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GigaOM Interview: Ray Ozzie, Chief Software Architect, Microsoft Corp.

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bio_ray.jpgFresh from his Mix’08 keynote, Microsoft’s Chief Software Architect and industry luminary, Ray Ozzie, spent some time on the phone with me, discussing everything from the company’s services strategy, to the economics of cloud computing, to the relevance of desktop and infrastructure challenges. What follows is a highly edited version of our 20-minute conversation.

Enjoy this interview, the first of what I hope will become a series of conversations with tech greats.

OM MALIK: You outlined Microsoft’s software-plus-services strategy, but what I want to know about is the changing role of the desktop in this service’s future.

RAY OZZIE: I think the real question is (that) if you were going to design an OS today, what would it look like? The OS that we’re using today is kind of in the model of a ’70s or ’80s vintage workstation. It was designed for a LAN, it’s got this great display, and a mouse, and all this stuff, but it’s not inherently designed for the Internet. The Internet is this resource in the back end that you can design things to take advantage of. You can use it to synchronize stuff, and communicate stuff amongst these devices at the edge.

A student today or a web startup, they don’t actually start at the desktop. They start at the web, they start building web solutions, and immediately deploy that to a browser. So from that perspective, what programming models can I give these folks that they can extend that functionality out to the edge? In the cases where they want mobility, where they want a rich dynamic experience as a piece of their solution, how can I make it incremental for them to extend those things, as opposed to learning the desktop world from scratch?

OM: So basically you’re saying that in this new environment, that you have to give up on your legacy of desktop and just view the world from a web perspective?

RAY OZZIE: Well, I can’t say give up on it. Here’s the way I talk about it to people at Microsoft. The desktop is very useful. People use it a lot on a daily basis. There are things that the web is good for, but that doesn’t necessarily mean that for all those things that the desktop is not good anymore. What I think is important is to re-pivot the center of what we are trying to accomplish.

OM: What makes you guys think that you can actually do better than everybody else?

RAY OZZIE: I’m not going to get cocky. The reason I’m a believer is that Microsoft as a company is in a number of different markets. I think we’re well positioned, because we have a selfish need to do these things, and because we have platform genetics. We have the capacity to invest at the levels of infrastructure that are necessary to play in this game. So I think we’ll be well positioned.  I can’t tell you specifically which aspects we’re going to kick somebody else’s butt, or where they’re going to kick our butt, but I think we’re pretty well positioned.

OM: I buy into the whole services model, but then I see what happened a couple of weeks ago — Hotmail goes down for quite a long time. And this happens way too often, not only just at Microsoft, but at other services also. It is very hard for me to imagine, we keep talking about services, but the reliability of the infrastructure is just not there.

RAY OZZIE: It’s not straight engineering, and it’s not an art. It’s somewhere in-between. And we are all learning. And so if you look at the innards of a Yahoo or a Microsoft, an MSN, or a Google, you will see the people who have designed the systems and have taken a number of the things we’ve learned in the enterprise space. We have to throw them them away, because the way that we did it in the enterprise space was more tightly coupled. We need to be more loosely coupled.

So I’m not going to make any excuses for downtime. We need to develop more and better application design patterns that we give to developers that let them develop mesh-oriented apps at birth, horizontal apps that can suffer massive failures of certain aspects of their infrastructure, while still surviving.

OM: It (mesh-oriented apps) sounds like a great idea, but in reality can we actually deliver that kind of a mesh app architecture, and how soon?

RAY OZZIE: I think that you’ll see is over the course of this year, to 18 months, you’ll see the incumbents and startups, both, do their first big volleys of services platform, apps tools, runtimes, various things. It really isn’t being taken seriously right now by anybody except Amazon. They’ve done the world a service by putting out there some fairly provocative, interesting services.

OM: The costs of computing, hardware and bandwidth are dropping quickly. Do you believe that the cost will come down fast enough to make cloud computing actually a profitable business?

RAY OZZIE: Well, it’s unlikely that we would get into it if we didn’t think it was going to be a profitable business. So we’ll just manage it to be profitable. It’s going to have different margins than classic software, or the ad (-supported) business. But, we have every reason to believe that it will be a profitable business. It’s an inevitable business. The higher levels in the app stack require that this infrastructure exists, and the margins are probably going to be higher in the stack than they are down at the bottom.

OM: Can you actually elaborate a little bit on that, like when you say higher in the stack, what precisely do you mean?

RAY OZZIE: Let’s go all the way up. Let’s stick to boring old enterprise, all the way up at business solutions, HR apps, or things like that. Somebody who is selling those apps is going to build in, more than likely, the underlying utility costs within their higher-level service. It will still be cheaper to do those things on a service infrastructure than it is on a server infrastructure, but the margins will still be higher to people who build solutions that customers understand the business value of.

