Microsoft buys into online vision with Yahoo bid

Microsoft's bid for Yahoo points to a radical shift in how the company perceives the internet.

Microsoft's bid for Yahoo points to a radical shift in how the company perceives the internet.

Many believe that Microsoft's existing approach to selling software - particularly its market-leading Office productivity suite - will no longer work in the internet age. Any changes to the way Microsoft supports the internet will radically alter how the company evolves its enterprise business in the long term and the future direction of the Office, Windows desktop and Windows server product families.

One of the gems in the Yahoo empire is online advertising, a business area that Microsoft desperately wants to move into. But Yahoo also offers online applications that could bolster Microsoft's existing Windows Live online services for businesses and consumers.

While it has until now "supported" the internet, Microsoft makes its money by selling licences of software that is installed on desktop PCs and servers. On the other hand, online search company Google has started offering products and services through the so-called internet "cloud", which enables software and services to be delivered purely over the internet

In his blog posting, Forrester principal analyst Rob Koplowitz said, "Google has not only thumped Microsoft in search and advertising, it has also taken the mind share lead in providing online business applications."

Koplowitz said Google Applications had enjoyed good take-up in the consumer and, to a degree, the small business market.

"The delivery of business applications through the cloud might pose a bigger ultimate threat to Microsoft than losing the search and advertising wars," Koplowitz said. "Microsoft is a huge, diversified company, but make no mistake, Office is paying more than its share of the bills. Anything that threatens Office threatens Microsoft. And Google threatens Office."

The changes that Microsoft looks set to make with Yahoo could reflect the way other large IT companies are evolving in the internet age. Ian White,in his IT collaboration blog, said, "Microsoft, like IBM, Cisco et al, has been heavily re-inventing itself over the past couple of years, and what we see today making news is a prerequisite to enable the new beasts that will emerge from the carcases of the past."

Ovum principal analyst John Delaney believes the proposed marriage of Microsoft and Yahoo could enable the two companies to develop a strong mobile internet strategy and support new types of internet-hosted applications for businesses and consumers.

"A merged Microsoft/Yahoo could exert a hefty counterweight to Google's mobile strategy," said Delaney. "On the software side, Microsoft's mobile strategy has focused on the platform through its Windows Mobile operating system. Yahoo, on the hand, has focused on applications, including both individual applications such as Flickr, as well as its integrated suite Go. A merged Microsoft/Yahoo could start to develop the kind of integration between platform and applications that is still only a gleam in Google's eye."

But whatever the outcome, and whatever Microsoft's eventual online strategy, businesses using Microsoft software have plenty of alternatives.

One reader commenting on Computer Weekly Networks Generation blogs said Linux had been taking strides in recent years for desktop use. He said, "I took the plunge two years ago to go fully Linux at home, and have not looked back since. Ubuntu can install in less than 20 minutes, and won't need to be rebooted for years. Software just 'works', too."

Bill Maslen, also commenting on Networks Generation, wondered if the move signalled the end of Bill Gates' reign over the company. He said, "I wonder if Microsoft would be contemplating this acquisition if Bill Gates was still the main driver."

Maslen has moved his core business applications over to non-Microsoft web servers. He said, "Setting up alternatives to Exchange, SharePoint, SQL Server et al takes significantly less time, and in the case of SharePoint and SQL Server can be matched by some really astonishingly good open source software (take a look at Deki Wiki, or Moodle)."

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