Looking over the PDC content for this fall you can definitely see a trend: Cloud Services. This is to counter Amazon's S3 offering.

First let's define what Cloud Computing is and what it means. Cloud computing is not Gmail, Hotmail, or even Google Documents. (This is why you won't see Microsoft Office moved to the Cloud in a very robust way, that is just web access for popular productivity software.) Cloud Computing is replacing an application's hardware and plumbing infrastructure with a service hosted by someone else. For example let's look a typical corporate system:

• Back-end data storage (SQL Server, Oracle)
• Back-end application server (IIS + .NET, COM+/ES, Tuxedo, even CICS (that dates me))
• Front end machine to access the application (Either a workstation via a browser or windows app, or mobile device)

It gets expensive for small and even large firms to build the network, firewalls, domain services, user accounts and of course the hardware (with its underlying RAID arrays, UPSes, racks, power, etc.) Sometimes this is a barrier to growth (or even entry) for small to medium organizations. Not only do you have to learn all about subnets and RAID arrays, you also have to learn about UPS and power strategy, and manage a development project. (Man, I just want to write some stored procedures, who cares about an UPS and RAID array!)

This is a problem, epically for start-ups. You have to build a rack before you even build a company and product. That is expensive and an up-front fixed cost. More than likely you will build a rack that at overcapacity so you can grow, since it is time consuming to add more capacity later on. Also, you usually have to hire people to help you figure this out. Building a rack is expensive and also expensive to maintain.

Cloud computing is providing the back end infrastructure, the first two bullets, to firms as a service. The beauty of this model is you pay for what you are using, bandwidth, storage, and clock cycles. So a startup does not have to spend $20,000 on a new rack, they can pay a monthly cost to host their application in the "cloud" and only pay for what they need. In the beginning this will be a small fee since a startup has no customers and then the fee will grow (as revenue grows hopefully!) Amazon S3 is attracting many startups and is changing the dynamics of funding a startup since they don't need as much expensive hardware and IT expertise.

So many critics of Microsoft say that they are missing the boat by not putting MS Office up in the cloud to compete with Google Apps. While Microsoft may have to compete with Google one day in this space (I personally prefer offline Office + a service like SharePoint to share my documents.) that day is not today. The real battle will be over the true Cloud-infrastructure and ultimately the stack.

Selling customers on your Cloud platform locks them into your technology. So if Microsoft offers storage (SQL Server Data Services), application synchronization (Live Mesh), workflow/relying (BizTalk Services) and application tier (IIS as a service? or at least VPCs) services, they will get developers to use the Microsoft stack (SQL, .NET, etc.) for another generation. Throw in Hosted Office and Exchange, and they are really hooked.

Judging from the PDC content, with sessions all around Microsoft Cloud services, I think that they get it. Too bad we have to wait until October, but I sure hope that it is good stuff.

Yesterday Yahoo! announced a deal that will outsource their search engine to Google. For those of you who don't remember, Yahoo use to outsource their search engine to Google about 8 years go, and Google ate Yahoo's lunch. That said, this is the final nail in the Microsoft-Yahoo merger. So the real question is "what's next" for Microsoft. They have three options at a high level:

1. Go Nuclear. Launch an all out court battle against Google-Yahoo starting with a lobbying effort in Washington, DC. We saw how effective Netscape, Sun and Oracle used the US Government to bring Microsoft to heel. (And more recently Google's complaints about Vista.) Microsoft saw how effective (some say Bill Gates was never the same after that experience) the nuclear option is and may just decide to go down this route as payback for both the Yahoo hubris and the old IE trial.

2. Do nothing. Remember how big and bad AOL was 10 years ago? Netscape? They were the hot new kids on the block that was going to dethrone Microsoft. Ten years later, Microsoft is still making buckets of money, revived interest in its development platform with a new push in 2002 (.NET) and AOL is practically bankrupt and Netscape disappeared (oddly enough at the hands of AOL, sound familiar to Google-Yahoo?) Microsoft can argue that the creative destruction of the Internet companies is more of a threat to Google than themselves. The Google model has not changed in 10 years: PageRank is old and outdated (still gives you irrelevant results and forces you to search like a techie). In addition PageRank is being gamed and people are getting frustrated. People are exchanging, buying and selling links on web pages with the sole intent of manipulating search results. Someone will come up with a better system and out Google Google. (Memo, it won't be Live Search.) Microsoft can sit back and develop its Mesh and Cloud computing offerings (Web as a platform) and watch Google struggle with growing pains, more defections, US regulatory issues, and challenges from hot new startups and see where the chips fall. My guess, both MS and Google will come out ok with this strategy.

3. Acquire a large portal. This is an attractive option, but nobody has the eyeballs that Yahoo! has. Only MySpace and Facebook have the eyeballs and they have problems making money.

So if you were Steve Ballmer which would you choose?

My lunch with Bill Gates yesterday at Tech*Ed in Orlando was very cool. His first word to us was "super" as was his second.

After snapping a few photos, we got right down to it. There were about 12 of us from the community who were invited and and we were eager to chat. First question: "Hey Bill, what are you going to do with your free time?" Bill indicated that he is going to be "super" busy and will be working full time on his foundation.

We then got into talking about schools and how he envisions most schools around the world to be textbook free and just use computers. Then about how university level learning will be done via the Internet for lectures. In poor countries "best of breed" lectures can be put on DVD and repeated. Bill was blown away  by the organic chemistry distance learning made available by MIT and wants to bring this model to everyone. He said that the traditional lecture will die at the university level. He was extremely passionate about teachers, schools, and education in general.

Andrew Brust asked about the UN, and Bill complained that there were too many agencies with more TLAs than Microsoft. (WHO, WFP, etc..)

