Steve Ballmer at UW: Is This Microsoft’s Cloud Computing Strategy, or Just Internet Software?

The first sign that Steve Ballmer was in the house came when I saw a cop car parked outside the University of Washington’s Computer Science & Engineering building. Then there were the paper signs telling you where to line up for his 10 am talk today.

The Microsoft CEO doesn’t make many local public appearances, so it was a rare opportunity to see him speak about company strategy at the UW. It was his first talk in the Allen Center, which was jam-packed and standing room only. His focus today was supposed to be on “cloud computing,” but it was really much broader than what most people call cloud computing these days. It was more about Internet software in general and Microsoft’s vision for reinventing itself in the era of the Web. (What this says specifically about Windows Azure—Microsoft’s cloud computing platform currently being rolled out—I’m not quite sure yet.)

In fact, my broadest takeaway is that there’s still a lot of ambiguity out there around what cloud computing means. I thought techies had come to a consensus on a definition. The basic concept allows companies and developers to pay as they go to rent data storage and processing power to run their applications, as a cheap and low-hassle alternative to maintaining their own servers. But I was wrong. My conclusion for now: cloud computing is really a term that’s so nebulous, it has become meaningless.

But back to Ballmer’s talk. I’ve always been struck by how much the Detroit native talks like a regular guy. Booming voice, yes; tough businessman, of course; but dressed in a red polo sweater and khakis and extolling the virtues of Internet computing and services, he really seemed to be enjoying himself up there.

Some low-level Kremlinology: I wondered if what Ballmer didn’t say would be more telling than what he did. Regarding competitors, he did mention Google at least twice. He also mentioned Amazon’s Kindle software (but not Amazon Web Services), and even Apple and Research in Motion (BlackBerry) once each. On the other hand, there was no mention of VMware, IBM, or Nokia. Also, Microsoft chief software architect Ray Ozzie (the original champion of Azure) was present, but didn’t speak.

Here are my immediate reactions to Ballmer’s talk:

He called the cloud—which I take to mean the modern Internet ecosystem—“the gift that will keep on giving.” He also emphasized, “The inspiration for what we’re doing now starts with the cloud. Windows Azure and SQL Azure start with the cloud as their design point…This is the bet, if you will, for our company.” He laid out pretty much the company’s entire strategy in terms of the cloud—in mobile, search, entertainment, devices, professional software, servers, and social networking.

This is a radical shift from the company’s outward thinking just five or six years ago, when it was still mainly focused on desktop-based software and business users. Ballmer laid out what he called the five key opportunities of the cloud (I’ll relay only the parts that seemed particularly interesting):

1. “The cloud creates opportunities and responsibilities.”

This means “new business models and new opportunities to start and form businesses because of commercial software infrastructure that’s never existed before.” Ballmer talked about a “whole new class of creators of a wide variety of intellectual property.” He jabbed at open-source developers, who pride themselves on standing up to The Man. With the advent of commercial cloud platforms, Ballmer predicted, “Some creators will think, ‘How can I monetize?’” At the same time, he emphasized that companies need to be strong on security, and respect consumer privacy and “let the user be in control.”

2. “The cloud helps you learn, decide, and take action.”

This is where he started to diverge from my notions of cloud computing. Ballmer was really talking about creating an intelligent Web using techniques like machine learning. “We’re trying to take a look at information and glean meaning from it, and look at human behavior and glean intent,” he said. In terms of helping consumers make decisions and take actions, he showcased the new version of Bing Maps, whereby you can zoom in on cityscape images, in the manner of Microsoft Photosynth-meets-Google Maps, to get to street-level images that connect to shared Flickr images. The maps also incorporate tags and blogs that connect locations to social media in real time.

3. “The cloud enhances your social and professional interactions.”

This sounded mostly like how to do business networking and Web conferencing better, but then he demoed an Xbox Live system available in the U.K. for watching TV and interacting virtually with friends. Between this and its work on video and gesture interfaces like Project Natal, it’s clear Microsoft is trying to lead the way in connecting consumers in the entertainment realm.

4. “The cloud wants smarter devices to access it.”

As Ballmer put it, “The devices you use do matter.” So this is about making smarter software that enables simple and cheap ways for people to connect to the cloud. Case in point: the new Window Phone 7 operating system phone, which he described as a “relaunching” of Microsoft’s mobile products specifically designed for the Web. Previously, Windows Mobile was designed for “voice and legacy” users, he said. Now Microsoft’s mobile business has gotten with the Internet, and “with a different point of view than some other folks.” (I took that to mean Apple’s iPhone, although Ballmer didn’t say exactly who he was talking about.)

5. “The cloud drives server devices that in turn drive the cloud.”

This one was a little nebulous, but it directly concerns Azure. Ballmer said there are 2 million servers sold around the planet just to power the cloud. But “everything about server software and hardware has to change because of the cloud,” because of the amount of data that gets stored, the number of users, and so forth. Ballmer positioned Microsoft’s cloud approach as being more advanced than current virtualization software, which he characterized as “yesterday’s ideas.” He said that the whole premise of Windows Azure is to “change how you write software…and how to migrate software” and manage servers without having to manually fix ones that break.

Lastly, Ballmer shared some thoughts on how Microsoft needs to innovate in the current era of cloud software and services. “Whenever you get a big shift in our industry—every five, 10 years—those are interesting times,” he said. “They are times that people say, big companies like ours—can they focus and embrace new opportunities? The field of endeavor keeps moving forward.”

Addressing an audience question about Microsoft being late to Web software, he said, “Nobody wants to have to react to anyone else. I’m certainly keen on increasing our hit rate in terms of ‘early and often.’” And he emphasized the importance of Azure and Bing in terms of driving cloud-based software forward. Amazon, he said, took the programming model of yesterday and brought it into the cloud with its Web services. By contrast, Azure will let developers write entirely new kinds of applications, he said. (A bold claim, but we will have to see about that.) And in Web search, he said, “there’s been more innovation in search in the last year than in the previous three,” because of competition between Bing, Google, and others.

But in terms of the five cloud dimensions laid out above, he said, Microsoft is “at the front or tending to the front.”

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