Over the next decade, the notion of the operating system is going to change immensely. Developing applications that only run on a local PC will become irrelevant with virtualization and the increasing capabilities in web browsers. More and more applications will get built for the cloud first, consumable on any device. This is also a boon for developers who can now scale incrementally to a customer ready solution with much lower costs, and even gain access to an out-of-the-box revenue stream from day 1 with search origination fees. It’s an exciting future that can really light up the tech industry. I am proud that Microsoft has seized this opportunity to rally around a true cloud computing platform that enables developers to leverage skills to enter this new era through Windows Azure. Ray Ozzie will be talking about this today at the Professional Developers Conference if you are interested. Large companies the size of Microsoft are not easy to turn, but over the last 4 years I have witnessed a commitment to the cloud across all of our products that is incredible to see. Things may look a bit patchwork at times, but the direction is clear. Expect to see more here from us over the next few years!

The Windows Azure platform offers an intuitive, reliable and powerful platform for the creation of web applications and services.

The Windows Azure platform is comprised of Windows Azure: an operating system as a service; SQL Azure: a fully relational database in the cloud; and .NET Services: consumable web-based services that provide both secure connectivity and federated access control for applications.

Currently in Community Technology Preview (CTP), the services are free to evaluate through January 2010. We will begin charging customers on February 1st, 2010.

Years ago (OK, maybe it was just four years ago but that’s a lifetime in online world) we were contemplating making Spaces into much more of a platform that would allow others to build customized experiences on top, but using our ID, storage, relationships info and core user experience. By using the same infrastructure, a user could be in multiple niches and still find it easy to move between them with single sign on, content reposts, aggregation etc. Not that dissimilar to what Ning has been doing in some ways. It didn’t fit with the direction Windows Live was going in so we abandoned it.

Fast forward a few years and it’s great to see some validation to this approach. Ali just sent me a link to below website for Amish people dating. To be clear, according to this website, there are 233,000 Amish adults and children. Let’s say 10% are inclined to date …. that’s just 23,000 users target market. Even if you have 30% penetration, that’s about 6,000 users on your service. Pretty niche I’d say.

I’m not sure which way things will go. Facebook continues to be an all things for all people, where it is becoming increasingly unwieldy. But at least everyone I know is there. Niche sites offer closer communities, but I have to sign up for multiple sites. Best of luck to Ning in trying to make this a false choice by developing the back end to enable such niche sites to flourish.

Great article in New York Times on “Cisco’s Run of Spending”. The article talks about the $22 Billion of acquisitions Cisco has done since 2002 (and doesn’t even mention the billions more before that). The case is pretty damning for Cisco overall ending with the statement “After 10 years of searching for the promised land of growth, it’s time for something different. Slowing acquisitions would a good start. If the strategy’s benefit isn’t apparent after a decade of purchases, it is hard to see how it will appear magically now.” Some other key points:

• Cisco purchased $60B of stock but the outstanding shares decreased by only 1.3B (current outstanding shares = 5.79B) due to dilutive acquisitions and options.
• John Chambers (CEO) claimed growth could increase by 50% a year over the long run. Actual growth has been closer to 7% per year.
• They have 26 new product areas that could account for $1B in new revenue in near term. I don’t know how anyone can even remember 26 things to “focus” on.

I took a look at Cisco’s revenue breakdown and M&A by business unit recently. As you can see from the numbers, in the last five years M&A in the core switches and routers group has slowed down a lot as Cisco has dominant market share in those segments and there aren’t that many big companies to buy. Growth in this segment is also in single digits. Most of Cisco’s growth has actually come from acquired companies dumped into the Advanced Technologies Group (ATG) which supports the premise of the NYT article.

The telling thing is that Cisco has put all these new acquired businesses into one group rather than baking into core business units. What that really screams out is Cisco doesn’t know what to do with the acquisitions and is desperate to show growth. That’s why it needs 59 councils to manage the acquisitions. That’s why core business groups are often prevented from doing things that make sense for them, but not the new hot business in the ATG. I could be proved wrong, but I can’t see how this is sustainable from a shareholder economics or management perspective.

The other factor is that a lot of the ATG acquisitions are “end customer businesses” that drive up demand for Cisco’s core network gear and allow them to charge a premium. Great strategy ….. but what does it mean for customers? Customers get all the capabilities they expect, but in a real patchwork manner. For example, in Unified Communications, Cisco has multiple soft phone clients that don’t work in the same way, they have several meeting/conferencing products, they are schizophrenic on need for email and have now acquired a company and all the backend administration for these is different. It is hard to build a clean user friendly user experience at the best of times, but almost impossible if you are trying to do it with patched acquisitions. Cisco’s new approach is to build a middleware layer to hide the complexity and plug into companies that can be trusted with user interfaces. But that begs the question for customers on why they would want to do this when they can get an integrated solution from other vendors.

Let’s see how Cisco’s strategy goes. But initial sense is that it is bad for shareholders, bad for employees and bad for customers.