Microsoft at 30 moves toward services

Windows may have defined Microsoft since its inception, but it will be services, not software, that give the world's largest software company its claim to fame in the future, according to analysts.

Microsoft, which celebrated its 30-year anniversary Friday with a party at SafeCo Field in Seattle, fundamentally changed the computer industry with an operating system that now runs more than 90% of PCs in the market.

That ubiquity poses a problem for Microsoft, says Joe Wilcox, analyst with Jupiter Research, because it means the company faces the difficult task of trying to outdo itself. "Microsoft is at this juncture where it's the victim of its own success," he says.

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Windows may have defined Microsoft since its inception, but it will be services, not software, that give the world's largest software company its claim to fame in the future, according to analysts.

Microsoft, which celebrated its 30-year anniversary Friday with a party at SafeCo Field in Seattle, fundamentally changed the computer industry with an operating system that now runs more than 90% of PCs in the market.

That ubiquity poses a problem for Microsoft, says Joe Wilcox, analyst with Jupiter Research, because it means the company faces the difficult task of trying to outdo itself. "Microsoft is at this juncture where it's the victim of its own success," he says.

Exacerbating this issue is the fact that conditions in the technology industry have changed drastically since 1975, thanks in large part to Windows. Today, it is much harder for a comparable product to become as pervasive as Microsoft's operating system, says Rob Helm, an analyst with Directions on Microsoft.

Helm says Windows was so successful because it rode the wave of two events - the invention of the PC and the arrival of the Internet. That subsequent chain of events "is not necessarily going to repeat itself in the next 30 years," he says.

Click to see: The long road

So as Microsoft tries to carve out a niche in a host of new markets it will need to come up with new tricks in order to surpass the success of Windows, Kusnetzky says.

"What we're going to see Microsoft attempt to do is move away from a packaged software model and sell everything as a service," he says. "Microsoft wants to make sure people pay Microsoft for any use of computers anywhere. It's a very clever, intricate strategy based upon control and ownership of low-level things like APIs, tools, communications protocols and file formats."

The company's recent restructuring into three divisions whose services strategy will be overseen by former Lotus guru turned Microsoft CTO Ray Ozzie shows that services are now a major focus for the vendor.

Microsoft also last week mandated that enterprise customers buy its Software Assurance service along with the next version of Windows.

One of the key services that might help Microsoft create a legacy beyond Windows is VoIP, an emerging market ripe for domination by a large software company, Helm says. Microsoft has been "gradually getting the pieces in place" to provide VoIP service, a technology with the potential to be as disruptive as the Internet was 10 years ago, he says.

Last week Microsoft announced its first telecom customer , Qwest Communications, to develop services using its new VoIP software platform. And last month, Microsoft acquired Teleo, a developer of services and technology that lets users make and receive voice phone calls on their PCs via the Internet. The company plans to incorporate Teleo's VoIP technology into its own software to upgrade online services from its MSN division.