Microsoft hopes to dominate the web-era of computing with Windows 7 by revolutionising its software and services, writes JOHN COLLINS

WITH ALL the coverage of Microsoft taking the wraps off Windows 7 at a conference in Los Angeles at the end of last month, it was easy to miss what was possibly an even more important announcement at the same conference.

It is one that will will have far-reaching consequences, not just for how Microsoft does business, but for the computer industry as a whole and the evolution of the web.

Unveiled at Microsoft's get-together for techies, the Professional Developers Conference (PDC), Windows Azure is the culmination of the "software + services" strategy that Microsoft has been talking about for the last few years.

Although the Seattle-headquartered firm has become the world's largest software company by selling software to install on computers, it is acutely aware this is no longer enough in the 24/7 world of the web.

Ray Ozzie, Microsoft's chief software architect - who took on the role from the company's founder and driving force for 33 years, Bill Gates - set the scene by saying the strategy is about a "new generation of applications that span the PC, web and mobile phone".

To do that efficiently, software needs to be accessible by devices over the web using open standards rather than from a corporate data centre where security is an issue and supporting a large number of users is not practical.

In the new era, applications and data will live in data centres owned by companies like Microsoft - hence the concept of pulling computing resources from a virtual "cloud" where storage, processing power and security rules may reside on different computers around the world.

Recent studies suggest that over two-thirds of American web users access some kind of cloud service - whether that's as simple as web-based e-mail or an online data back-up service.

Google in many ways has pioneered the model with services from online spreadsheets to blog publishing tools, while online retailer Amazon has led the way in providing the necessary infrastructure to others with its Elastic Cloud Computing (EC2) service.

Microsoft sees three big themes driving the demand for services to complement its installed software - the up-take of cloud computing, an increasingly globalised and inter-connected economy, and the increasing use of web services by business.

Software installed in a consumer or business user's own premises has a number of inherent advantages.

The owner of the software has full control over its security and there are less concerns about privacy as information is not stored on someone else's computers. The software can be fully customised for each individual user and access to data on the local network is rarely an issue.

In contrast, the software-as-a-service model means that applications can be accessed from anywhere you can get an internet connection, the software can be easily made available to new users, and it is easily deployed and managed centrally. All in all, it's ideal for the agile enterprises that management gurus now tell us we should be running.

Microsoft sees "software + services" as giving customers the best of both worlds - they decide what things they want stored locally where they have more control over it and what should be on the web where it is more accessible.

While the concept of the cloud or utility computing, where you simply plug into the network to access the computing resources you need, has been around for many years and was the subject of a best-selling book by technology commentator Nicholas Carr this year, the concept is not well understood by businesses. Tony Lock, an analyst with Freeform Dynamics, says his research with business technology buyers suggests that they don't fully understand what is meant by cloud computing.

Ozzie's comments at the end of his LA keynote speech were telling in this regard. He pointed out that Microsoft "still believes deeply in the world of on-premise software", while at the same time "believing deeply in the potential of the new world of the cloud".

As well as unveiling Azure, Ozzie also announced that versions of some of its key products would be made available in the cloud: Live Services for consumers, Net Services for developers, database capabilities in the form of SQL Services, collaboration with SharePoint Services, and customer management capabilities with CRM Dynamics Services.

Taken together with Azure, this is called the Azure Services Platform, an environment which enables the creation of new applications by mixing and matching elements of the different available services.

The introduction of Azure, which is still only available as a "technology preview" with no details provided of a commercial release, also marks a significant change in Microsoft's business model. Rather than selling you a license that gives you the right to use the software - remember, you don't actually own the software installed on your computers - use of the Azure Platform will be charged depending on the resources used and the level of support that a customer requires.

Windows Azure, may bear little relation to Windows as you know it on your desktop PC, but the choice of name is not just another example of brilliant marketing by Microsoft.

Ozzie and other senior executives drove home to developers that while the paradigm may have changed radically, they would still be able to use the development tools and languages that they use for Windows today.

While the Windows Azure platform is how businesses will create the new generation of applications for their customers and staff, Microsoft is using the same concepts to enhance its consumer offerings under the Live banner.

As is often the way with Microsoft, the Live branding came before it had a suite of products to back it up. Its search engine was re-branded Live Search, its webmail became Hotmail Live and the instant messaging service was renamed Windows Live Messenger.

This year, however, real products have begun to emerge such as Live Mesh, which places a user's data in the network cloud and allows them to access it from any of their Windows devices. Windows Live Mail, to be released later this month, can access Gmail accounts as well as those based on Microsoft technology and allows content and calendaring to be shared over the web.

The new strategy also shows signs of a more open Microsoft that is willing to work with competitors rather than trying to crush them (as chief executive Steve Ballmer famously told a departing employee he would do to Google).

Live products integrate with services from Yahoo and Google and is far more open than anything from current consumer darling Apple.

Windows 7, when it ships in a year or so, will really mark the arrival of software and services for consumers as most PC makers are likely to ship it with the Windows Live Essentials suite.

Current versions of the products that make that up can already be downloaded and installed form the web.

The PDC event was in many ways Ozzie's coming out party.

Although he's made public appearances in the three years since he joined, Azure is his baby and his big bet on Microsoft's future.

It may be far from certain that Microsoft will dominate the web-era of computing in the same way it dominated the PC one, but it is devoting significant resources and taking risks in an attempt to do so.

HAIL TO THE CHIEF: Who is Ray Ozzie?

WALKING ON stage with no fanfare sliver-haired Ray Ozzie could not be more of a contrast to Microsoft's excitable chief executive Steve Ballmer.

But Microsoft's long-term future is reliant far more on Ozzie than Ballmer.

He may not have the public recognition of his boss, but Ozzie is highly regarded by software developers.

In fact, Microsoft were so impressed with him that in April 2006 they acquired his collaborative software company Groove Networks in order to secure his services.

Prior to Groove, Ozzie was central to the development of Lotus Notes, the collaboration and e-mail product that almost became the standard for large corporates in the late 1990s and is now part of IBM.

He studied computer science at the University of Illinois Urbana-Champaign, one of the most highly regarded technical colleges in the United States, which was where the Netscape web browser was invented in the early 1990s.

One of his earliest jobs was with Software Arts where he worked on VisiCalc, the first spreadsheet program for PCs. Earlier this year, Ozzie told Microsoft's in-house television station, Channel 9, that being at the juncture of business strategy, product and market strategy and technical strategy, was what he really enjoyed about being Microsoft's chief software architect.

"I have the opportunity to work with not only the executive team on larger strategic issues, but also with the product teams at fairly detailed technical architectural levels," he said.

"As an engineer, it is really fascinating," said Ozzie.