I got to finally get a word in edgewise. :) I had lots of questions sent to me by readers of this blog ranging from "What's next" to "Why not just buy the Mets, that is charity at this point."

I asked about Microfinancing. The answer surprised me. While Bill's foundation gave $300 million in total to microfinance, Bill said the micro-financing had too high of interest rates and the opportunities to make loans were not as abundant as you would think. Bill had a passion for micro-savings.

He said that too many poor people have no access to banks due to distance and bank fees. So banks become something only the rich can have access to in many countries. (Including the US in many regards too, witness check-cashing shops in the inner city.) Bill went on to say how most poor will stash their currency somewhere or buy jewelry, only to get stolen or inflated away. Or some will buy livestock as a way to store their wealth and save only to be stolen or come down with disease. Bill described a system that he worked on that will allow poor people in remote areas to make microdeposits in the bank via a local retailer. Then they can view their balance via that retailer or on their cell phone if they have one. Then can spend the money via local retailers or via an ATM. He also spoke about the need for a quality interest rate for the microsavings. This was really amazing, all you hear about these days is micro-loans, but Bill turned the tables on everyone wants to combine micro-loans with micro-bank accounts. Makes complete sense.

The last question by Kate Gregory, was on how does Bill deal with the public sector/volunteer sector's non type A personality. Bill basically indicated that he was results oriented and brings the same passion and project management skills to his non-profit work.

I can't say that I had lunch with Bill Gates since he did not really eat, we just kept asking him questions and he never really got to eat his lunch. All in all he spent about 1.5 hours with us and it was great. I have to say that it was really inspirational to talk the whole time with him about non-technical issues (not a single techie question was asked). Here is a man who is one of the greatest technical minds (still!) around, the chairman of a Fortune 500 company, and we talked about his passion for his foundation. I am looking forward to what his foundation will do with him working there full time.

Back in September, two classmates convinced me to join them on a crazy quest. Merrill Lynch and our Business School, the City University of New York at Baruch College, sponsors an annual business plan entrepreneurship contest. For a small team, write a business plan and then show how you can execute. The contest started with an elevator pitch and an abstract way back in September and 140 teams entered. Over the months you have to write a business plan and then sell it to judges who act like investors. The judges cutoff more teams as the months progressed and eventually there were 10 left for a final pitch two weeks ago.

By some miracle, my team won! Our concept is all about on-line advertising using a behavioral approach on top of demographic slicing. It is easy to implement and we are going to do so (Watch out Google!) We won a $10,000 cash prize (wow!) as well as $20,000 start-up investment for our business. In today's day and age, with technology so cheap, the Internet so ubiquitous, and overseas resources readily available, we can get to a prototype phase with the $20,000. That is the power of Web 2.5.

The best part of winning was being given the "big check" like when you win the Lotto. We took the big check to the bar with us to celebrate, however, the bartender would not cash it.

God bless the lawyers. (I never thought I would start a blog post that way.)

The way we buy cell phones in the United States is different than in almost all other major markets. The carriers (AT&T, Verizon, T-Mobile, Sprint, etc) control the market. You can only buy a phone through them and with a service plan attached to it. Not only that but the phone manufactures (Nokia, Motorola, etc) have little control as to what features they can put on the carrier's "version" of their phone. For example let's say that Nokia releases the sexy new Nokia 123456 phone. This phone has integrated bluetooth and a cool wifi feature. AT&T will sell you the 123456 phone without the wifi and Sprint may sell it to you without the bluetooth feature. You can't buy the "normal" Nokia 123456 anywhere in the United States, you have to check eBay or travel to Asia or Europe and buy an "unlocked" version (more on that in a minute.)

Europe, Asia, and the rest of the world does it differently. You can buy the Nokia 123456 at a Nokia outlet, a retail shop like Radio Shack or Circuit City, or online. It is unlocked, meaning that you can put in any GSM chip from any service provider. (By contrast US phones are locked, my AT&T phone will only work with my AT&T chip. But I can buy an unlocked European phone and put in my AT&T chip, but AT&T won't support the phone, and they get mad at me when I do this.)

So the rest of the world is free and unlocked. This leads to major consumer choice. Consumers change phones all the time and also change carriers quite often. This forces the carriers to compete on coverage, price, service, network reliability, and features (exclusive MP3 downloads, cheap wall papers, etc.) In Europe there is major innovation both at the phone level (unlocked phones have to compete with other unlocked phones) and on the carrier level. This leads to innovation and more consumer choice.

In the United States, we have no such competition. We have an oligopoly. We have expensive plans, crippled phones, and we are tied to our carrier forever. (I have been with AT&T since 1995 and I hate them!) This also explains why at 16,000' on Mt. Kilimanjaro I had service but can't get coverage on 3rd Avenue and 86th Street in Manhattan, a "dead zone" for AT&T, which is funny since an AT&T store is one block away.

In November 2007, this was promised to change. You were suppose to  be allowed to unlock your phone (funny it was illegal up until then to unlock your phone since it violated an intellectual property law).

So what did the carriers do? Take it all to court.

Good news. People started to sue. (Thank God for lawyers! Wow, I said it again.) Under threat of the lawyers, Verizon and Sprint, have agreed to unlock hones after customers have completed their original contract. (Not perfect, but a start.) AT&T and T-Mobile decided to fight on. They took their case all the way to the California Supreme Court and lost. So they appealed to the US Supreme Court.

Good news. The US Supreme Court yesterday sided with consumers. (All those Reagan and Bush arch-conservatives are good for something!) The court declined to review an October decision by the California Supreme Court that  basically cleared the way for a class action lawsuit that will allow millions of California customers to sue the carriers. (The suits also prompted all the carriers to reduce the fees charged to costumers who terminate a contract before it expires. Thank God for lawyers a third time!)

