I am in Hong Kong speaking at the Hong Kong International Computer Conference. It is a great conference, it focuses on IT as a driver for innovation and economic transformation. I was lucky enough to be doing one of the keynote presentations on how technology is so disruptive and how cloud computing changes entrepreneurship. In my talk I mention Ray Kurzweil’s Abstraction of Moore's Law, which can be summarized as saying that the next 20 years will see as much technological innovation as the past 100.

I represented Microsoft Hong Kong in this talk, and after the speech lots of people came up to me to chat. I got to talk to tons of folks at the conference: I got to talk to students and professors at Hong Kong University, the folks from One Laptop per Child, entrepreneurs (including a dude building some amazing robotics), people form NGOs, and local software developers. We got to talking about how the new technology reality has drastically changed business models. Think about digital media, the music industry has changed forever, old business models just don’t work anymore.

This got me thinking. Microsoft recently announced a great offer for Visual Studio Ultimate (yet another SKU). But the world has changed. Web 2.0 is here! So I say: All SKUs of Visual Studio should be free.The goal should be to get Visual Studio out to everyone, for free. I know that we have Express versions of these products, and for the most part, they are very capable, but I mean the real deal, Visual Studio Ultimate.

Now I know what you are thinking: Steve, have you gone soft on me?

Of course not.  I am still a disciple of Milton Friedman and a firm believer of free markets and economic incentives. But that does not mean you have to actually sell something to make money on it. I am thinking of Visual Studio 2.0.

For example, there are four versions of Visual Studio as far as I can tell. (And the fact that I have no idea is a problem.) There are the free express versions, Professional, Premium, and (the new SKU) Ultimate.

Microsoft should do away with all versions and give away Ultimate (without MSDN) to anyone who wants it. My mom could go and download it if she wanted to. Just have to provide some demographic information and have a Live ID.

The startup page in Visual Studio would be ad supported (and you can’t make it go away, so you will see it each time you load Visual Studio.)  I could see Telerik or our competitors wanting to sponsor that page-but not in a “pay us a million dollars model”, rather as a pay per conversion model. Basically Telerik and our competitors would pay a small fee to be on the startup page and be able to stream ads to the developers and each Telerik license sold, Microsoft takes a cut.  Note to Microsoft, since this was my idea, can Telerik have an exclusive on that page? :)

In addition, in exchange for the free Visual Studio, Microsoft will get anonymous data from the developers. What country you are in, the specs of the developer machine, installation experience, etc. Also how many projects were started in C# v VB v F#, etc. Silverlight v Web, etc. Imagine if Microsoft knew all of this data!! I want to know how many lines of C# code in Brazil were written for Windows Forms last week.

Microsoft can then sell ad space based on your environment. Think about a C# developer in Poland working mostly on Silverlight. On the startup page next time there are offers (in Polish) for Silverlight tools, conferences, books, or even job offers. How much would Dell pay to market to every developer in Australia with Visual Studio installed on an “underpowered” machine? The vendor would only know who you are if you actually clicked on the offer.

Microsoft can also make money by using Visual Studio as a sales engine for MSDN. MSDN does not really have a “sales force” and Visual Studio can be a “loss leader” for MSDN.

But MSDN’s business model would have to change as well. Why not have MSDN (not the software part) evolve into a Visual Studio based Facebook/Linkedin social network for developers. You can only get into your “MSDNFacebook” via Visual Studio. When you are coding, Visual Studio can automatically update your status (Stephen Forte is currently breaking the build….) Imagine hitting F1 and be brought to a MSDN forum search on that line of code as one option. Every .NET developer in the world would be a member of this social network! Want to find a user group? No problem! Imagine the collaboration opportunities. A whole new world of revenue opportunities would open up to Microsoft, including an IPO of MSDNFacebook! :)

In addition, the MSDN software pricing model would change. Microsoft can sell fractional MSDN licenses and specialize MSDN for local markets and different developer types. Maybe you only want MSDN for Web Development. MSDN is expensive since it includes big things like Windows Server and Exchange, etc. (I have never installed Exchange, nor will I ever do so.)  Maybe you can have MSDN options where that is excluded. Kind of like a menu where you customize just want you want and pay only for what you use. Sell more with less. (Sound familiar?)

Of course if you want the ads and the anonymous data collection turned off, you can pay an annual fee. If your employer is paying that annual fee, they can opt out of certain content, such as a job offer coming your way, etc.

Visual Studio 2.0 would be awesome. Developers get free software and more collaboration, vendors get to tap into the entire ecosystem, and Microsoft makes more money while collecting a tremendous amount of metrics, metrics that will drive new features, service packs, etc.

Maybe this will be one of the great announcements next week at the PDC……..