...more features to its MSN Web properties, such as Hotmail, and introduce hosted options for its server-based products, such as its Exchange email program. By blurring the line between servers and services, Microsoft will offer businesses and consumers better hosted options, he said.
"As we bring these things together, we give you the richness and also the choice of having it as server or as a service," Gates said. "Everything we're doing — this idea of server equals service [and] getting the symmetry there — is part of our long-term architecture."
In the area of Web development, Microsoft has already taken steps to foster collaboration between its MSN Web properties and its server and tools division. Last week it released programming interfaces designed to let developers write applications that run in conjunction with MSN properties, such as MSN Search and Messenger.
In the corporate market, Microsoft's stepped-up commitment to software services reflects moves by competitors IBM, Sun and Oracle, all of which have sizable investments in that area, as do upstarts such as Salesforce.com.
Though details are not totally clear, Microsoft is likely to bring its own twist to the market, said Rob Helm, an analyst at Directions on Microsoft. Pointing to existing hosted offerings, such as email security service FrontBridge and Web conference application Live Meeting, Helm said the company is apt to create strong ties between its software products and hosted services.
"Microsoft is not trying to eliminate software, but make it less painful to manage or take care of tasks for you," Helm said. "You won't see any 'No Software' signs like you do at Salesforce."
Gillett expects that more technology providers will try to find ways to incorporate services into software products. For example, Microsoft could embed monitoring code in a client's Windows server software that would alert Microsoft to problems that could be fixed remotely.
"It's not enough to hand people a shrink-wrapped box and a wet kiss and say, 'Good luck with my complex product.' You have to create ways to improve the customer experience with the product," Gillett said. "And if you're stuck with four-year product cycles, you aren't delivering much on the customer experience."
CNET News.com's Dawn Kawamoto contributed to this report.
Talkback
Like most large businesses, a major restructure like this, is a possibly debilitating move that may render the business unviable. Microsoft had a good thing with their OS, but now they want more and more profits, and are diversifying into a field where companies like Google rule the roost currently. Good luck to them, but the more diverse the services of a company, the less excellent their flagship products become.
Science tells us that big stars tend to collapse into themselves and transform into black holes that suck up everything that comes near enough without any hope of giving anything back.
In short. One-way street. And the only way to avoid it is to plan well ahead before you get to close and thus get sucked in with no realistic escape options left.