This does not unlock the phones automatically and change the US market to behave just like the rest of the world. But it is a start. We are free from the control of the carriers. Let freedom ring. Bring on the innovation!

PS iPhone users, you can finally get an unlocked iPhone!

As Bill Gates heads to retirement, he is making one last hurrah as the keynote speaker at TechEd next week in Orlando. I am lucky enough to be invited with 12 of my closest friends to have lunch with Bill after the keynote.

I was told not to ask anything controversial or not to monopolize the conversation (those who know me well will appreciate that one) but since I will be also in attendance with Richard Campbell and Andrew Brust, I will be lucky to even ask Bill how his golf handicap is going. So I have to be strategic. In an hour and a half lunch with 12 people, I can possibly get one good question with a follow up.

What would you ask Bill Gates if you could? Here is what I am thinking, leave in the comments or via email what you think is a better/worse question.

You recently said in Davos that a new style of capitalism may be needed in order to solve the world's problems. You make the case for more corporate social responsibility (CSR), so what is one major problem in the world today that you think is severe (AIDS, global warming, etc) and how can the "creative capitalism" you outlined at Davos solve it. Also would a Microsoft of say, 1980 with revenues of just over $1 million and just hired the first MBA "manager" type (Steve Ballmer) react to this positively (what is in it for MSFT '80)? Isn't "the business of business is business" and wouldn't Steve and Bill in 1980 agree? How do you motivate 1980 Bill Gates and Steve Ballmer to "creative capitalism".

Let me know if you have something better. :)

Napster just launched a digital music store that is DRM free and has 6 million MP3s to download for $ 0.99. It will not have the proprietary DRM from Apple or Microsoft on it.

"Music fans have spoken and it's clear they need the convenience, ease of use and broad interoperability of the DRM-free MP3 format," said Napster CEO Chris Gorog, "and they want to be able to find both major label artists and independent music all in one place.  Napster is delighted to deliver all of this and more with the world’s largest MP3 catalog."

This is bad news for Apple.  Apple got strong in this business because the record labels wanted DRM on the songs and Steve Jobs gave them one, one that will only work on the iPod. Jobs argued to the labels that in order to make Apple's DRM software, FairPlay, effective, it had to be proprietary. The labels agreed and the iPod was released in October 2001 along with iTunes as the first legal digital music download store. Jobs won't license FairPlay, so all music sold on iTunes can be played only on iPods. This lack of interoperability, combined with the iPod's overwhelming dominance, gives Apple a stranglehold on the digital music marketplace. How big is this stranglehold? 22% of all music sold in 2007 was sold on iTunes.

So the empire strikes back. In July 2007, Universal said it would selectively choose which songs (or albums or artists) were sold on iTunes, rather than granting iTune blanket access to the entire catalog. (This was a major blow to Apple.) In August 2007, Universal announced the plan to offer DRM-free tracks through non-Apple retailers. Amazon and Napster are now selling DRM free music in an attempt to break the stranglehold Apple has with its proprietary system.

Is this the beginning of the end of the iPod? Time for Apple to respond. It would be nice if they licensed FairPlay. Something has to change. it will be fun to see what does.

On Monday I will be speaking before representatives of the US House of Representatives about legacy systems. The question is to invest in brand new systems and technology or just to kind of glue together things on top of old systems. The question boils down to one of public policy, should the Congress pass laws mandating this, or should they give some autonomy (and budget to attract some talent) to their in-house IT staffs.

I am working with the Association for Competitive Technology on this issue. We feel that scraping the old and leapfrogging over a generation of technology or two is the best bet. Get some creative destruction on Capital Hill from new IT systems.  Treat the IT departments like a business, not a governmental agency. Give them budgets and goals and have them develop the applications and processes required. A little autonomy can go a long way.

Cable company Comcast acquired Plaxo yesterday for about $150 million. Comcast did for the same reason Microsoft wanted to buy Yahoo, eyeballs. Plaxo has a lot of members, and a popular new feature called Pulse, gives Comcast a toehold in Silicon Valley.

Was this a wise move? Probably not. Plaxo was on the block for a long time and nobody would touch them. Google was rumored for a while, then Facebook. The problem is that Plaxo is not relevant anymore. With the movement this year behind both OpenID and Data Portability, your social grid should be your to manage and in a new environment where profiles, contacts and your data is portable across platforms (Facebook, Yahoo, MySpace, etc), it is the API and applications that matter, not how many contacts you have.

Plaxo will most likely die a quiet death inside of Comcast within a few years. The good news, no more Plaxo spam.

About 13 years ago, Microsoft ruled the Earth. Windows 95 shipped to much fanfare and people were talking about a "monopoly" and how nobody could remove Microsoft from their top position- ever. Then came Netscape and the Internet, then the .com boom and then Google. Now everyone counts Microsoft out. (Mary Jo Foley and I don't agree, but that is a topic for another day.)

There was a time when GM ruled the Earth. Their market share was so dominate we could not envision a world without them. Their profits were larger than most European countries' GDP. First came the Japanese, then the Koreans (and soon the Chinese will come.) But the real death kill was the environment. Now everyone (including non-car owner me!) wants a Tesla. Now everyone counts GM out and they are probably right to do so. They will survive but struggle for relevance.

There was a time when AT&T ruled the Earth. They even had a real monopoly, but I am talking about post monopoly. They were big and had infrastructure and controlled a large portion of the long distance market. Then came Voice Over IP. Vonage was the early trend setter, then cable/fiber companies, then Skype. People keep asking me what my "work" or "home" phone number is and I say either call my cell or Skype me since I don't pay long distance or have a land line. Companies like VOIPo are just killing AT&T and other telcos. (Congratz to VOIPo for hiring such a smart CTO!) The telcos are now irrelevant. 

