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Microsoft Acquires Ozzie...uh...Groove

Microsoft's acquisition of Groove Networks may have more to do with personnel than with technology.

The Redmond software giant announced plans to acquire the Beverly, MA-based collaboration software maker last week for an undisclosed sum. Microsoft will get Groove's peer-to-peer systems and ID technology in the deal, which the company intends to integrate into the next version of Windows, code-named Longhorn, as well as to the next version of Microsoft's Office productivity suite.

"The acquisition of Groove complements Microsoft's collaboration offerings to include real-time, server-based, and peer-to-peer solutions that address the ever-changing and more-complex work environment," said Jeff Raikes, group VP of Microsoft's Information Worker Group, in a statement. "Together, Microsoft and Groove will make anytime, anywhere collaboration a more natural and easy extension of how information workers coordinate their projects and document-centric work."

But the key acquisition in this deal may be Groove's founder, Ray Ozzie, who will join Microsoft as one of the company's three chief technical officers. Ozzie is legendary in the software business as, among other things, he co-created the groundbreaking Lotus Notes workplace-collaboration suite in the mid-1990s.

"Ray Ozzie is an outstanding visionary," says Forrester senior analyst Erica Rugullies. "He can help Microsoft develop a cohesive vision and strategy around collaboration. As collaboration tools and technologies evolve into a collaboration platform, he can really help to propel Microsoft forward in that [market]."

Ozzie launched Groove in 1997, and from the beginning the company engineered its products to run smoothly with Microsoft's Office suite. In 2001, Microsoft invested $51 million in the company, and invested again in 2003.

Purchasing Groove's technology outright--a move that industry watchers have expected for some time--probably won't, in and of itself, do much to increase Groove's market share, at least initially, says META group analyst and VP Nick Gall.

"I don't believe that the Groove technology out of the box, simply because Microsoft now owns it, gets any radical increase in traction," Gall says. "It had pretty much reached the market it was going to reach, given its current form. It is very popular in the intelligence and defense community, but for some reason, private corporations--even Fortune 500 organizations--weren't interested enough in that set of capabilities to really embrace it."

Ozzie's presence, however, is likely to have an impact, Gall says. "Ozzie's vision plus Microsoft's resources and mass-market-centric focus might be just the right combination."

None of which is to suggest that Groove's technology doesn't count in this equation. Microsoft's investment alone suggests that it matters a great deal.

"Groove's technology fills holes in Microsoft's product offerings," says Rugullies. "The current Microsoft collaboration products--specifically Windows Sharepoint Services, Sharepoint Portal Server, Microsoft Office, and Windows--are not good for cross-firewall collaboration, or for enabling a seamless online-offline experience. That's where Groove excels. Microsoft was intending to flesh out features like this in its Longhorn and Office 12 releases, but this really gives them a jump start."

Groove also brings hundreds of enterprise customers to Microsoft, says Rugullies, customers with serious expertise in collaboration, including inter-enterprise collaboration. "This gives Microsoft a quick crash course with customers who have done this in real environments, who understand what some of the requirements are and what works and what doesn't. Microsoft's own customer base, when it comes to collaboration, specifically around team collaboration, has been very much internally focused."

Analysts are expecting the Microsoft-Groove union to be a successful marriage of both technology and personnel.

"This is a good fit," says Rugullies. "It's a market that has become very hot in the past few years, and I have no doubt that both companies will do everything they can to make it successful."

About the Author

John K. Waters is a freelance writer based in Silicon Valley. He can be reached at john@watersworks.com.

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