Microsoft adopts hybrid SaaS strategy

Denver — Well, it is not exactly software as a service, nor is it maintaining the status quo, but Microsoft Tuesday at its annual worldwide partner conference announced a hybrid software as a service (SaaS) business model called Software+Services.

Microsoft’s channel chief Alison Watson is planning to announce a channel partner program around Software+Services today. While more details on the program are still to come, CDN has learned that the partner opportunity will be based on three main delivery models: On-premise, partner-hosted, and Microsoft-hosted.

In the hosted by a partner method, the software and the services infrastructure will be owned and licensed by the partner. The hosted by Microsoft model will see Microsoft own everything and provide products such as Office Live, Windows Live CRM Live and Virtual Earth, and it will be up to the channel partner to figure out how to monetize the opportunity in subscription fees and other partner developed and deployed solutions.

According to Microsoft COO Kevin Turner Software+Services is not SaaS, but rather a hybrid approach that he hopes will offer better flexibility and control of IT.

“This is a hard transition and one that has been hard to accept at Microsoft for a few years. It is a new business model, and it is change and change is tough. We have to change faster internally or we will become obsolete,” Turner said.

Company CEO Steve Ballmer said to the close to 10,000 people at the Colorado Convention Center that Software+Services is an ambitious project for Microsoft.

Kevin Restivo, an analyst from the Seaboard Group, said it was clear from Ballmer’s comments that there is a demand for hosted services and that the company is moving with the times.

“Microsoft can help to shape the trend towards SaaS with its own unique take on SaaS, and it makes a lot of sense that not all customers want to be in the clouds or 100 per cent Web-based,” Restivo said.

Microsoft’s biggest challenge is coming from Google, which is offering all online services, and Restivo isn’t sure the customers are ready for that transition. In this waiting period, Microsoft has an opportunity to capture these customers before they decide to go to Google, he said.

“Familiarity is on Microsoft’s side. Moving to a total Web-based Office would mean re-training and that is a non-starter for a lot of customers,” Restivo said.

As with all of Microsoft solutions, the company will rely on its channel partners, which run into 600,000 worldwide.

However, Microsoft partners have told Turner that they are not interested in Software+Services, he said, adding that it was taken from feedback from many partner roundtables during a 22 month worldwide tour.

“It is going to happen and we need to build a door and reach that door,” Turner said of the SaaS movement.

Turner added that Microsoft does not believe nor will it abandon locally based software adoption. “Customers want the choice and I encourage all (partners) to make those changes,” he said.

Turner also described, during his keynote address, a potentially lucrative market opportunity with Software+Services. He said that there are 400,000 small businesses that are ready to take advantage of this new hybrid model and he believes partners will be writing applets that will be either hosted, hosted by Microsoft or an on-premise solution. Office Live will be at the centre of the Software+Service advantage, Turner said.

One partner that is transitioning to Software+Service is Vancouver’s Absolute Software. This partner, which specializes in computer theft recovery and data protection, did not have an offering for customers that wanted an on-premise solution since Absolute’s solutions are primarily Web-based.

Although only 10 per cent of its customers desired an on-premise solution it represented 20 per cent of the partner’s revenue, because those customers happened to be larger corporations. Absolute also witnessed a five per cent increase in revenues from the hybrid solutions.

Other product areas under Software+Services will be Windows Live, Windows Live Search, MSN, CRM Live, Xbox Live and AdCenter.

“Some people like to use SaaS and it’s not right and others like to use Web 2.0 and that isn’t exactly right. This new model of computing will supersede (everything) to bring together the best of the four different desktop worlds with rich user interfaces, online and offline access and personal integration and it will not be restricted to what someone will allow you to do on some service. People do not want to give up the best of desktop computing,” Ballmer said.

His main example is the Apple iPhone, which he believes is a big heavy OS that has rich media.

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Paolo Del Nibletto
Paolo Del Nibletto
Former editor of Computer Dealer News, covering Canada's IT channel community.

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