Internet services — the next big thing?

Providing software functionality over the Web is not new, but until now, it’s never really hit the mainstream desktop. This may be the year that all that changes

By Jacob Stoller

Every five years, according to Bill Gates, Microsoft has had to alter its course dramatically to respond to changing technology. In 1990, it was the Graphic User Interface (GUI), in ’95 it was browsing the Internet, and in 2000, it was the exchange of data and software functionality over the Web. The latest wave is something Microsoft’s new chief technology officer Ray Ozzie has dubbed “the Internet service disruption.”

“It is now 2005, and the environment has changed yet again — this time around services,” Ozzie wrote in an October 10 internal memo that has subsequently become public. “Computing and communications technologies have dramatically and progressively improved to enable the viability of a services-based model.” Change is inevitable, argues Ozzie because users and businesses are “increasingly drawn towards the simplicity of services and service-enabled software that ‘just works’.”

What we’re talking about here is functionality that doesn’t reside on your hard drive, but on a server that is accessed over the Web. The simplicity is in not having to install and maintain applications. Services-based delivery has been around for almost a decade. Salesforce.com was the well-known trailblazer here, while vendors like SAP and Oracle have brought the concept to the mainstream. In the sphere of enterprise apps like enterprise resource planning and customer relationship management, the service approach brings sophisticated functionality to organizations that otherwise wouldn’t be able to afford it.

Until recently, this approach wasn’t considered viable for the desktop, but two developments have changed that. The first is the recent explosion in the number of users who have high speed Internet access — Canada, in fact, has the second highest level of penetration in the world. The second is a set of technologies collectively called AJAX, an acronym for Asynchronous Java-script and XML (extensible markup language). What AJAX allows, essentially, is a user to control a remote application with a bare minimum of information having to be sent back and forth. The result is that the propagation delay (between, for example, pressing a key and seeing the response on a screen) can be virtually eliminated.

This difference sounds subtle, but it’s very significant because it gives the user the local-like feel that originally made the PC so popular. With that gap closed, it’s possible that millions of users will be attracted to on-line services that replace the software that they previously had to install on their machines.

Upstart success

Entrepreneurs are grabbing this opportunity. One company that has been getting a lot of buzz is Upstartle, which hosts an on-line word processor called Writely (www.writely.com). Today, Writely is being offered free as part of an extended beta period, during which time user feedback is being solicited. Writely combines basic word processing functionality with a number of cool features, including the ability to publish directly to a blog or website. But the biggest advantage is the ease of sharing documents with others. (As an experiment, I used Writely to submit this article for publication.)

In keeping with the services approach, Upstartle is trying to think outside of the box when it comes to functionality. “We are trying to solve a problem that is going to be solved abundantly well by a ’net-centric application,” says marketing VP Jen Mazzon. As a case in point, users frequently ask when Upstartle will add a spreadsheet. “Does it make sense to have a completely separate application that does spreadsheets?” asks Mazzon. “One of the things we’ve been talking about is what if we take tables and we add spreadsheet-like functionality to tables so you can have a little mini-spreadsheet embedded in your Writely document. When people respond and say ‘we want spreadsheets,’ we say, ‘tell us what you want to do.’”

A spreadsheet called Numsum, by the way, is available on the Web as a service. Other available services include a collaborative suite (Zimbra), and a collaborative calendaring system (Trumba).

Adding value at Microsoft

All eyes will be on Microsoft as services continue to penetrate the desktop. Two initiatives have emerged; Windows Live and Office Live. These will be used to enrich the features currently in Windows and Microsoft Office, but there’s no paradigm shift in the works as far as delivery. “I would say that at this time, we are not changing our direction in terms of what our primary method of distributing software is,” explains Owen Sagness, VP of MSN Canada. “I think the key in this instance is that Microsoft Live is an adjunct. It is something that adds value to the existing software experience that people already have.”

Like Upstartle, Microsoft will be making extensive use of beta programs to elicit user feedback. “We’re going to use the concept of a sandbox,” explains Sagness, “where we release the software broadly in beta form, and we collect a lot of user feedback. And then we have a defined quality and usability bar, and we only ship the software when that’s been met based on the feedback from many users around the world that will have been using the software in beta form.”

When it comes to the big question of revenue, Microsoft will be turning to advertising. How this will be executed is still under discussion, but Sagness envisions an arrangement in which users can voluntarily identify the kind of information they would like to receive from advertisers. We’re not necessarily talking about aggressive techniques here — your selection could be used to determine the ad content that shows up on websites you frequently use. So instead of seeing an ad about life insurance on your local news site, you might see an announcement about the latest CD from your favourite pop star. “We think that actually a lot of consumers will voluntarily sign up for that because they want to see things on the Internet that are relevant to them. But it wouldn’t be a requirement.”

Simplifying business IT

In contrast to this, Upstartle plans to provide a chargeable level of service targeted towards business users. One such service, which has been released free as part of the beta, is the ability to convert documents to pdf. Another potential service would be the availability of various permissions levels that would protect the privacy of shared documents. This would allow, for example, a document to be unsharable to any e-mail address outside of the company. But the consumer product will remain free, according to Mazzon. This model of using the free consumer product to create ubiquity is similar to Adobe’s distribution of the free Acrobat Reader product.

Microsoft isn’t clear on how the services approach will generate revenue from businesses (consumer-type advertising may not be appropriate), but the direction, according to Sagness, is to reduce the complexity of running an IT department. “I think you’ll see us starting with the things where reducing complexity adds a lot of value to the small business. Things like sharing documents and not having to create your own server infrastructure and have lots of IT people on staff to support that. Things like e-mail infrastructure.”

Jacob Stoller (jacob@stollerstrategies.com) is an independent writer and researcher based in Toronto.   

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