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Microsoft held a big to-do this past week to announce that they are turning
the ship to offer their software as services. In fact, they have taken to
calling the new alignment "Microsoft Live," which begs the question of what that
says about their current products?
At any rate, the whole affair brings up several interesting points. First, we
are always happy, as I have said before, to welcome fellow travellers. It is not
an easy journey to make, from single tenant, on premise software to
multi-tenant, hosted service. Microsoft not only has to reinvent their software,
but they have to reinvent the entire company, in my view.
Consider the enormous direct sales team. Microsoft has always used one
product to pull the rest through the account. Need desktop office applications
and soon you have a NT network running and MS server products everywhere. The
strategy has worked wonderfully well for many years and the direct sales force
has a lot of eggs in this basket, there is bound to be some heavy pushback from
a change in strategy.
Then there's the partner network. What are you going to tell all of these
partners who sell, install and service on-premise Microsoft systems? That should
be an interesting conversation.
But what is Microsoft really bringing to the table in software as
services? Does it make sense to lease desktop applications? In a previous post I
argued that desktop office productivity applications probably belong on the
desktop. But the file server makes more sense as a service simply because you
can have it backed up and secured off-site, and for small and medium sized
businesses this is not something for which they have the resources to
handle themselves.
But the really big issue is the open source movement which in many ways has
already passed Microsoft by with the LAMP
stack; Linux, Apache, MySQL, PHP/Perl/Python. Many companies that are
bringing new software as a service to market are using this stack to build their
offering, and a lot of the problem apparently stems from
Microsoft's pricing strategy. This goes back to the huge direct sales
force. It was built and has maintained itself on a pricing strategy for
corporate clients who use the software on premise, and only for themselves.
Microsoft has enough R&D spend to handle the technical challenges to turn
their software ship to an on-demand model. The question is can they hand the
huge cultural shift away from on-premise software to on-demand services. We'll
see, but in the meantime the fact Microsoft is now joining the on-demand push
makes the case for companies like NetSuite
with its web-based accounting and CRM applications. Even though they're
late and they have a lot of challenges, they have admitted to the business
public that there are serious gains in efficiency, security and business
continuity through software as a service.
Amen | 
