Ray Ozzie on Cloud Strategy and Washington Vs. Massachusetts: Takeaways from Tech Alliance

5/1/09Follow @gthuang

In football, the expression is “three yards and a cloud of dust.” But at Microsoft, it’s apparently “three screens and a cloud.” That’s according to chief software architect Ray Ozzie, who took part in a keynote conversation with University of Washington computer scientist Ed Lazowska at today’s State of Technology Luncheon, hosted by the Technology Alliance at the Westin Hotel in downtown Seattle.

Ozzie was speaking about the evolution of cloud-based software to serve three key device categories: phones, laptops, and TV-sized monitors. He and Lazowska (an Xconomist) touched on many other aspects as well, including Microsoft’s leadership and culture, the past, present, and future of computing, and even Boston versus Seattle (which suits Xconomy’s mission particularly well since we’re in both cities). The event was a big deal, especially because Ozzie doesn’t make a lot of public appearances around town, but there was also plenty of other high-profile news and activity from the lunch. Here’s a quick recap, including an edited account of the Q&A with Ozzie.

Susannah Malarkey, executive director of the Technology Alliance (also an Xconomist), made the opening remarks and introduced Gov. Chris Gregoire, who kicked things off with a few comments about the region’s technology leadership. “On a national scale, I’m very excited that science and technology is back in a big way,” she said. “The innovative spirit that is the lifeblood of the 21st century economy is going to happen in our state.” Gregoire cited the importance of such technologies as the smart grid, broadband access, and healthcare software, and stressed the need to improve education from early childhood through graduate schools. Lastly, Gregoire singled out a few Washington companies, including Modumetal, Insitu, and Verdiem, saying “This is the future of our great state…It is not going to happen without all of us working together. We will get through this terrible downturn in our economy.”

Next up, Marty Smith of the Seattle-based Alliance of Angels announced his group had just closed a $4 million-plus seed fund yesterday, to make “sidecar-type investments.” The Alliance of Angels funded five companies that were acquired last year—Cleverset, Shelfari, Insitu, SnapIn Software, and Coffee Equipment Company. And one of these, SnapIn Software (acquired by Nuance for an estimated $180 million last August), was named the Alliance of Angels 2009 Company of the Year, Smith announced. SnapIn, based in Bellevue, WA, was backed by Frazier Technology Ventures, Trilogy Equity Partners, Hunt Ventures, and Oak Investment Partners.

Jeremy Jaech, chair of the Technology Alliance and CEO of Seattle-based Verdiem, followed with an eye-opening rundown of benchmarking stats comparing Washington state with its top technology peers around the country: Massachusetts, Maryland, New Jersey, Connecticut, Virginia, California, New York, Colorado, and Utah. Jaech, who’s also an Xconomist, pointed out that Washington ranks 4th among its peers in terms of its share of total U.S. venture capital investment (behind California, Massachusetts, and New York), which is encouraging. Washington also ranks in the top 5 in the strength of its engineering workforce, but suffers in education rankings such as 8th grade math proficiency, high school graduation rates, number of bachelor’s and graduate degrees awarded, and state spending on academic research. The most urgent recommendation from Jaech’s team? Boost investment in undergraduate and graduate science and engineering education.

Then it was time for the keynote. The UW’s Lazowska introduced Ray Ozzie by telling the story of how the latter showed up in Seattle in 2005 (when his startup Groove Networks was acquired by Microsoft) and gave a three-hour lecture on collaborative software in Lazowska’s class on the history of computing. I’m not going to do justice to Ozzie’s background here—he’s the main creator of Lotus Notes, among other things, and was a developer at Data General, where Craig Mundie also worked—but let’s just say I’ve long been fascinated by his story of discovering the PLATO mainframe at the University of Illinois in Urbana. (In part because that’s where I did my first computer programming as a high-school kid in 1983. And also, props to a fellow Illini alum.)

Here’s a condensed and edited version of the Ozzie conversation:

Lazowska: In Malcolm Gladwell’s Outliers, he talks about the importance of serendipitous timing. What is it about people born in 1955 for computing—Bill Gates, Steve Jobs, and you?

Ozzie: Timing is a huge, huge factor. Something else in Gladwell’s book is pretty germane—the 10,000 hour rule [to master a skill]. I don’t know about Steve, but Bill and I both started out using GE timesharing computers. If you do the math, it actually does work out. About 20 hours a week throughout high school, and 60 hours in the summer and in college. Around sophomore year of college, you reach 10,000 hours. Once you master the technology, you start to think about user aspects. There’s also the big serendipitous nature of what was happening in the early 70s.

Lazowska: For years, Bill Gates personified Microsoft. What is your role, and how do you work with Craig Mundie and Steve Ballmer as a team?

Ozzie: Bill’s presence is still at the company. The founder sets the tone and culture of the company. He set the rhythm, the processes, the belief system. There really is only one Bill Gates, and there will only ever be one Bill Gates at Microsoft. In the early years, the mythology of Bill having everything in his head was true. But as everyone is aware, that’s not scalable. Though his presence creates some organic alliance, things change over time.

Microsoft in many ways was trying to adapt to the size and scale of different things we were trying to accomplish. What are the ways we should structure the company? Currently, it’s line leadership that leads up to presidents. Craig and I have interesting roles in that we took on most of what Bill did. Everything I do is through influence and partnerships. I am more inwardly focused, and I work with the product teams. Craig is more outwardly focused, working with organizations and government. Craig starts at the atom level and works upward and ends up at the feature level. I might start at features and move to customers. I’m trying to drive alignment and synergy based on what will happen in this product cycle and the next one.

Lazowska: What has the transition to a 100,000-person company been like?

