Ozzie's exit huge shift for Microsoft

Microsoft's chief software architect Ray Ozzie is set to depart the company. Photo / Supplied

It was the quietest of departures. In a low-key footnote, the giant software company Microsoft disclosed the departure of its creative guru Ray Ozzie last week.

The reaction outside the computing industry might have been: Ray who? But for those around the Seattle-based corporation, it was a tectonic shift.

Ozzie, brought into Microsoft in 2005 as chief software architect, was supposed to fill the technical shoes of Bill Gates when the company's legendary co-founder ended his day-to-day role in order to spend more time giving away his money.

An evangelist for "cloud" computing - where storage and applications are provided over the internet to order - Ozzie had enemies within Microsoft, notably those defending its Windows and Office suite monopolies.

His exit sparks questions about Microsoft's direction and piles the pressure on the company's veteran chief executive, Steve Ballmer.

Microsoft is struggling to adapt as more businesses move their work to the cloud of internet-connected processing and storage such as that offered by Google and Amazon.

While others in the industry shift their products online, Microsoft still relies on its monopolies in the Windows operating system for PCs, and its Office suite of programs such as Word.

Together, they generate more than 50 per cent of its total profits; those online losses then drag down the net profit.

In a famous memo written and sent around the company in October 2005, soon after he joined, Ozzie extolled "the power of the advertising-supported economic model" and "the effectiveness of a new delivery and adoption model". The company had to change, he said, or its existing businesses were at risk.

There were two problems with that: first, the entrenched political inertia within Microsoft which protects the revenues from Windows and Office; second, that Ozzie had no leverage, because unlike his rivals he was not in charge of a product group.

"He's more of a gentle, entrepreneurial professor [than a] corporate shark," said one Microsoft insider.

But others are proving Ozzie right. Google is grabbing Office users away from Microsoft by offering its online "Google Apps" products, which it says are now used by 3 million businesses; Microsoft claims 40 million "customers" of its online services.

Amazon is becoming known as much for its online storage services, used by companies such as Twitter, as for selling books.

The cloud is becoming pervasive.

Microsoft does have online services; it has just launched Office 365, which mixes the desktop Office with an online offering. But Google's alternative is cheaper, and for many businesses might be just as effective.

Within Microsoft, the idea that the cloud will be the future sounds like swapping a business that pays pounds for one that pays pennies.

Ozzie's departure also demonstrates that Ballmer, chief executive since January 2000, is tightening his grip on the company. Compared with a year ago, he is now in direct control of the divisions responsible for mobile phones, the Xbox and the Office suite.

Insiders say Ballmer agreed with Ozzie's cloud vision - but, crucially, didn't back him publicly enough.

An anonymous Microsoft middle manager who blogs as "Mini-Microsoft", and who since 2006 has been urging the company to slim down, said "[Ozzie] didn't take a broad view of Microsoft at all" and that in contrast to Gates, "the rigour of a focused, intellectually deep and sturdy software development declined" under Ozzie.

And Ozzie made enemies.

Ballmer now faces the biggest challenges of his career.

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