It has long been argued that this is all good. It is "Creative Destruction"  or the process of something new killing something old. The term was coined by Joseph Schumpeter in his 1942 book called Capitalism, Socialism and Democracy to be a "process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one."

The role technology plays in the process of creative destruction is simply amazing. I can list ten more examples but you get the point. I watch with sheer excitement when Microsoft feels that it has to "bet the farm" on some new technology or Google has to buy YouTube to stay relevant, or how they all bow to the Facebook alter (and Facebook will be made irrelevant by someone new just like Friendster and MySpace before it.) I love how 13 years go Yahoo was predicted to take over the world (along with Excite and others that have gone away) and now it is struggling for survival. My old employer Zagat is struggling to stay alive (I only half like that with my unexpired stock options still on the line <g>).

Technology is the most powerful creative destruction force and will continue to be so. The reason why I am not on the Al Gore bandwagon (despite my insistence of taking the subway everywhere) is because I have faith that the problems we are facing here in 2008 of the environment or health care will be solved with technology, motivated by the powerful market force of creative destruction. We now have a Tesla, the sexiest car on the planet. We now have targeted chemo-therapy based on your DNA, making it far more effective. What is next? I don't know but I sure what to watch it all play out.

Breaking new on CNN:

"Bill Gates one of the world's richest men, a philanthropist and humanitarian was denied an entry visa to Myanmar today in his effort to help with the victims of the Cyclone. The Military junta was worried Bill would try to buy the country. Bill Gates was very disappointed and was quoted as saying "I just wanted to help a few million people." So instead he decided to help a different million people, those who hate their friends sending them Twitter updates. Bill bought the company with some pocket change and closed it down to save humanity the pain of tech geeks micro-blogging about picking their noses. Microsoft's stock jumped 100% on the news."

Since Bill did not really save the world from Twitter, I will tell you why I don't Twitter.

1. Everyone wants to be a Microcelebrity. Get (micro) famous on Facebook, Flickr and Twiter? Only an ego the size of Silicon Valley thinks that people actually care about our daily lives. I know that I live a dull life and don't feel the need to boost my ego to Twitter and think that you actually care about it. I don't want to be a microcelebrity, if I can't get a role in a movie opposite Cameron Diaz, then screw it, I will just go back to what I am good at: writing code.

2. "I use Twitter so my wife knows if my flights are delayed." People who are way smarter than me give me this excuse. The only person who cares about your flight is the person who is picking you up at the airport, so why broadcast that to the whole community? Ever hear of an airline alert? Far more reliable then your 3G network. I use airline alerts and I take public transportation to and from the airport to offset the huge airline CO2 emissions.

3. "I use Twitter to update my status." What makes you think that anyone cares about your status? Also in the post 9/11 world, should you be broadcasting to potential criminals and terrorists your whereabouts? My DPE just checked into the San Francisco Marriott last night, maybe criminals want to go and rip him off (since they know he has iPods and expensive stuff with him due to his Twittering). Worse yet I travel to places where they kidnap businessmen for ransom or worse (like in Pakistan), should I updating my status to them?

4. "Twitter is good for Conferences." If you need to read Twitter feeds to know where the cool parties are, you should stay in your room coding and eating room service.

5. "Twitter is fun." Yes fun for people who would rather play baseball on an XBox than outside with a real ball. Twitter is a time suck and you could be using that time to ether be working (if you are Twittering at work) or just going and doing something fun. If you are doing something fun, disconnect and enjoy it. I don't care what you are eating for dinner, the score of the baseball game, or how is traffic on the I-95.

The last reason why I won't use Twitter is that it is going to fail. Meaning, micro-blogging may succeed and eventually I will have to do it  (but I have still resisted Facebook!), but Twitter won't be the platform we use. First of all it is slow and times out all the time since it is built on Rails and Rails just doesn't scale. Even if they rewrite the site, someone else will move in for the kill. Remember Friendster? They never overcame the damage of their performance problems. Second, most likely we will just alter our Blog feeds to have have micro-RSS feeds and anyone can build a client for it. No need for a central server.

We're looking to hire a few good .NET developers. Instead of the traditional way of sending in CVs (resumes), I figured we can do this Web 2.5 style. Resumes are so 20th century and Web 1.0. What can we learn about you with just a resume?

Below are 10 things I want you to send me: some easy, some hard, some fun, some coding challenges. There are no right or wrong answers this is just a way for us to get to know you. Some questions will take you 5 seconds, some may take you 5 minutes, and at least one will take you an hour (#7, but it is fun). I am looking for what drives you, where you want to go, and of course your approach to problems and how you craft a solution. For the coding questions, good coders are easy to find, I am looking for a coder who in creative (one guy once solved a TSQL problem better than the actual official solution and now I use his answer as the new solution) but also through. (Hint: check your own work a gizillion different ways, I have gotten compile errors back in the past!) I am also looking for some who takes pride in their work and goes the extra mile (or kilometer). (Hint: things like good Unit tests also give you bonus points.) After we get to know each other via this process, then I will look at your CV and we can do the traditional interview.

Good luck and HAVE FUN!

1. Send me a link to you online. Your web page, blog, MySpace profile, user group you are a member of, or a site that you worked on. Anything to get me acquainted with you. If you are reading this blog you already know me, so it is only fair. :)

2. List your top 5 values. (Why do you get out of bed in the morning? What makes you tick?)

3. List the top 3 blogs that you read and tell me why.

4. Tell me what programming language you want to learn next and why.

5. List the top 3 new features you want to see in the next version of the .NET framework (4.0) that has not been announced and tell me why you want to see them.

6. Write a short essay on the greatest failure (canceled or late project, bad code breaking the build the night before a major demo, etc) in your professional career.

