use it with.

In fact, I think interoperability is the hidden promise of Microsoft’s new vision, for both devices and services. The company hasn’t said much about this yet, of course, because it’s still early in the transition, and many are still freaked out over what might seem like a fairly impetuous change. But the future is going to be a lot more heterogeneous.

What Microsoft's Transition Means to You

Now, let's talk about the final piece in this puzzle: Microsoft’s customers. It’s not hard to imagine that many rank-and-file Microsoft admins and IT pros out there aren’t too thrilled with this transition. But one thing that Microsoft has always done well is bring customers forward. Just as the company will support hybrid environments that consist of a mix of both on-premises and hosted solutions for the foreseeable future, it will also allow those who manage Microsoft-based systems to bring their skills forward. Today’s expertise in Active Directory, System Center, and Exchange ActiveSync will map nicely to the management solutions of the future, just as an understanding of on-premises SharePoint will help in the transition to SharePoint Online. It’s a continuum.

With Microsoft speeding so quickly to this future, however, it’s pretty clear many are going to feel left behind. There's going to be a divide between the haves and have-nots as certain new functionality is provided only in the preferred, online services versions of certain technologies. On the surface, this might seem like any other transition, such as the move to 64-bit systems that caused a drop-off in new 32-bit Microsoft server products. But in this case, the effects will be more profound and far-reaching because they will occur across the entire Microsoft stack.

I do believe this is going to happen faster than many will be comfortable with. Ultimately, I return to the conversations I’ve had with IT pros at the last few Microsoft Tech Ed conferences, conversations that were triggered by early fears of cloud computing and job loss. Those who entered this field did so knowing that technology would always change and improve and that their careers would involve continually evolving as well. With this incredible transition, Microsoft is ensuring that your career is going to be more interesting than ever in the coming year. I guess you could view that as good news or bad.

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