Microsoft, the ultimate deep pockets strategic funder (think of their accumulated losses in areas deemed important, like IPTV, gaming consoles, and MSN as examples of where they are taking a long view of return), just announced the beta Windows Live Folders, their hosted storage-in-the-cloud play for consumer. I am happy to see the launch, but in many ways I am really confused at both its positioning and why it took so long to bring to market.

First, as a matter of full disclosure, I am a huge fan of the category of digital asset management – so much so that we acquired the IP and assets of Xdrive while I was at AOL to jumpstart our efforts in the space. It remains a huge unmet need for consumers, who are acquiring more and more digital assets each year, but doing little to both protect and fully leverage those assets. I remember our in-home research showing us that consumers had at least made some progress – they now at least feel guilty about their inaction to protect their digital assets (a change from a few years before).

But digital asset management is so much more than just backup, which, while it has some value, has no emotional resonance with consumers, who view it as a utilitarian function at best. That’s why backup-positioned services have failed as for-fee services. They are write-once, hopefully read-never functions, and eventually, that creates a situation of “fee fatigue” for consumers, who then drop the service over time.

Digital asset management (DAM) in its broadest sense allows a consumer to create a logical hub to access their collective information assets, wherever they may be hosted. It applies concepts of the open web at each layer of the stack:

It should be easy to plumb new information sources from disparate locations that you deem important to centrally store

It should also allow digital assets to physically reside in external hosted services (while centralizing the appropriate meta data about each asset) – if someone like their Photobucket experience, don’t force them to abandon it if they want to use your DAM solution.

It should allow a litany of federated publishing and sharing experiences – you’ll never keep up with all the innovation in the space with a captive approach.

Most importantly, it should give immediate payoff to the “lazy user” – I should get value delivery with minimal upfront configuration and categorization/tagging.

The challenges in the space today is that noone has created a service that broadly reflects this model. Folk like box.net, the Xdrive team, and a few others are beginning that journey, but even these early leaders are only at Chapter 2 of the overall story.

I wonder if broad-based solutions will win the day, or whether more focused value propositions, that bound the problem more, are the the right approach. The just-released Plaxo 3.0 is an example of digital asset management in a bounded space, and I like what they are trying to do a lot (effectively being a “softswitch” for contact, calendar data, to-do/reminders across all my experiences (Yahoo, Outlook, Google, etc.)). I will be fascinated at what Google (and its gdrive efforts) do here – will they go broad-based and shallow (the drive in the sky approach), or find logical extensions of individual existing Google services a better path.

So, with all the work being done in the space (and the broader unmet need), the move by Microsoft struck me as a hugely tactical release. Thinks I didn’t like:

• What was so hard about the infrastructure here? There are good commercial solutions that can give you an at-scale answer to having a GFS-like architecture at a competitive price point. Was this the case of NIH syndrome?
• At a time where Microsoft really needs to take intellectual leadership, they launch a 500MB offer. That’s 1/10th of what xdrive offers for free today. I truly don’t understand how being late and falling so short of market offerings makes any sense whatsoever.
• The folder population experience (at least at beta launch) is incredibly manual – why couldn’t the acquired FolderShare assets be leveraged at beta launch – heck, it was a 2005 acquisition.

Net net, I see nothing bold here in a space that could give Microsoft a wedge to drive a reason for consumers to use them as the entrypoint for information retrieval and reuse/sharing. It’s not too late to change, but the first mover window in the space is closing, and unless the speed of innovation changes by Microsoft in this area, they risk being left out in the cold.