7. Listen to this podcast. Reflect on it and give me your reaction to it.

8. Send me an ASP.NET project from Northwind that uses the Model View Controller design pattern. (Not the ASP .NET MVC framework.) Use the categories, products, and sales. Be creative. Bonus points if it is real easy to install.

9. A TSQL Challenge. Give me a script to solve the following problem. (Run this setup here.) There are no real wrong answers, but the more efficient and bulletproof the query is the better. No cheating and no cursors! Don't Google the answers (we'll know.) Assign rooms to classes based on capacity using the Classes and Rooms tables. Rules: each class should have a room (and NULL if a room is not available). No class can be in a room where there are more students than capacity. No room can be used twice.

The results of your SQL statement should be something like this:

10. Create a data driven ASP.NET page using the Telerik controls. Tell me something that sucks about the control you used. (I already know what is great about them.) Bonus if you find a bug. (We'll send you a .NET Ninja tee shirt if you do.)

After Microsoft walked away from its takeover bid (or maybe this is just a tactic) Yahoo's share price lost most of its takeover premium this morning and is trading about 15-20% below its closing price on Friday. (But still above the $19 it was trading immediately before Microsoft's offer.

So what is next?

Yahoo will try to do something. They fought hard to stay independent, but at what cost? Shareholders have already started to sue and the market is punishing Yahoo today. They can outsource their search to Google (like they did when Google started) and focus on using Yahoo's web properties' traffic to make money. Slash jobs by outsourcing search and increase your valuation.  Then if Microsoft comes knocking again, they can argue a higher valuation. But Microsoft most likely won't come knocking if Yahoo outsources search. (This of course if the US Congress allows the Google deal.)

Microsoft may make a move on AOL. While not as strong as Yahoo, AOL will come with the traffic to build out the Live platform and Time Warner really wants to get rid of AOL. I am not so sure that this will work, but it is possible. AOL brings far less to the table than Yahoo. I can see a MySpace play but that does not really look like it will make money, ditto for Facebook. Social networking may have the eyeballs but not the ad dollars.

That brings us back to what happened this weekend. Yahoo and Microsoft have no good options in front of them. Yahoo can't stay independent without a major change. Microsoft needs to push its ad strategy out to more eyeballs and Live is not cutting it. I think they will both be back at the table in a few months.

Microsoft released a tech preview of Live Mesh for developers today. Live Mesh is a software-plus-service platform that enables your PC and your other devices to “come alive” by making them aware of each other through the Internet. I was invited to the beta and so far I have been using the storage features and synchronization services. (Think of a Live Mesh aware TV set top device and season 4 of Lost downloaded on my PC.)

I can see road warriors like myself using Live Mesh quite often, all you have to do is upload a Word document to your virtual desktop and then it will be automatically be kept in sync on every machine and device I have. As long as it runs Microsoft operating systems, a limitation I can live with. (But support for Mac is coming soon I hear.)

While the marketing engine of Microsoft seems pointed to the consumers with their XBoxes and PCs, I think this software+services approach represents a change in direction for Microsoft. Using the software (Office 2007 + Vista) and the services (Live Mesh's synchronization and discovery services) developers can build some really cool business applications.

Not only can you sync documents and files, but you can also sync applications (via a two-way RSS or Atom feed). Once again Microsoft is showing its strength with the developer community. For example, a Web developer can build an app using any programming language and then sync that application across multiple devices and even other applications. 

Contrast this to what Google is doing. Google is trying to bring all of your applications from the desktop to the cloud. Microsoft is trying to get you to keep your desktop applications for their rich features and leverage the cloud for storage, synchronization, and collaboration. Microsoft is not pretending that we have uber powerful and cheap PCs and is using the cloud for infrastructure.

Will Live Mesh make Microsoft a player? Ray Ozzie thinks so. He has said that Microsoft now has to build software+services with a connection between devices (and their data) and people.

Its' a great time to be a developer.

This week has been a nice vacation in Thailand in between a week of work in Penang, Malaysia and two weeks starting next week in China for a school trip with my MBA class for our international study program.

Last week in Penang, I meet up with the academic staff at the computer science department at USM (University Sains Malaysia) in Penang. We had a great time talking about how to bridge the gap between the research the students are doing and commercial applications. (I suggested that they work more closely with their alumnus to come back and teach classes on this very topic.) I walked the faculty and students through the technology used at my old company, Corzen-mostly the statistical models (cluster analysis), data mining algorithms, and grid/distributed computing. The student's eyes lit up.

The whole reason why I was there was due to my friend Jihad Hammad, he invited me. Jihad was born and raised in Palestine and is taking his masters at USM. (This is his first time out of Palestine.) He is the founder of the Palestinian Information Technology Center (PIT), a non-profit to help people in Palestine learn about technology and PalDev, a Microsoft .Net User Group in Palestine-with 100+ active members at each meeting, a user group that sometimes has no place to meet so they meet at a refugee camp.

Jihad and I met online five years ago and collaborated to build the PIT and PalDev; we have been partners and friends for 5 years.I helped get the PIT center funding from various sources in the USA and helped get Microsoft recognition for the center (plus free software) as well as INETA membership for PalDev. While Jihad did all the hard work, I was able to lend him a helping hand over the years by making the right introductions to the right people.

This was the first time we met in person.

This is the power of the web, it brings people together and helps them do wonderful things. Two people who never met before can easily build trust, a friendship, and make a difference by using technology in a war zone to give people hope (and hopefully one day play a very small role in ending the violence.) This would not have been possible 10 or so years ago. That is the power of the WideOpen Web. Anything is possible, even peace in the Middle East via .NET. :)

Ok back to the mixed drinks by the beach...

All of the mainstream press is done talking about Mix last week. So I wanted to give my impression as a long time Microsoft watcher and developer.

