The Geek: Charles Arthur

Microsoft set to gatecrash the online services party

A few years ago, you knew where you were in computing. Microsoft made the software that powered pretty much everything computer-y you'd come into direct contact with, such as PCs. Palm did handhelds. Mobile phones were just phones. And Google did a web search engine.

Now? Well, where to start... Google does maps, satellite photos, e-mail, instant messaging, voice-over-internet phone calls, a free program to analyse website traffic (Google Analytics, launched this week), news searching, a shopping service and free blogging software (through blogger.com).

Palm is vanishing into a rump, and Microsoft is becoming dominant in handhelds. Mobile phones are getting more computer-like every day, taking pictures and playing music and videos; I now use mine for all my personal calendar and to-do lists, superseding my old Palm.

And Microsoft? Well, Microsoft is gamely trying to transform itself into something that doesn't just do bits of software you have to stick into a computer's CD-rom drive, or download off the internet. It's trying to transform itself into a "services" company - in effect, to become a new Google or Yahoo!.

A key step was the launch this month by Microsoft of its Microsoft Live website (www.live.com ) as part of a plan to try to turn the corporation from something that just makes CD software into one that provides "services" - such as maps and user-generated pages - over the web. Bill Gates (pictured below) also announced that from next year there will be a service called Office Live, aimed at small businesses (typically with fewer than a dozen machines) for collaborative work. In the latter case, though, the detail is so vague that it comes across like something out of King Lear: "We shall do such things, what they shall be I know not, but they shall be the terror of the earth."

Microsoft very much wants its online services to be the terror of the earth, having got used to being that in pretty much every other area of computing. Five years ago, when venture capital money was washing around the industry, potential investors only had two questions for new companies: "How much do you want?" and "How will you avoid Microsoft squashing you like a bug if it chooses to emulate this?" (Usually, they asked the second question first, of course.)

But this time, things are different. While Microsoft has been concentrating on its own internal problems (which have seen it becoming almost sclerotic, and led to a huge reorganisation last month), allied with the problems of getting its next-generation operating system Vista in order, smaller, younger companies such as Google, Yahoo! and a multitude of others have crept up and created a whole new arena: online software.

I've covered a few, like Writeboard (www.writeboard.com), which lets you collaboratively create and edit documents. But there are so many such "web services" that there's now a blog devoted to listing the new ones (at http://www.webapplist.com). And it's far from exhaustive.

Here's the problem for Microsoft: what if people only need a computer with broadband and a browser to write collaborative documents? What if they can do online spreadsheets (see http:// web.peoriadesignweb.com/spreadsheet/)? What if the computer doesn't matter? What if you don't need Office or Windows to do your work? That chops away the vast legs on which Microsoft stands (as all its other divisions are unprofitable). The worrying thing about web services is that they could leave it, Ozymandias-like, as dust in the desert.

To show that it recognises the problem, Microsoft "leaked" (via a PR newswire) internal memos from Gates and Ray Ozzie, the chief technology officer, about how essential they see services being to Microsoft's future. And now, here the corporation is again, and late to the party once again. Being late hasn't been a problem in the past for the company; it wasn't first with a browser, wasn't first with windows, and so on.

But online habits are hard to lose. Once you start using Google, why give it up in favour of Microsoft Live? (Especially as Live's search is less accurate than Google's.) And I suspect that the new services side and the ingrained, hardware-based side of the company are going to tussle like two cats in a bag, one having the advantage of popularity and speed of implementation, the other being the money generator. And which wins will determine whether we talk about Microsoft in the past or present tense 10 years from now. Watch this space.

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