Microsoft announced Monday that it is expanding the range of business software it makes available as a service on the Internet. The move comes as people increasingly use writing, accounting, email and other programs online instead of buying packaged software and installing it on their own machines. Microsoft’s packaged software has long been the foundation of the US firm’s product line but is threatened by a “software as a service” (SaaS) trend being capitalized on by Google, Oracle and SalesForce. The Microsoft Online Services suite announcement made by chairman Bill Gates was touted as a “significant step” toward expanding the company’s “software plus services” strategy. “The combination of software plus services gives customers advanced choice and flexibility in how they access and manage software,” Gates said in a statement.
“In the future, customers and partners should expect to see this kind of choice and flexibility for all of Microsoft’s software and server products.” Businesses of all sizes will be able to subscribe to use software online or combine SaaS with Microsoft programs installed on their computers, Gates said. Microsoft invites US firms to register online at www.mosbeta to be part of a beta test of the new services, which it expects to make available publicly in the second half of this year. New online services being tested include Exchange Server and Office SharePoint Server software handling tasks such as email, schedule calendars and online conferencing. Microsoft realized a decade ago that the market was heading to SaaS but “it has taken them a while to turn the boat,” said Silicon Valley analyst Rob Enderle of the Enderle Group. “You are going to see them get a lot more aggressive treating software as a service,” Enderle said. “The trick is to move to SaaS at a rate that doesn’t cannibalize their revenue streams prematurely. A company like Google can go hell-bent for leather and if their products aren’t ready, it doesn’t hurt them.” A benefit of SaaS is that it lets providers connect better with the people actually using software programs instead of network administrators or technical departments at firms.
When providing software as a service, companies hosting programs tend to updating, security and troubleshooting. A key factor limiting the popularity of SaaS is the reliability of Internet connections relied on to get to the software. On-demand computing is sometimes referred to as “in the cloud” because of the perception that the work is done in the ether of the Internet. “SaaS reflects where the market is going,” Enderle said. “What is holding it back right now is as much infrastructure as it is an unwillingness to change by people.” Internet network reliability is improving and the roll out of WiMAX wireless broadband access technology is expected to boost the appeal of SaaS, according to the analyst. Enderle referred to SalesForce as a “poster child” for SaaS. The US company has been growing apace since it was founded in 1999 by former Oracle executive Marc Benioff. The firm has already formed a partnership with Google. Last week SalesForce reported its revenues soared to 216.9 million dollars in the fiscal quarter ending January 31, a 50 percent increase from the same period in 2007.