First I have sat through hundreds if not thousands of keynotes over the last 15 years at Microsoft events. (Most recently I sat through one in Portuguese on Wednesday in Lisbon.  2700 developers, what a turn out!) Microsoft is really focused on the developer. They have a developer culture (that gets them in trouble with the mainstream press a lot) and treat developers like gold.

For all the great treatment, they will still turn up the PR engine at these keynotes, because while TechEd, PDC, and Mix maybe developer events, the press is still there. I noticed something different about Microsoft at Mix: honestly.

Case in point. In all of my years at keynotes, MS has never admitted to a mistake. They have come close by saying "Version 3.0 was slow, sorry. Version 4.0 out in XX months will be 10x faster! We rock! Cheer for us!"

They have touched some third rails like during the IE monopoly trial in the USA they brought a new computer out on stage and said "where is IE" in the middle of the demo. It was loaded with Netscape. That kind of poking fun at themselves was nice, but still not what I was looking for.

No at Mix they showed the maturity of an industry leader. They showed IE 7.0 not implementing CSS 2.1 standards. They then showed FireFox and Opera implementing it correctly. Then they said that they will fix it in IE 8 and showed us a demo to the point.

Wow.

Some of you may not think that this is a big deal. It is. It is Microsoft growing up knowing that they are not the only player out there, realizing that people depend on their stuff and they are willing to take responsibility. This is the first step in losing their arrogance.

Speaking of arrogance. That is my opinion of Apple at the moment. As a developer, the iPhone SDK is 1. late to the party, 2. not that compelling (I had similar tools for RIM 7 years ago and Palm and MS SmartPhone 5+ years ago) and 3. arrogant. I have to develop according to the Apple UI and deployment standards. Sorry Steve Jobs look in the mirror. You will see Bill Gates of 10 years ago. The person you hate is the person you just became.

A torch has been passed. Who will replace Microsoft as the arrogant one in the software space? It will take a few years for Microsoft to completely change and a few more years for that change to be accepted. I think buying Yahoo! and working in a mature manner with Yahoo! is the first step. Who will replace Microsoft? The likely candidates: Google or Apple.

I have been working with web technology since the earliest days of the commercial web. I remember back about 15 years ago learning HTML and basically making a fool of myself with my personal home page and talking myself into a job at Fidelity Investments in 1994 saying I knew this thing called HTML. I remember about 13 years ago using raw ODBC via CGI scripts to make data from a database appear on a web page. Then came OLE ISAPI and life got a little easier-but you had to code the page yourself (like do all the response.* stuff that ASPx does automatically for you today).

What I remember for most of my time as a developer is how hard the web was to code for. Around 1995 I tried to tell customers (I was construing then) that the web was a passing fad to avoid building web apps. (they did not believe me.) The tools were immature (Visual Notepad 1.0) the IDEs just sucked (remember HotDog?) and all the APIs were out of process. Then along came a beta for IIS 1.0 sometime I think 12 years ago. I still remember where I was when I first saw it. I was in Chicago at a developer conference. Things started to get easier.

Back around 1996 programming for the web was better but still quite a challenge. At the same time, Java was threatening Microsoft. Netscape was the darling of Wall Street and the geeks. Microsoft's back was against the wall. There was an anti-trust lawsuit. People said that they were big and mean (and they were mean at times!) and could not adapt to the Internet. The Internet would make Microsoft unimportant.

Microsoft responded. Code named Denali, Active Server Pages and ActiveX Data Objects gave us an in-process way to code pages with a framework on top of ISAPI, gone were the days of having to write the pluming. Tools started to come along, Visual InterDev was a good first attempt and then the evolution of Visual Studio. The Java folkes were jealous of the MS IDEs. Coding for the web just got way easier.

This helped fuel the .COM boom. IIS was so innovative (the only web server at the time to be out of process), the IDEs were so much easier, and scaling to a web farm was so cost efficient, Microsoft set a new standard in web development. Microsoft technology lead the way during the boom, others were big players but by 2001 people were actually starting to play catch up to Microsoft when they put .NET to beta. How about that for not being unimportant?

Well fast forward 7 or 8 years.  I was at the New York Windows Server 2008, Visual Studio 2008, and SQL Server 2008 launch today and headed to Mix 2008 tomorrow. I look at the way we code web pages today and it is 10 times easier than the .com era! Maybe more!

The likes of Google and open source-ers have claimed that Microsoft is again unimportant. Goolge is the darling of Wall Street and the geeks. Linux and open source have their religious zeal. Microsoft faces anti-trust in Europe. Sure Google owns the online ad space. Great, they can have it. Wall Street and the lay press have stated that Microsoft is behind Google because it is in third place for Ads on the Web. They say that Microsoft was asleep behind the wheel. I beg to differ. Let's take a look at some of the technology that the boys and girls from Redmond have produced in recent months:

• The .NET Framework and the 3.5 extensions (WF, WCF, ASP Ajax, and ASP.NET MVC Framework)
• Visual Studio 2008, the slickest IDE out there
• SharePoint
• Silverlight

Not to mention all of the back end stuff like Windows Server 2008 and SQL Server 2008 all with supporting technology like LINQ and XLINQ.

Holy cow is developing for the web easy! Not only easier, but developers have more unprecedented power. When you compare the Java and Open Source offerings of .NET, Visual Studio, SharePoint, Windows, SQL Server, and Silverlight, there is no stack that even comes close in power and productivity. Not bad for the "unimportant" Microsoft.

Case in point. I started a new business in December. Something very speculative and it needed a large data driven user interactive transactional web site. Back 10 years ago, I would have had to make up some PowerPoint slides and beg angel investors for a few hundred thousand dollars to build out a proof of concept. It would then take six months to get to an alpha since debugging would consist of CTRL+G and counting down to the response.write("strSQL"). The UI was painful for users and very static.

