Microsoft reaffirms software as key to Internet-connected life

Step aside, smartphone, television, and laptop screens. This is a job for software.

Microsoft’s internal news staff published a 6,500-word treatise on Monday arguing that software services are becoming more important to people’s lives than the physical gadgets they’re accessed from.

It’s a convenient argument for Microsoft, a software-focused company that has occasionally stumbled when it ventured into hardware, most recently with its still-flailing smartphone business.

But it’s also a theory that’s in vogue from Silicon Valley to Wall Street.

In an increasingly Internet-connected world, software services are power players. Think Netflix’s challenge to established terrestrial television networks, Airbnb’s inroads in the hotel industry, or Uber and Lyft.

Of the 146 startups worldwide that investors have valued at $1 billion or more, 102 of them make software, Internet or e-commerce products, according to data from The Wall Street Journal. Just six make hardware.

Between the lines of Microsoft’s lengthy post on Monday was an explanation of what Chief Executive Satya Nadella really means when he repeats the mantra that the world is mobile-first, cloud-first.

The company thinks it will thrive if its products, from Office to Skype to Windows, can follow people seamlessly from screen to screen. Meanwhile, its growing cloud-computing services offer off-the-shelf plumbing that other companies can use to do the same.

To be sure, fortunes have been made – and continue to be made – by technology companies that build physical things.

Apple, the world’s largest technology firm by market capitalization, got to that point by dominating emerging categories of devices like smartphones, music players, and tablet computers. Consumers think of the Cupertino, Calif., company as a maker of stylish gadgets, despite Apple’s forays into software services.

And these things tend to go in cycles. You don’t have to go very far back in Microsoft’s history to find the company touting its ambitions to be a devices company.