Microsoft says Google success was “wake-up call”

The success of Google Inc. served as a “wake-up call” for Microsoft Corp. to the financial power of Web advertising, Microsoft’s chief technologist said on Tuesday.

Google’s success forced the company to consider advertising as a new revenue stream beyond its traditional licensing and subscription model, Microsoft’s Chief Software Architect Ray Ozzie said at a Goldman Sachs investor conference in Las Vegas.

“Google’s success very clearly caused an inflection point within the industry and within Microsoft,” Ozzie said in a question-and-answer session monitored online.

Ozzie stepped into the top technical position at Microsoft last year, replacing co-founder Bill Gates and spearheading an important transition for the $44 billion company to extend its reach beyond the computer desktop.

The challenge for Ozzie is to deliver a host of Web services alongside Microsoft’s classic out-of-the-box software to remain competitive with online rivals like Google and Salesforce.com without compromising its core desktop software business.

“In most cases it’s not going to be cannibalistic, but on the fringes there will some substitution of one thing for another,” said Ozzie, a technology guru respected in the industry for developing ground-breaking software, including Lotus Notes.

As an example, Ozzie said some small businesses may opt for Office Live — an online service that helps set up Web sites, company e-mail and Web applications for collaborative projects — instead of a company server running on Windows.

Microsoft believes new Web services will work in tandem with software installed on the computer, a vision that differs from “software as a service” advocates who expect services delivered over the Web to eventually replace software that resides on local PCs.

“The services opportunity is … really more than just taking what’s on the PC and putting it up on the Web,” said Ozzie, who has only made a few public appearances since taking over for Gates.

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