MIX 08 and the Great Microsoft Internal Conflict

Microsoft's MIX 08 conference is over, and the usual pundits have said their usual things.  Robert Scoble (Mr Microsoft) says, "Microsoft hits multiple Internet home runs".  Leo Laporte (Mr Apple) says, ""Frankly, it's a snore".

I'm here to tell you the truth.  The big story from Mix is that Microsoft has finally embraced the web and the software as a web service model.  They've been watching carefully as Google and Amazon build incredible businesses that show signs of making the desktop irrelevant.  Everybody agrees that Microsoft has no choice but to make a move in this direction.

What have they announced?

IE8 and Silverlight 2 - proving that Microsoft still wants to own the end user entry point to the web.  As Ballmer said "Web Developers".

SQL Server Data Services - Here's the strategy story that I'm interested in.  This big announcement at MIX was largely ignored.  Note that it comes after Windows Live SkyDrive, Microsoft Office Live, Hosted Exchange and Hosted Sharepoint.

There's no doubt that Microsoft is moving quickly into the data center business.  This is all about commoditizing their complements.  These products will offer a cheap alternative to Microsoft servers in the office.  They will also offer Microsoft servers to home users, who usually don't have servers.  Microsoft servers complement Microsoft desktop applications - Office and Windows, the cash cows.

Short term, this makes a lot of sense.  The demand is going to be there - if Microsoft doesn't host these services, everyone will go to Google or Amazon.  Right now, Microsoft has the desktop, and they can potentially make their servers work better with the desktop software.  They should have a competitive advantage if they can catch up to Google and Amazon before the "cloud" becomes mainstream. 

(Aside to you folks in California - no, the cloud is not mainstream yet.  And while we are on the subject, Apple doesn't own the desktop and some people don't even use Firefox.)

Long term - this is the story that nobody is talking about yet.  How is this going to work long term?  Microsoft is not going to abandon the IT shops.  They still want to sell every business multiple copies of Windows Server, Sharepoint, SQL Server and Exchange.  But they will also be using these tools internally in their own data centers.  Microsoft will suggest that we (the IT shops using those tools) will benefit from the super-dogfooding effort.  Microsoft will learn the shortcomings of the server software and work to enhance it.  I think this is true. 

But at what point do those improvements become valuable strategic assets to Microsoft?  Conceivably, in the battle with Google and Amazon, these enhancements to the software could become too valuable to Microsoft for them to release in their off-the-shelf software products.  Don't think this will happen?

Check out this article at The Register.

SSDS is based on SQL Server, though Microsoft technical fellow Dave Campbell told Reg Dev: "We are not using an off-the-shelf SQL Server to power this, we've taken the technology and shifted it around to make it more suitable for large-scale datacenter deployment."

Seriously.  Microsoft has been telling us for years that SQL Server is suitable for large-scale datacenter deployment. 

There you have it.  My concern is that the new services side of Microsoft has the potential to be the end of decent server tools for the rest of us.  I know this isn't going to happen overnight, but lots of us in this business have long careers ahead of us.  Some will argue we should go with the flow and use the new tools in the cloud.  Will you store your valuable competitive data in the cloud on someone else's servers?