Microsoft's Ozzie admires "perfect" iPod

Speaking at the VortexSF 2005 tech conference on Tuesday, Microsoft's chief technical officer, Ray Ozzie, has given an indication of the strategic direction which Redmond is going to take.

Microsoft's newly appointed services guru pointed to Apple's iconic music player, the iPod, as a "perfect example" of a product that marries hardware, software and services. Ozzie also pointed to RIM's BlackBerry, which brings together an email device, server-based software and wireless data service.

In both cases, people don't think about the individual pieces of the package, he said. They just think about the tasks they want to do, such as listening to their music or getting email on the go.

The comments were the first detailed indications of where Ozzie and Microsoft are headed following a company reorganisation last month. The reshuffle was seen by some as an attempt to better compete against services-based rivals such as Google.

Ozzie conceded that the rise of Google had been a "great wake-up call" and rallying point to get Microsoft thinking about services. However, he said he didn't accept that the software giant has been playing catch-up in any area other than ad sales.

He said: "I don't really feel personally as though Microsoft is behind in any way, shape or form related to services, except for the size of revenues from the new economic model."

The services chief's comments offer a prelude for an event on Tuesday, at which Ozzie and chairman Bill Gates are expected to offer a more detailed look at Microsoft's plans.

While acknowledging that "services" is a pretty broad term, Ozzie pointed to a wide range of opportunities for the company, from hosting software for small businesses that don't want the complexity of managing a server, to adding specialised products for large businesses that already have scores of servers.

Ozzie said: "Services-enabled software really is going to change the nature of how almost everyone uses technology, from consumers to small businesses to enterprises." But that change, he added, will come "in different forms and at different paces".

While the idea that consumers might prefer to use internet services rather than download software is pretty much accepted, it is still a fairly foreign concept to most companies that they would want to take business software out of their data centre, Ozzie said.

He added: "For enterprises, I think we've just barely scratched the surface about which systems can... be brought into the cloud in some way shape or form."

Microsoft already has traditional software products that can be purchased on a subscription basis through its Software Assurance programme. At the same time, Ozzie said it is also possible to have software delivered on a subscription basis but in which the payment is more "chunky" than the traditional notion of a steady monthly or yearly fee.

Cheap and plentiful bandwidth has made it possible for businesses to get their software over the internet but Ozzie said enterprises will still have to pay for their software in some way, regardless of how it is delivered.

He said: "On the consumer side, there really is a question - or even small business - as to whether there is a different business model that might be emerging that is based on ad-funded software... I don't think that maybe has as much enterprise relevance."

Ina Fried writes for CNET News.com