Now due to infrastructure reasons like cheap bandwidth, outsourcing, and tools like Skype and IM, you can do this much cheaper. But Microsoft has made the development light years ahead of the .com era.

Remember my new startup? We have an Ajax enabled Microsoft .NET 3.5 ASPx site up and in customer ready beta today, in only two months. One architect, one developer, and one tester. That is 200% faster than my last startup Corzen which was built on top of the .NET 1.0 stack 6 years ago and 500% faster than a comparable web site build in the .com era for Zagat on the last ASP stack. All that and no begging any Angel investors, it was so cheap we paid for it ourselves!

Google may own Sillicon Valley and Wall Street, but Microsoft owns the majority of developers hearts and minds. They own it because they make our life so damn easy. Microsoft has thrown the web wide open to everyone. If you can get a new business started in 2 months on the Microsoft stack, think about all the great things that people will do!

Looking forward to the next stack in a few years from Microsoft and looking back at this current stack as slow and out of date like I do the .NET 1.0 stack. Maybe it will only take me 1 month to start a new business. :)

Google's co-founder Sergey Brin said on Sunday that Microsoft's proposed takeover of Yahoo! is an "unnerving" maneuver that threatens innovation on the Internet. Brin stated:

"The Internet has evolved from open standards, having a diversity of companies... And when you start to have companies that control the operating system, control the browsers, they really tie up the top Web sites, and can be used to manipulate stuff in various ways. I think that's unnerving."

Get a grip Sergey. This sort of scare tactic could have worked 10 years ago before Web 2.0 and before there was a serious threat to Microsoft on the Internet called Google. Google is a huge company that has an over 70% market share. Microsoft has a tiny market share, even with the combined Yahoo, Microsoft-Yahoo will still be very far behind Google.

Microsoft's hold on the desktop and browser for the last 10 years has not made it any more powerful in the 2008 Web 2.0 world. They are distant third place in search and losing ground. They are no longer the evil empire.

Google is the new evil empire. They are big, they control a ton of eyeballs and many people in the valley are now saying that Google is very difficult to deal with. Microsoft is just another player in the Internet space, Google is bringing up old battle cry's from yesteryear. Sergey better watch out, the Department of Justice may just come after him in a few years. Don't think so? Bill Gates never thought so.

Today Toshiba announced the death of HD DVD saying that it will no longer produce HD DVD players. While a standards war between Toshiba's HD DVD and SONY's Blu-Ray was in full swing, Blu-Ray emerged today as the winner. The death of HD DVD was very quick, here is how it happened:

• Popularity of SONY Playstation 3 at Christmas
• Warner Brothers pulling out of the format leading to limited Selection of HD DVDs titles
• Netflix going Blu-Ray exclusive

I think the tipping point was Netflix going exclusive. With Warner Brothers out and Paramount rumored, the writing was on the wall. It took 8 days from the Netflix announcement to the actual tossing in of the towel by Toshiba. Score one for the power of the people. Once Netflix spoke on behalf of its members, HD DVD died.

Blu-ray will have to compete hard against high-def Internet downloads. With a lot of the public not willing to pay over $30 for a new Blu-ray disk movie (compared to a $10 DVD) and new players being expensive;  hard drive space being super cheap and broadband also ubiquitous and cheap, Blu-ray will have a major fight on its hands. Expect a repeat of the MP3 Napster debate from 10 years ago.

Business models will have to change. Will the movie/DVD industry learn anything from the music/CD industry? I doubt it.

According to the Alley Insider, Yahoo's second largest shareholder, investor firm Legg Mason, has met with Steve Ballmer and supports a bump in the price and thinks that Yahoo should take it. Legg Mason outlined in a letter to shareholders that Microsoft will offer better value than Yahoo can deliver on its own. If you remember Microsoft offered $36 last summer. Expect them to go at least this high, if not higher. (They most likely were prepared to pay this high already.) The Google-Yahoo deal has went cold according to the Wall Street Journal, so Yahoo has very little in the way of options.

Brilliant strategy by Microsoft. Come in at a low point when Yahoo is laying off 1,000 workers with a low bid. Get the shareholders excited, have the board reject the offer and then up the bid. Not the board of directors is stuck between a rock and a hard place. Or between a Google and a Microsoft.

When it looks like this deal will go through, I will post why I am such a strong supported of it and counter all the anti-deal.

Over the weekend Yahoo! board members leaked to the Wall Street Journal that they felt that the Microsoft bid of $31 a share is "massively undervalued." Yahoo then officially rejected Microsoft's bid on Monday. What happened is that Yahoo's management convinced the board of directors not to sell at $31. But Yahoo shareholders want to earn that $31 or more. So Yahoo said the offer was "massively undervalued" and that $40 is what they want. Microsoft responded by saying that $31 is a full and fair deal and that Yahoo's counter offer of $40 is "Absurdly High." This is the classic negotiation tactic know as anchoring.

Microsoft is not backing down. Steve Ballmer said he is willing to go higher. Negotiation statistics say that in cases like this firms usually "split the difference" and would settle for around $35 a share. But Microsoft is also pulling no stops, they are hiring a proxy firm to start a hostile takeover. This is knows as Microsoft's BATNA or "best alternative to a negotiated agreement." It is the stick to the upping the price carrot.