Ozzie: I worked at Lotus and then IBM. I had a feel for the challenges and opportunities when you’re at scale. Startups are amazing because you can put all your passion and energy into one thing, and you can make it so beautiful. But at Microsoft, you have the ability to have broad impact. With startups, if you’re very fortunate, you can bring it up and have broad impact, but it’s rare. [They're similar in that] processes are very focused on customer No. 1. The founding team needs to nurture the first 5,000 users of that product. You have customers counting on it as they run their business.

Lazowska: Talk about the ‘Internet Services Disruption’ memo you wrote at Microsoft in October 2005, and how Microsoft is doing its services these days.

Ozzie: One of the cultural things in the company is you get people’s attention with memos. Externally, when I was competing with Microsoft, it seemed like whenever there was a competitive threat, everyone [at Microsoft] even out in the field was on message. Internally, it doesn’t seem that way. People said, get it out on paper, and you’ll see, it’ll happen. I’m extremely pleased, if you look at where the products were at the time—how PC and server-focused people were— and now there has been a dramatic shift. There has been a tremendous reception. In this time, which IT investments will help my business? Shifting e-mail and communication infrastructure and document repositories, they’re happy to have someone else run it.

Lazowska: People say every five years, there’s a sea change in computing. In 1990, it was the graphic user interface; in 1995, the Web; in 2000, Internet programming; in 2005, Web services. What’s the next one?

Ozzie: It does look in retrospect like there’s an inflection point every 5 years. But it’s not really the case. Technology builds on top [of what was there before], and then markets flip. You have to do pattern matching with technology trends, what’s going on with the social environment, and how people use technology. Right now, the way I’ve been framing things, we’re moving to a world of ‘three screens and a cloud.’

For the user experience, we will all commonly consume solutions delivered to us in a coherent way—to something the size of a phone, a PC, and a TV. Yes there will be better devices, but there will be solutions that weave those things together, with the cloud at the back end. You can project where things will go for developers.

Lazowska: In terms of the cloud, how is Microsoft positioning itself?

Ozzie: Everything we’re going to deal with from here on in—and it has begun—we have to re-pivot to think not ‘what is the specific delivery device,’ but ‘how do you deliver it across these different devices.’ Microsoft Office is a PC product, but there are [broader] scenarios for productivity—editing, presenting something. The Web is for sharing. When you’re in meetings or a conference room, you have your phone with you. You can take a snapshot or record audio. Because all of them are cloud connected, they can all fit into the same scenario. Office people have re-pivoted—how is it best delivered across PC, phone, and Web? Eventually, everything we have will be appliance-like. The data or metadata appropriate for that device is on there. That represents a tremendous business opportunity for our partners and us. People will be less afraid of ‘what happens when I lose this device or drop it in a lake.’

Lazowska: I have a plethora of special-purpose devices—a phone, music players, Kindle. How do you think about different devices versus a generalized device, and new business models?

Ozzie: Some people in this room like to read on a Kindle, or the Kindle app on the iPhone. One is a general-purpose device, one is special-purpose. There’s an element of how you relate to the device [in a fashion sense], how you want to be seen and perceived. There’s a new business model associated with anything—certainly anything delivered digitally.

For news, the old business model is impacted. You used to have to wait to get the news, now you can get it all the time. For apps, now you can treat software like ringtones. It’s not clear as these new models come into play, whether the profit pool is equivalent in the new world versus the old world. It could be that the model is sound, but a it’s a new pool. If journalism is something we care about, we’re going to have to find a new way to support it.

Lazowska: There’s a question from the audience on how you think about the pricing of netbooks.

Ozzie: I’m not sure what a ‘netbook’ is. I think it’s an inexpensive laptop. The clamshell thing you get doesn’t look all that different from a laptop. What you’re observing is, as devices become more appliance-like, as people conceptualize them with more limited or vertical function, the price they’re willing to pay might be different from a general-purpose device. Many, many people use netbooks in conjunction with their PC. People are actually buying family packs for their kids, but they might still have the family PC at home. There are markets buying PCs now that we’d written off as the phone market. Where will things go? I don’t know, but conceptualizing netbooks as a different thing from a laptop—I’m not sure where that distinction lies.

Lazowska: Another question from the audience, on the impact of Web-based collaboration on intellectual property.

Ozzie: That’s a very broad question. Intellectual property is our lifeblood, and the lifeblood of many industries. The open source movement is based on strong intellectual property controls. Open source licenses are very precise in terms of the types of environments they want around the handling of their source code. We’re in an era, because of sharing, because we’re all connected, we can explore new models of creating intellectual property. Certain areas are really hard, and really profitable. Over time, we are in a stable state where there will be many, many businesses based on proprietary intellectual property, and they’ll sit side-by-side with open source. We have to focus on interoperability between the two.

Lazowska: Coming from the Midwest and Massachusetts, what’s your perception of the strengths and weaknesses of the Seattle area compared to the other regions where you’ve lived?

Ozzie: This is a wonderful region. Being here, I had no idea in terms of the lifestyle perspective, the natural resources perspective—it’s a wonderful place to live. In terms of the high-tech community, so much is shaped around university systems. The cluster of universities in Cambridge [MA], for instance. There are some dynamics. Here it’s the Eastside versus Westside. There’s a different feel. In Boston, there’s Cambridge, there’s [Route] 128, and [Interstate] 495. If a student is at a university in Cambridge, they’ll come to Seattle as easily as 128! Each region is really a subregion. But there’s a big opportunity here. The venture capital community is very solid. I think by communicating between different regions, we can do a lot.

Gregory T. Huang is Xconomy's Deputy Editor, National IT Editor, and the Editor of Xconomy Boston. You can e-mail him at gthuang@xconomy.com. Follow @gthuang

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