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Monday, June 19, 2006 - Page updated at 12:00 AM

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Driving the Windows Live initiative

Seattle Times technology reporter

Bill Gates' announcement last week that he will begin shifting more of his time away from Microsoft spurred many to declare the end of an era in information technology.

The days of buying software in a shrink-wrapped box and loading it on your computer are waning, the prognosticators say. Now and in the future, ever more programs will be delivered as free services with data and functions residing in a "cloud" of dispersed servers accessible via the Internet from anywhere in the world. The cost to the user is targeted advertisements appearing next to search results and e-mails.

Ray Ozzie, one of the executives who will fill Gates' thinking cap at Microsoft, took the helm last fall of a broad company effort to deliver more software as services over the Internet. Microsoft's Live Services strategy is perhaps the largest, most important and most transformative initiative launched at the company in years.

"We will be tenacious and persistent in driving our Live initiative with all the technology and business-model implications it has," Microsoft Chief Executive Steve Ballmer said in a news conference Thursday, the same gathering at which Gates announced plans to dial down his day-to-day involvement and pass the mantle of chief software architect to Ozzie.

The consumer-focused portion of that effort is called Windows Live, a suite of services including search, communications and social networking. It will go head-to-head with some of the biggest names on the Internet, including MySpace, craigslist, Google and Yahoo!

As the summer progresses, more Windows Live services will be introduced to the public, beginning in the coming days with Microsoft's new instant-messaging program, a major piece of the puzzle.

So far, however, the company has struggled to clearly articulate Windows Live internally and externally.

"A lot of people from Microsoft read us to find out what the heck's going on," said Kip Kniskern, one of five contributors to LiveSide.net, a news site that tracks Microsoft's moves in this area.

A Microsoft employee staffing a Windows Live booth at a conference last week for technology professionals wrote in a blog, "After talking to about 25 customers, it was abundantly clear that customers have no idea at all what Windows Live is, or how it relates to Windows or MSN."

Different sentiment

That sentiment does not reflect how the rest of the division that is building and marketing Windows Live feels, said Adam Sohn, director of global sales and marketing public relations for Windows Live.

If little is known yet about its services, that's by design.

"We never planned to shout from the rooftops until we have stuff in the market," Sohn said.

With two exceptions, all the Windows Live services are in various stages of testing. Microsoft is seeking feedback from users, already numbering in the millions for some services.

As more of the 20-plus pieces fall in place this summer and fall — the exact number differs depending on how they're counted — the company will begin marketing them as a package. It will highlight features such as a consistent user interface; a contacts list that follows a user from instant messaging to e-mail and other applications; the ability to do searches from anywhere; and a single log-in.

"I think the concept of the sum being greater than the parts is a big part of what they're trying to do," Kniskern said.

Windows Live, in turn, will be strongly linked to the company's forthcoming Windows Vista desktop-operating-system software, due for release to consumers in January.

That's where analysts see Microsoft's biggest advantage.

"If they can effectively — and in ways that makes sense — tie some of these services into the software, I think they have a good chance of taking some [market] share," said Matt Rosoff, an analyst at Directions on Microsoft.

For example, Windows Live Messenger will allow text, voice and video communications, as well as simple file sharing, Sohn said. Users will be able to drag a document or photo onto the name of a "buddy" in their contacts list. The file then becomes available in their buddy's "sharing folder."

The same function will work in Windows Vista and in desktop applications, such as Microsoft Word. A party invitation written in Word could be saved directly to a buddy's sharing folder, immediately replicating it on his or her computer. This would eliminate the steps of saving a file, attaching that file to a message and sending the message.

Another service is designed to extend the parental control settings built into Vista onto the Internet, making them accessible on any PC.

Some services not new

Many of the services offered under the Windows Live banner are not new to Microsoft or the Internet broadly.

The mapping, shopping, search, instant messaging and e-mail services all have antecedents in MSN, the company's Internet-services effort that has been allowed to wither.

"MSN has been focused as a business on cost cutting and really going from a money loser to a profitable business," Rosoff said. "They did this at the expense of improving the sites and services. Some sites hadn't had an update in 10 years."

Several of these — most notably Hotmail, the world's largest e-mail service, which Microsoft purchased in 1997 — are being rebuilt from the ground up for the Live version. (Hotmail users can keep their current e-mail addresses, and the company is building a user interface that matches the status quo.)

For other services, the company is adding only some new code.

"Nothing is a simple rebrand," Sohn said.

Development effort

The Windows Live development effort has come at a blistering pace and a high cost.

Since last fall, Microsoft has increased employment in the business unit that includes Windows Live by some 35 percent, according to a report Rosoff published last month. The company expects to spend $1.1 billion on research and development in the fiscal year that starts July 1, more than double what it spent in the 2005 fiscal year.

There are also high costs to deploy and maintain the "cloud" of servers underlying the Live services.

Microsoft intends to recoup its investment by selling advertising on Windows Live that reaches hundreds of millions of users and is also targeted to an individual's specific behaviors.

For instance, if someone spends time searching the Internet for a wristwatch, advertisements from watchmakers might appear next to their e-mail.

"We want this sort of serendipitous experience where all of a sudden you feel like the network is on your side, that the services in the background are taking care of you," Sohn said.

For people who don't want data about their interests collected for this purpose, Sohn said the feature can be turned off, though Microsoft will still track basics such as age, gender and hours of Internet use.

It's not clear how much of the behavioral data collection will be opt-in — users have to affirm they want to participate — vs. opt out, in which participation is the default.

"In general, we like the opt-in model as a policy matter at the company," Sohn said.

Benjamin J. Romano: 206-464-2149 or bromano@seattletimes.com

Copyright © 2006 The Seattle Times Company

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