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I was reading a Fortune Magazine article on how Ray Ozzie is the vanguard of Microsoft’s new Internet Services strategy. It struck me that Microsoft realizes that we’re moving away from the desktop to the “webtop” paradigm, where your data resides in the “cloud” of the Internet, and that we’re moving towards fundamentally new services that leverage the power of the Web. In other words, MS seems to “get” the Internet of the future.

In fact, one of the tenets of the “new Web”, or Web 2.0, as it’s more popularly known, is that value is moving up the software stack, and that applications are now commodities; the real value lies in services that are offered via those applications. For instance, I’m writing this document on Writely, a sort of Wordpad-for-the-Web. Mind you, it isn’t an application in the traditional sense of the term, as much as it’s a service. In any case, the important thing here is that it doesn’t matter what browser application I’m using to access this document on Writely. I’m using Firefox, but I might as well have been using Internet Explorer. Or Opera. Or Safari. Or… well, you get the idea. The browser does not matter any more. It is a commodity. A lot of application “services” today run on the same principle. All of Google’s offerings: Search. Local. Maps. Gmail. Orkut. Blogger. Writely itself. Take a look at the hottest tech startups today. Flickr. del.icio.us. 37signals. YouTube. Digg. Bloglines. Spot the pattern? How you access the application services does not matter.

The browser is just the way we access the Internet today. What will matter is how we will access the Internet tomorrow. I’ve said this in the past, and I’ll say it again here. Google Desktop (GD) is the application to watch out for. The future will belong to what are known as Internet-connected widgets, or as MS calls them, Internet-connected components (ICC) . These will be used on desktops, mobile devices, and any other appliances that will be connected to the Web in the future. And GD is one application that uses these ICCs already. Almost every single plugin connects to the Internet to gather the data it needs. Or take a look at Konfabulator, deemed valuable enough to be bought by Yahoo!. These widgets are the future of how information and content on the Internet is going to be created and accessed. Taking it to the next level, imagine these widgets on your smartphone. Or in your TV/TiVo. Or in your car. That is the opportunity for ICCs.

So does MS need Internet Explorer?
The area we’ve talked about above is where MS’s future opportunities are. Ray Ozzie and his team have to find a business model to monetize this opportunity. That’ll require his deep technical insight. It’ll also require immense technical talent from within MS to build a programming model around the new Web. And here’s where I’m going to step in and make this assertion.

Microsoft should stop developing Internet Explorer.

Instead, it ought to concentrate on building the Internet into the very heart of the next Windows, whether it’s the successor to Windows Vista (for the desktop), or Windows Mobile (for mobile devices). Firefox is doing a better job than IE in every respect. It’s the better browser by far. Only Opera can come close to being as good. IE isn’t MS’s competitive advantage in the least, in many respects, it’s a liability. A wise move would be to cease development on the browser - any development on IE would be simply playing catch-up to Firefox and Opera. It makes no sense to compete in such a market when you’re better off building up tomorrow’s market. Microsoft needs to jump to (in the words of Guy Kawasaki) “the next curve”. Or in the words of John Sculley, “change the rules of the game”, as he did at the helm of Pepsi.

I sense that Windows Live is another mistake that the company’s making. Not the idea of web-enabled services - that’s fine by me. But the fact that Windows Live works best on IE and has problems with Firefox, Opera, Safari means that we’re going down the same path again - trying to “lock-in” users to their browser, when it doesn’t make sense - does the value lie in Windows Live application services, or does it lie in Internet Explorer? There’s no rationale in their policy right now, and it looks as if it’s degenerating into an ego issue - stop the spread of Firefox at any cost. If Ray Ozzie is to be believed through his “The Internet Services disruption ” memo, MS is now a services company, only with multiple product offerings. (As an aside, this model is precisely what Gates had alluded to in his book “Business @ The Speed Of Thought” more than half a decade ago. Talk about visionary!) So why is it competing in a senseless, hopelessly commoditized market which isn’t even a revenue source, where all it gets is bad publicity, and where its product offering is way behind competitors from a feature and ease-of-use point of view?

If Microsoft has the courage to back up its vision with action, it ought to include a copy of Firefox with Windows Vista, as the default browser. But the home page ought to be Windows Live. Hmm - now that’s a move that makes sense!