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Microsoft Tech Chief: Hosted Software Offers Opportunities, But Also Challenges

Rapid advances in computer technology that are transforming the world of consumer software on the Internet are bearing down on businesses, which could realize lower costs and increased productivity by embracing them, Microsoft Chief Technical Officer Ray Ozzie said during a speech in his hometown of Boston Sunday night.

Speaking at Microsoft's TechEd 2006 conference, Ozzie said the computer industry is approaching an era in which Internet services will transform business software by giving companies access to the processing power, data storage, and communications bandwidth resident in large data centers being built by Microsoft and its competitors. That will bring fundamental changes to the way companies manage technology, which IT pros need to be aware of.

So far, the "steady march" of cheaper, more widely available technology has had more influence on consumer markets than in business, he said. "Our latest in hardware and software is more likely to be used by our teenagers rather than ourselves," said Ozzie. Business technology will become more valuable when it's combined with innovation happening on the Internet, he said.

Microsoft is designing software that can let businesses take advantage of remote data centers. Future Microsoft products will give companies the option to run the software on their own computers or as an Internet service, then switch modes at any time. "Microsoft is laying the foundation for this new world," said Ozzie, who joined the company last year when it acquired Groove Networks, which Ozzie founded in the '90s to develop software that combined the processing power of PCs with the collaborative capabilities of the Internet. Ozzie is most famous for creating the Notes e-mail application for Lotus Development in the 1980s.

According to Ozzie, the large data centers that Microsoft and its competitors Google and Yahoo are building in Washington and Oregon will be used mainly to serve up consumer-oriented technology such as search engines, Web-based e-mail, blogging sites, and instant messaging services. Those applications can support hundreds of millions of PC users, Ozzie said, whereas business software is designed to serve at most tens of thousands. By tapping into those data centers, companies could have more powerful tools at their disposal. Microsoft's online business software will complement its ubiquitous Windows and Office products and its customers' own applications, he said, adding that that's counter to the view of "extremists," who believe IT departments will disappear as most software moves to the Net.

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