But Gartner Inc. analyst Daryl Plummer said such concerns are perennial and have yet to stop any Web-based, service-oriented architecture or software-as-a-service efforts from going forward. Plummer, in fact, said he thinks Microsoft will have to move farther away from software infrastructures than it is now, and toward services.

Microsoft's own software licensing scheme is paving the way toward broader adoption of online services, said the chief technology architect at a major food-processing company. Many Microsoft users already pay a yearly software fee, noted the architect, who asked not to be identified. Shifting to a services model is the next step, he said.

But some TechEd attendees still had trouble getting their arms around the new approach that Ozzie laid out.

"I can't relate to what they're doing," said Tyrone Boyd, associate director of network services at Howard Universityin Washington. "It just doesn't register with me yet."