What is this Sea Change?

From Good Morning Silicon Valley: Press release actually confidential Microsoft memo.

“The next sea change” in computing — software as a service — has arrived, Gates writes, and Microsoft must embrace it or lose ground to the advertising-supported Internet businesses being developed by Google, Yahoo and Salesforce.com. [The Memo Itself.]

In the Web 1.0 Dotcom days, a concept had emerged called B-to-B-to-C, as a successor to B-to-B and B-to-C. As consumer marketeers were looking for more efficient ways to reach their consumer audiences, the idea of reaching them through their employers seemed cost-efficient and attractive.

Now, at the height of Web 2.0, Microsoft seems to be in the absolute best spot to capitalize on the B-to-B-to-C advertising opportunity.

Imagine, you are BMW, and you want to advertise to a very targeted audience of consumers with a certain household income level. Who else is in a better position to give you access to this super precisely segmented data about people’s income levels than major corporations?

Let’s say, GE cuts a deal with BMW, and lets them advertise to the 10,000 employees in the annual income range $100,000 – $500,000. What form would this advertising take?

It could be, that for this set of employees, as soon as they open up Microsoft Office or Outlook, BMWs AD is placed on their desktop. As a result, instead of GE paying Microsoft for the corporate license of MS Office, BMW ends up subsidizing the application.

As Microsoft thinks through their response to the Sea Change that Gates discusses above, it would be good to remember that Microsoft is still in a position of strength within the enterprise, large and small, and not try to follow Google blindly into the pure SaaS zone.

Microsoft should re-define the rules of this war, instead of chalking out a blow-by-blow response to Google.

ps. Also, here is Ozzie’s Memo.