In an address at the annual Financial Analyst Meeting at Microsoft's campus here July 27, Ozzie said a transformational shift to services will be necessary for all technology companies at this point if they want to expand their relevance.

"We can, now, for the first time, balance where to put the application [and] the device, and how we balance and deliver the user experience. That architectural choice is now ours, and the importance of services in the design of new hardware is a services transformation," he said.

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The first impact of this change was on the Internet, but it then affected small businesses and will ultimately impact enterprise IT as well, he said. "Clearly enterprises would need to make tradeoffs to leverage these services, with cost versus control being one, and I believe this services transformation will impact all markets serviced by technology," he said.

While the term 'Internet services' is a broad one, it is really an architectural principle, a way of defining solutions, as well as an online value-based delivery model, Ozzie said, adding that the user is now firmly in control on the Internet and that all Microsoft's online products and services will have a connected, user-focused perspective.

"We should also be focusing on what we want to do with technology rather than spending a lot of time getting it to all work together," he said.

While Microsoft used to look at development from a PC-centric point of view, in this new era, Microsoft sees the Internet as being at the center.

The Windows Live Web services platform needs to increase the number and quality of services it offers to attract users and increase usage, and has to optimize infrastructure and significantly increase the seamlessness of its services across multiple PCs and other devices, Ozzie said.

Microsoft will also monitor the rate of adoption of its services and service-connected offerings, the ecosystem growth rate, the application attach rate and the device attach rate, he said. "As we dramatically reduce the cost and complexity of using multiple devices, the revenue opportunity is largely additive," he said.

Also, Ozzie emphasized that in the future, Windows Live would be the hub for the rest of the services that Microsoft rolls out across the company, from Windows Live ID to Windows Live Mail.

"So, in summary, I believe a fundamental transformative shift to services is appropriate for all technology companies; there is a conceptual model that brings together desktop and services offering under our Windows Live services platform; and solid metrics can and will be used to manage products and measure returns and investments," Ozzie said.

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