When you go down to selling bandwidth, or selling MIPS there will be competition at that level. So the margins, at generic commodity levels are going to be substantially lower.

OM: When do you think utility computing can be a profitable business; are we’re looking at like maybe two years, four years out before it actually starts to become a profitable entity?

RAY OZZIE: (Let’s) take (one company) who is in the market today: Amazon. They chose a price point. There are either customers at that price point or not. They may have priced themselves at expected costs as opposed to actual today costs, but it doesn’t really matter. They could have brought it out at twice the existing price and there still would have been a customer base, and they’d be making money at birth.

I think all of these utility-computing services, as they’re born will either be breaking even or profitable. At the scale that we’re talking about, nobody can afford, (even Microsoft) can’t afford to do it at a loss. We could subsidize it, I suppose. Google could subsidize it by profits in other parts of their business, we could subsidize it, but I don’t think there’s any reason that any of us in this world would bring out that infrastructure like this without charging for what we’re paying, and then trying to make some profit over it. The cost base is so high in terms of building these data centers you do want to kind of make it up.

59 Responses to “GigaOM Interview: Ray Ozzie, Chief Software Architect, Microsoft Corp.”

  1. Nothing but excuses offered to prop up the lies put out by Microsoft. Their so called “highly educated” “skilled” visa and outsourced workers are shams. They are not educated even at a base level, nor are they skilled. They have less than a high school education and are given a two week or less training session and a manual. Most of their “service” amounts to telling people to perform a cold reboot.

    Web services (if Microsoft and their ilk have their way) will continue to deteriorate. More of the same old thing, with one price tag or another attached. Offering nothing substantive.

    What they are visualizing is a drastically smaller consumer base, and offering high premium “services” that are what has been available for free. Create a big dependency, control all means of support and service and bleed the dependent dry.

  2. Anthony

    totally agree with you hence the notion of Sofwtare PLUS Services that Microsoft talks about. i know that will sound like pushing the Microsoft message but truly, it’s an important point you make and one other SaaS vendors are actually quietly accommodating.

  3. Om:

    Good to see you back! Thanks for your coverage on Ray Ozzie’s musings. I would think that distributed/cloud computing relies too heavily on a backbone that is NOT 100 percent stable. The military would never run its systems on a “sometimes” available network, so I would guess that any business hoping to attract people away from enterprise systems needs something very robust and secure. I’m looking forward to reading more of your pieces, I hope at a more leisurely rate than before. Best of health, Om!

  4. @ Paul,

    Regarding your question about why Microsoft is doing it: two reasons: mostly to get developer action and actively involved. I think they are doing an infrastructure which is blended – in house and outsourced. the other reason for building their own infrastructure: who else can spend millions to keep MSFT-based infra running. ;-)

  5. aha, as msft and others move toward services infrastructure development, how long until we see a new utility computing cost model and standard on par with KwH (electricity) for consumption and usage? isn’t that where it’s all headed? mark my words, software is headed toward the electricy industry utilities standards model – or my name ain’t orville reden…

  6. Paul, I understand your question because I pondered the same. I believe there are basically 3 tiers of service in the cloud. One is the underlying server farm infrastructure of hardware and bandwith, two is a middleware cloud utility software platform, three are the applications that reside on the cloud platform. I think MS will get vertically integrated in all 3, as they usually do. They will have higher margins at levels 2 and especially level 3.

    My understanding – hope it helps.

  7. If the margins are going to be higher in the stack, why is Microsoft investing in low level clould infrastructure? Why not just delegate this low level stuff to a datacenter, like did Sun?

  8. I’ve had to chance to meet Ray a couple of times and think he’s singular in our universe: he’s not only credible as both a platform architect and business executive, he is an amazingly nice guy without a scent of the usual arrogance that haunts our industry.

    A couple of things come to mind from your interview:

    1. I think people sometimes forget about peer-to-peer in this discussion of cloud computing and hosted server farms like AWS. Beyond the obvious cost advantage, it’s remarkably fault-tolerant and there’s no lag in demand and supply. From Skype on my desktop to my Vudu box on my TV, I think we’re only just beginning to understand the benefits. And yes, I know Skype was down last year as well, but let’s not mistake implementation for design.

    2. Ray hit the nail on the head when he said services like AWS are going to have different margins. Let’s be clear though: it’s going to have really low margins because a provider’s ability to differentiate this low in the stack is pretty limited. But that said, I really have to applaud Amazon for pushing the envelope on this.

    Looking forward to more of these.