I always find it interesting when internal memos allegedly leak. It is like reality TV, what actually happens inside of those corporate walls. So Microsoft’s Bill Gates and Ray Ozzie star in this most recent memo exposure where “Internet services” services are seen as the next serious disruption.

They point to a variety of threats to Microsoft’s Windows and Office franchises, from advertising-supported Internet businesses like those being pursued by Google and Yahoo to, as Mr. Gates notes, a new "grass-roots adoption and popularization model" that has made it easier for start-up companies to reach large audiences at low cost. John Markoff, November 9, 2005, New York Times

It amazes me that everyone thinks this movement is about advertising. Advertising is the bread and butter for a Google or a Yahoo. It is not how they will grow the company. The key, which is alluded to by Gates is in the grass-roots activism garnered by the survivors of the dotcoms. Google owns the minds of the people – no one hates them or their products. I have heard people refer to companies like Google as being young and destined to a crawl like everyone else, a fatal miscalculation in my opinion.

Companies like Google happen to have sizable revenue streams because of the relevant impressions they deliver for advertisers. Those impressions have also captured an intent audience, performing intimate tasks like reading email, sharing photos, searching their desktops and instant messaging. Small companies can stir up hype like no other. Large companies have to work harder to show they are nimble. Microsoft is a big company. The notion that they missed the AJAX ship is foolishness. Anyone in the space can point to the technical underpinnings at least as far back as five years. So this is not about technical capability either. There is more to Google than AJAX. There is more to “Internet services” than the servers or middleware running on them.

The document written by Mr. Ozzie, titled "The Internet Services Disruption," criticizes Microsoft for moving too slowly to capitalize on technologies it developed and for failing to capitalize on industry trends. John Markoff, November 9, 2005, New York Times

The ability to capitalize on industry trends is something larger companies do in strategic commanding ways – as leaders of the industry. Big companies are like the US military, ready for two full scale wars on two different fronts ready to deploy at any time, they rally the battalions and drive a strategy that in 12-24-36 months time they own a significant portion of the mindshare and cash flow. In the mean time the world is infatuated with Google and their lab offerings, their impressive ability to attract talent and substantial bank account. The best part of where Google sits is that they can actually dabble in these disruptive activities without losing their core business, ad revenue.

Google is disruptive, but in the best way possible. We might actually drive to a new model of simplicity that makes IT really useful.

I wonder, how scared is Microsoft of facing Google as a competitor in the services arena?