Monday, March 3, 2008

Microsoft goes into the SaaS business big time

Since showing up at Microsoft a couple years ago, Ray Ozzie has been jonesing for a good Internet services approach to the traditional Microsoft licensing model - recurring revenue is way better than one-time software charges. Today a huge new step was taken in that direction.

Microsoft announced their intentions to get into the hosted services business, likely competing against some of their biggest resellers who are already in the hosting services business. Plans call for 20+ data centers around the world sized at half a million square feet each. Initially Microsoft will offer hosted instances of Exchange, SharePoint, Office Communications Server and Office Live Meeting, everything a company needs for collaboration.

The licensing is an interesting approach:

To help companies take advantage of Microsoft Online Services, Microsoft introduced a new licensing model with flexible options for customers.
New customers and customers without Microsoft Software Assurance can purchase Microsoft Online Services as a per-user subscription. Existing customers with Software Assurance on their Microsoft Client Access Licenses can purchase a user subscription at a discount, enabling them to maximize their existing Microsoft software investments. Customers with a subscription have rights to both Microsoft Online Services and to access on-premises server software, giving them the ability to blend Web-based services with on-premises software.

In other words, once you buy your licenses and you buy SA then you have the privilege of paying a little bit more to have Microsoft host the service for you. It makes sense that they'll charge extra for the hosting, though it will remain to be seen just how competitive that pricing is.

The release also discusses hosted/on-site hybrid solutions. This seems very similar to some existing offerings, such as the ForeFront anti-X service, though I'm guessing there are probably some other twists that will come around.

All in all, a huge new market opening up to Microsoft, assuming that people buy into it.

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