Will Ozzie era at Microsoft signal a revolution?

If Bill Gates leaving Microsoft is the end of an era, then Ray Ozzie’s ascension is the beginning of a revolution designed to transform the company’s business model as well as redefine corporate IT infrastructures and how end users access, share and interact with applications and data.

Ozzie, who invented Lotus Notes and created Groove before selling it to Microsoft for $120 million, is Gates’ successor and Microsoft’s point man to lead it into the online services era, what he calls “a time of great turbulence and potential change in the industry.”

In a 2005 memo to Microsoft’s executive staff, Ozzie said if Microsoft failed to respond to the advertising-supported services and software model sweeping the industry “our business as we know it is at risk.”

For more on Bill Gates legacy see:
Bill Gates in pictures: A retrospective
Bill Gates: the video tribute
Mitchell Ashley: Ozzie, you must transform Microsoft
Ron Barrett: Interesting thoughts about the legacy of Bill Gates

To understand the threat and why the golden slipper isn’t on Microsoft’s foot this time, one only need to know that industry experts predict that by May 2009 Google’s search business alone (not including AdSense) will be larger and more profitable than Microsoft’s most famous cash cow – Windows.

The services effort is the biggest test of Ozzie’s storied career.

With Gates leaving his full-time post July 1, the new chief software architect, at Microsoft since 2005, is officially on the clock as it ticks into the future.

His task is to meld Microsoft’s packaged-software pedigree with both consumer and corporate services, what the company calls “software plus services” and battle Google and other Web and Enterprise 2.0 companies.

"He certainly is regarded highly as a technical person, and he carries a certain amount of prestige,” says Dwight Davis, an analyst with Ovum Summit. “But it’s sort of a minefield for Microsoft to go down this path, but it understands it has to go down the path. With Gates gone there is going to be a new environment, and so there is going to be a more federated team at Microsoft. How that plays out is difficult to predict.”

Click to see: Chart of what Microsoft has in store

Ozzie, a noted technologist like Gates, has established a framework for Microsoft’s services architecture; presided over the rollout of a mish-mash of consumer and enterprise services; and is spearheading the development of perhaps his most important effort to date – Live Mesh, an online data-sharing and synchronization service introduced in April. It will likely compete with Apple’s newly unveiled MobileMe and start-up services such as SugarSync and Joggle.

Microsoft must also overhaul the nontechnical side where makeovers will be needed for its corporate culture, business model, and partner and customer relationships to accommodate a services model that includes lightning-fast development, new distribution strategies and superior customer service.

It’s all in its infancy, and has already suffered a hit with the failed bid to acquire Yahoo, a move designed to accelerate Microsoft’s online and advertising strategy.