Microsoft flirts with “cloud"-based applications, still making billions off Earth-bound variety
Though they squabble over things such as the rights to control parts of Facebook and Yahoo, the real battle between Microsoft and Google is only just beginning to show itself as the two jockey …
Context & Ripple Effects
As of March 2008, Microsoft's position is deliberately double-sided: the company continues to draw billions from its Earth-bound desktop software business (a fact the coverage treats as settled), while reportedly flirting with cloud-based applications — a signal the same coverage flags as unconfirmed rather than a committed strategy.
What gives this story its stakes is the surrounding jockeying already under way: Microsoft and Google are squabbling over rights to control parts of Facebook and Yahoo, and the coverage explicitly frames the application-layer contest between the two as only beginning to show itself, with the Yahoo and Facebook fights as its visible surface.
First-order effects
- Yahoo becomes the immediate battleground asset: with Microsoft and Google both maneuvering for control of parts of it, Yahoo's shareholders hold leverage neither suitor can ignore.
- Microsoft's own customers see nothing change yet — the billions still come from licensed desktop software, so any cloud experimentation is being funded out of the existing franchise rather than replacing it.
Second-order effects
- Google enters the fight as the incumbent in hosted applications, which forces Microsoft to defend Office-style licensing economics instead of simply extending them online.
- Facebook gains bargaining power of its own, since whichever of the two secures distribution rights there gains a social layer the other lacks.
Third-order effects
- If the pattern holds, the industry's revenue structure shifts from per-license desktop sales toward service- and advertising-funded delivery — the 'real battle' the coverage says is just beginning between Microsoft and Google.
- Control of consumer distribution platforms (Yahoo, Facebook) rather than application code alone becomes the asset class that decides which company owns the next software layer.
The trend: Software delivery is pivoting from licensed desktop products to cloud-based applications, with the Microsoft-Google contest over Yahoo and Facebook serving as its opening round.