Manufacturing business models are changing.  Traditional original equipment manufacturers are embracing new "smart" service business models enabled through embedded software, wireless connectivity and on-line services.  IndustryWeek defines smart services as "differentiated post-sale product support capabilities, enabled by wirelessly capturing and analyzing real-time product performance information."   I would broaden that definition to include not only support capabilities but also value added post-sale features and product improvements.  These services have the power to redefine the product value chain for manufacturers.  From industrial equipment companies to Auto OEMs to consumer electronics companies, this new convergence is being discussed in manufacturer boardrooms across the country.  I've included a few market leading examples of companies that I believe are delivering on this convergence today:

This shift has tremendous implications for manufacturers.  Product development roadmaps are more complex and must converge to incorporate software design, on-line service management and traditional device and equipment manufacturing.  Product lifecycles are shortening as releases and innovations now ship "real-time" with software updates delivered to devices over the network as needed.  Customers are demanding connected product "experiences" rather than just a product support link on a website.  Real-time data gathered from these devices is becoming a tremendous resource for product and customer research.  Manufacturers also need to infuse new people and skills into their organizations to make this shift possible.

At Microsoft we are working on many fronts to help manufacturers accelerate the new manufacturing convergence.  One area of focus has been in embedded software.  Microsoft has been developing Windows Embedded for over ten years.  This software is helping over 1,000 manufacturers around the world innovate in the connected devices they bring to market.  Another area that Microsoft is focusing on is improving connectivity of people, data and devices for consumers through an on-line service.  Microsoft has released a Tech Preview of new service called Live Mesh.  Although still in a very early stage, I believe this service demonstrates the type of connected experiences that software will allow manufacturers to deliver to their customers in the future.  I encourage you to check it out.  Finally, another key front for Microsoft in enabling this convergence is in building software development tools that provide engineers the power to bring these new products and services to the marketplace.  Visual Studio 2008 will be shipping later this year and represents a breakthough in application development for connected devices and the web.

The convergence of these capabilities and technologies in the marketplace represents one of the single greatest business opportunities for manufacturers to differentiate themselves in the marketplace over the next five years.  I welcome feedback and learnings of other manufacturers embarking on this transition.  I'll be posting updates on this topic and including other successes in the marketplace in the weeks and months ahead.