Microsoft is offering Yahoo a solid premium over its true valuation. Since there are no other bidders and Yahoo's financial position is weak at the moment, Yahoo has very little leverage. Yahoo's only other option (BATNA) is to have massive layoffs (some scenarios put it at 33% of the company) and potentially outsource search and advertising to Google. (We all saw how that worked for AOL, moving from 20% to 5%.) Actually according to the Alley Insider, Microsoft's premium is rather large: RBC's Jordan Rohan has said: Yahoo is valued at about $24. That would put Microsoft's bid at an approximately 30% premium. Shareholders like 30% premiums. They also don't like when board of directors let pride get in the way of a fail deal to earn 30% on their money (epically with the Dow down 14% this year.) They tend to have shareholder revolts when board of directors do that. Microsoft is already talking to large investors to get them on their side. According to the Alley Insider:

• Mutual fund giant T. Rowe Price, which owns 18 million shares of Yahoo! said yesterday that it would be "very vocal" if Microsoft raises its offer and Yahoo! rejects it again.
• Capital Research and Management, Yahoo!'s largest investor with a recently raised stake of 11.6 percent, is said to favor a deal as well.

Once again, my prediction is that the deal will go through. Yahoo has nowhere to turn. Its large shareholders are going to be angry if the board rejects another offer. Microsoft has to fight the new evil empire Google and will up the ante. This is going to be fun to watch.

Yahoo!'s board of directors is to meet today to decide the fate of the company. There is a lack of an alternative suitor since the only viable one, Softbank, bailed out today. Microsoft CEO Steve Ballmer said in Business Week that the Yahoo! brand will "live on" which means the death of MSN and possible the Live! brand as well.

Yahoo!'s only other option is a deal with Google and try to stay independent. They would have outsource the search and ad functionality to Google and shut down that operation, laying off thousands (some estimates are 33% or more of the company) and focusing on the portal/content side of the business.

AOL did that. It did not work out well for them, they lost drastic market share and have never recovered. If Yahoo! did the same and lost market share, then they would be ceding eyeballs to Google.

My gut tells me that Yahoo! is not going to make the same mistake twice. It is Yahoo! that put Google on the map. Yahoo! outsourced their search to Google in the early days of Google and Google eventually took all the market share away. Why would all those smart people make the same mistake twice? My gut tells me that Ballmer has assured them of independence and they will swallow their pride and take the deal.

As a Microsoft watcher, I am excited about the deal. Here is my message to Microsoft: Don't mess this up! The whole world is watching. Microsoft is the "evil empire" in Silicon Valley. Everyone hates Microsoft there. If Microsoft handles Yahoo! right it is a historic opportunity for Microsoft to win the hearts and minds of the Valley. If they mess up the brand (think of this: Microsoft Yahoo! MSN Live! Messenger for Workgroups Professional Edition 2008 Service Pack 2a) and come in all arrogant and have tremendous layoffs, then why bother? If Microsoft handles this in a great way and wins over the hearts and minds of Yahoo! employees (who all hate Microsoft) then it is the first step in repositioning itself in the Valley. The new new evil empire in the Valley will be Google.

Google is afraid of the potential of a Microsoft acquisition of Yahoo. On Sunday, Google posted a reaction on the takeover deal. Google's reply is well, amusing.

They cry wolf.They say that the deal is uncompetitive. I find that hard to accept when Microsoft+ Yahoo= a tiny fraction of Google's market share in ad and search traffic. They are also crying foul saying that Microsoft is the big evil machine. This is an easy thing to do in the valley. Everyone hates Microsoft in the valley. Flickr even has a protest group. The valley is home to the anti-Microsoft camp: Oracle, Sun, Apple, and Google. Lots of people in Silicon Valley will automatically say "Microsoft is Evil!" when prompted just as people will automatically say "Down with Bush!" when promoted at a Clinton rally. Why do they hate Microsoft? They are the "evil empire" of course. Microsoft is big, owns too much market share, and is arrogant according to the valley faithful.

But Google has to look in the mirror. They are the big 800 lb gorilla everyone is afraid of! Not Yahoo, not Microsoft!

Google is the reason that Yahoo has failed as a company and is a takeover target. Yahoo use to be the sizzle of the Internet, now Google destroyed them. Google is the reason why the most profitable company of all time, Microsoft, is scared and doing such  a bold move. Yahoo may be Microsoft’s last hope to be a meaningful player on in a Web.20 world. Who's to blame? Google. Google is the big bad machine nowadays.

Back to the deal, Yahoo has three choices.

First they can ride out the offer and try to stay independent. That is unlikely since the company is in such deep trouble. They may also face shareholder lawsuits if they reject Microsoft's offer. Maybe they can take hedge fund money or be acquired by an European telecom or take money from a sovereign wealth fund.

Second they can outsource their search and ads to Google and focus on being a portal. They may raise their revenue by 25% in doing so according to the Wall Street Journal. This would be a total surrender. (Remember it was Yahoo that put Google on the map!) The DOJ may get involved in this case since Google would own search except for smaller players like MSN and Ask.

Third option is to take the Microsoft offer. This is the most likely outcome.

There is likely to be some DOJ action on this case, however, a Yahoo-Microsoft deal would make an actual attractive competitor to Google. Absent of the deal, Yahoo has to do something, most likely outsource the search and ads to Google. Google could be a very dangerous company without any real competition (Microsoft's AdCenter is a poor competitor) in the search advertising space. They would be more evil then Microsoft on the desktop.

Google knows this. This is why their CEO phoned Yahoo and said that they will give Yahoo any "help" they need to fight off the takeover. The status quo suits Google well. That is why they are arguing for it.

But there is no more status quo. If the DOJ blocks the deal and Yahoo remains independent, Yahoo will not remain independent for much longer. Someone else will acquire them, Yahoo is in too much trouble.

Google is afraid. They should be. Their world is about to change drastically. Their share price dropped almost 10% since this deal was announced. If the deal goes through, Microsoft will eventually lose the evil empire title and Google will be crowned the new king of evil. Funny since their motto is "do no evil."