Microsoft postpones Iowa data center

January 24, 2009, 08:43 PM — IDG News Service —

A day after reporting flat revenue for its online services business, Microsoft said it is postponing construction on a planned data center in Iowa.

It's one of several other cost-cutting measures the software giant announced along with a disappointing financial report Thursday, including laying off around 5,000 people, reducing the use of vendors and lowering marketing spending.

Microsoft will continue construction of its new data centers in Chicago and Dublin and open them based on the level of demand for its online services. The company will revisit its data center plans quarterly, wrote Arne Josefsberg, general manager of infrastructure services, and Michael Manos, general manager of data centers, in a Microsoft blog about its data center efforts.

They referenced Microsoft's cost-cutting efforts in the post, but optimistically described the postponement in Iowa as being a result of successful efforts to improve the efficiency of data center operations elsewhere. "Thanks to the efficiencies we've gained through these ongoing efforts, we will be able to delay the construction and opening of some of our facilities," they wrote.

Josefsberg and Manos said they expect more companies to rely on hosted services from companies such as Microsoft to save money, and that despite the economic downturn, Microsoft's online services businesses are growing. That's just barely true. Revenue from its online services in the quarter ending Dec. 31 was US$866 million, up just a hair from $863 million in the same period in 2007.

Microsoft revealed in August that it would build the facility in a suburb of Des Moines and use it to host consumer services such as Hotmail, Live Search and Windows Live applications. Like its Chicago data center, the facility would use shipping containers to house servers, the company said at the time.

Microsoft is not alone in reining back its data center expansion plans. Google late last year decided to delay building a facility it planned in Oklahoma.

Microsoft to merge Windows Live and Office Live

January 24, 2009, 08:55 PM — IDG News Service —

Microsoft seems closer to rebranding its search engine and Live online services under the Kumo name, something that's been rumored to be in the works since last year.

The company confirmed Friday that it will merge its Office Live and Windows Live services into one unified online portal, but did not give a specific time frame for the move and declined to provide any other information.

"Microsoft has made the decision to converge Windows Live and Office Live, that includes Office Live Workspace and Office Live Small Business, into an integrated set of services delivered through one single destination," Microsoft said in a blog post on the Workspace Team Blog attributed to Kirk Gregerson, product manager for Office Live Workspace.

Microsoft's confirmation comes after a blogger unveiled Thursday that Microsoft planned to integrate the services into one set of offerings when the next wave of those services is released.

Currently, there are two separate portals through which users can reach Windows Live and Office Live. Office Live services are related to Microsoft's Office software, while Windows Live are applications and services that more closely align with functionality in the Windows OS.

Based on actions Microsoft has taken, it has been rumored since last year that it plans to rename its search engine and possibly its entire line of online services under the name Kumo, so the integration could be preparation for that move. Microsoft has declined to comment on any name change for its search engine or services.

However, on Dec. 4, 2008, Microsoft filed a trademark application for the Kumo name. The application is to trademark a host of software and services that include not only a search engine, but also advertising and telecommunications services, education, training, entertainment and the design and development of computer hardware and services.

Prior to that, according to Whois.Net, Microsoft registered the kumo.com domain, and through CSC, a company that manages domain names for corporations, also registered related domains that indicate the Kumo name could be used for other services. Those domains include: www.kumosearch.com, www.kumopics.com, www.kumowiki.com, www.kumogroups.com and www.kumotravel.com.

Kumo is a Japanese word that can be used to mean "cloud," "ceiling" or "sea spider" among other things, according to an online Japanese-to-English translation service.

Both Windows Live and Office Live, while somewhat recognizable by Microsoft customers and Web users, are fairly new brand names for the company. Microsoft revealed them in November 2005 in conjunction with a revamp of its online services. Still, the company's Online Services Business -- home to Windows Live, Office Live and the company's online advertising business -- is its least financially successful one, and Microsoft has struggled with developing an audience and solid base of users on the Web.

In an e-mail from its public relations team, Microsoft said the upcoming change does not affect current product cycles for its Office Live and Windows Live services, and the company will have more to share about specifics of the change "at a later date."

Microsoft's struggle to compete with 'free'

Back in 2002, as Roy Schestowitz calls out, Microsoft was desperately trying to figure out a response to Linux. The problem wasn't Linux as a product-level competitor. The problem, as its Windows chief, Jim Allchin, told a small gathering of Microsoft partners (PDF), is that Linux changes the nature of software competition with odd things like "community" and "GPL licensing," the latter of which Microsoft didn't like one bit :

We feel a huge threat from Linux. Maybe we shouldn't, which is a question you could answer from your perspective...There's Linux the community. We're going to learn from Linux the community. Incredible what they did...We're going to practice and practice and practice (to learn how to respond to Linux)...

