Week in review: Microsoft's cloudy future

Microsoft is planning an ambitious makeover to its Internet services, the E3 game confab focuses more on entertainment, and what lays ahead in Apple's iFuture is anyone's guess.

Microsoft plans to open up its underlying Internet services to developers as part of an ambitious makeover some refer to as "Cloud OS."

In addition to making available its existing services, such as mail and instant messaging, Microsoft also will create core infrastructure services, such as storage and alerts, on which developers can build. The software maker has been talking for some time about its plans to have a full-fledged platform that lives on its servers, but the company has been extremely short on details.

During a speech at the Worldwide Partner Conference in Denver, Microsoft CEO Steve Ballmer didn't quite answer all the questions. But he did promise that more news will come sooner rather than later, and also offered a few hints as to where the company is headed. During the presentation, Microsoft also pledged to share more information with partners and developers.

"This is an ambitious project for us but it is very important," Ballmer said. "We have a lot of news and things that we'll be talking about and unveiling...this year."

Ballmer said that later this year Microsoft will deliver the first version of a set of developer tools to build on top of Microsoft's Windows Live effort, and noted that the tools will be based on .Net.

Late last month, Microsoft introduced two new Windows Live Services, one for sharing photos and the other for all types of files. While those services are being offered directly by Microsoft today, they represent the kinds of things that Microsoft is now promising will be also made available to developers.

The idea was not popular among some CNET News.com readers.

"People do not like someone else controlling their assets," wrote one reader to the News.com TalkBack forum. "They would much rather be responsible for their own actions."

Microsoft also isn't quite ready to talk about plans for an ad-supported or online version of its Office franchise, but the company clearly is thinking about it.

"We've put more of our marketing IQ beyond alternative business models and alternative distribution strategies in the last two years," corporate vice president Chris Capossela said in an interview at the Worldwide Partner Conference.

"It's definitely something where we feel there is this whole population of people we are not reaching."

Many of those people are in emerging markets, where Microsoft is trying things like prepaid cards good for two or three months of Office use. But Capossela agreed that there is an opportunity to reach consumers in well-developed markets like the U.S. and Europe as well.

One possibility is to introduce some sort of online productivity options as part of the Office Live suite of software. BusinessWeek reported last year that Microsoft was exploring such a move.

Meanwhile, in an effort to rally its partners around the reality of hosted software, Microsoft Chief Operating Officer Kevin Turner told them it was a matter of financial life and death.

"We have to change faster internally than the world is changing externally, or we will be obsolete," Turner said, as part of his speech, which kicked off the Microsoft conference.

While change is hard, Turner said, Microsoft's partners need to be ready to offer customers the choice of running software on their own servers or subscribing to hosted services. "It doesn't mean locally based software is going away, but customers want the choice."

Microsoft is trying to keep its partners in the fold through the transition. With its new Live CRM service, set to go on sale next year, Microsoft is offering partners a 10 percent cut of ongoing subscription revenue for those that help sell and support the product, for example. He also noted that an early access program for Live CRM, which kicks off this quarter, is available only through partners.

This year, E3 stands for entertainment
At this year's E3 Media and Business Summit, the three major game console makers--Microsoft, Nintendo and Sony--were all eager to highlight their successes and differentiate themselves from their rivals. Nintendo is at the top of the heap this year after the wild and serendipitous rise of its Wii console.

But beyond that, the "Big 3" at E3 were all about the "E" word. All three presentations stressed a common goal of establishing video games as a form of entertainment that's unquestionably on a par with television or film. As a result--despite the fact that the revamped E3 is smaller, quieter and more exclusive than its massive predecessor--there was nothing low key about the console companies' presentations. With giant video screens, surround sound and fancy lighting, the atmosphere had the feel of a movie premiere. Game previews, with their emphasis on action and storyline, were virtually indistinguishable from film trailers.

Focusing on the entertainment factor was one thing that the companies could use to get the attendees excited. But it was a bit of a catch-22 for the console manufacturers: the "new E3" was supposed to cut down on the glitz factor, but at the same time, it was clear that the likes of Sony, Microsoft and Nintendo needed to use some smoke and mirrors (literally) to mask the fact that there weren't going to be a whole lot of shocking moments.

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