From Fortune magazine: "To deliver a Web-based product line, Microsoft must build a global network of server farms that will cost 'staggering' amounts of money, says Ozzie." That's Ray Ozzie, the new hire Microsoft has pinned all its hopes on. "'The people who could build a viable services infrastructure of scale,' he says, 'are companies that have both the will and the capacity to invest staggering amounts of money - staggering amounts.'"
Web services have been talked about for years now, but they're finally starting to work on a larger scale. Implicit in web services is standards, interactivity, and a lightweight connection. Is a web service really a web service if it's just one Microsoft component talking to another Microsoft component? The popularity of a service is determined by how many ways it can connect to others and how simple and human-readable the connection is. Lock-ins don't happen because of proprietary software or legacy platforms but because the service has too many great features to do without. If a service stops performing a new one can be plugged in.
Perhaps Microsoft can build a giant server farm to house data, but their services won't succeed if they are equally massive. The key is to provide small functional components that can scale massively, not masses of functional elements that can't be reduced to their separate parts. Lighter, smaller and faster companies should win out in this space. 37Signals is constantly picked on for narrowly focusing all their development advice on the small team, but that's where the web is going. If a giant corporation like Microsoft can think and move like a small team, perhaps it can survive. Robert Scoble has some ideas on how Microsoft can do this.