GPL is the licensing model. We thlnk it's very bad...We don't think it's the same as public domain. Somebody wants to put in a free DSB(?), we don't have a problem with that, at least on licensing. But GPL, we think it's very bad basically for the world, but especially for the United States.

This is not surprising, given that Allchin had earlier deprecated Linux as "an intellectual-property destroyer" in 2001.

But name-calling was proving not to be enough, and for a reason that Allchin and Microsoft struggled to grasp, but one that its partners, which distribute the bulk of Microsoft's software, felt first-hand on the front lines. When Allchin later asked the participants what the biggest driver of Linux is, they didn't mention its modularity, high performance, or other characteristics. Back in 2002 (and, indeed, today, in many instances), one thing mattered:

Linux was free.

Sure, there was the cost of deployment, training, etc., and Allchin called out the work Microsoft was going to do to "educate" the market through IDC and other analysts about the "true" costs of Linux, but price was why these Microsoft partners were starting to defect, in some instances, to Linux.

Allchin's response?

We'll never meet free."

And that is why Microsoft has struggled against open source, and why it will continue to do so. Ubuntu's Mark Shuttleworth called it out well over a year ago, arguing that the difference between $0.00 and $0.01 is huge and game changing. Microsoft can halve its price, and Allchin talks in the transcript about doing just that. But free? That's not its business model.

Given Microsoft's difficulty in competing with open source's price, it's perhaps not surprising that Allchin hinted at another way of competing with Linux and open source: patents. Imposing a patent tax on open source is a viable way of raising its price tag beyond $0.00.

There's going to be a patent lawsuit on Linux. It's bound to happen...and the patent lawsuit won't really be about the license. It will be simply, "Hey, these guys took intellectual property." And whether the lawsuit comes from Wind River or in X, Y, Z, there's going to be one. Guaranteed. As I sit here today, I will guarantee you at some point there's going to be a challenge about the patents...

(H)ere's indemnification that is being passed on when you buy products from Microsoft. You don't get that (with Linux). And eventually, you know, in the litigious society that we live in, something is going to happen.

Was Allchin just speaking of probabilities, or was he hinting that Microsoft was going to help ensure a certainty? Well, as we later found out through Groklaw, Microsoft was hard at work all this time supporting SCO's lawsuitagainst the integrity of Linux and its patent rights, and later as it went public in Forbes with wild accusations of Linux's infringement of 235 of its patents, completely without (public) substantiation.

To its credit, Microsoft has not directly launched a lawsuit against any open-source vendors, and it has becomefar less strident lately against open source in terms of patent FUD. Indeed, Microsoft's history is not litigious and I doubt it ever will file any such lawsuit.

But until it learns how to effectively compete with "free," there's always the risk that it will feel compelled to defend its "right" to a proprietary business model by launching a lawsuit. As I noted in 2007, "Microsoft makes good software; it doesn't need to be a lumbering Lenny of a patent troll."

I still believe that. Let's hope Microsoft does, too. It can compete on product quality. It doesn't need to compete on patent quality.

What the EU might force Microsoft to do

The European Union is considering forcing Microsoft to distribute rival browsers as part of Windows, the software maker disclosed in a regulatory filing this week.

As part of its quarterly filing with the Securities and Exchange Commission filed on Thursday, the software maker offered more details on the EU's statement last week that it believes Microsoft's inclusion of a browser in Windows violates antitrust law.

Microsoft said that the EU is considering forcing computer makers, known as original equipment manufacturers, or OEMs, to offer multiple browsers with new Windows PCs.

"While computer users and OEMs are already free to run any Web browsing software on Windows, the commission is considering ordering Microsoft and OEMs to obligate users to choose a particular browser when setting up a new PC," Microsoft said in the SEC filing. "Such a remedy might include a requirement that OEMs distribute multiple browsers on new Windows-based PCs. We may also be required to disable certain unspecified Internet Explorer software code if a user chooses a competing browser."

Microsoft also noted that the EU is also seeking to "impose a significant fine based on sales of Windows operating systems in the European Union."

The company reiterated that it will have the opportunity to respond in writing in the next two months and, after that, could also request a hearing.

And that's not the only area where Microsoft faces further EU action. Microsoft confirmed that an investigation into Office may still be ongoing.

"In January 2008, the commission opened an additional competition law investigation that relates primarily to interoperability with respect to our Microsoft Office family of products," Microsoft said. "This investigation resulted from complaints filed with the commission by a trade association of Microsoft's competitors."