Microsoft preps pay-as-you-go Office for June launch

After more than seven years of lobbying by service providers, Microsoft is finally set to allow pay-as-you-go licensing for Microsoft Office and other products downloaded to PCs using streaming technologies, according to information the company recently made available to channel partners. Many observers will see the move as a new salvo in the Microsoft's titanic struggle against Google Apps and other online challengers to its desktop application franchise. An early trial-run of the scheme saw Office offered for as little as $10 per month, with no contract commitment.

Expected on June 1st or shortly afterwards, the long-awaited change to terms in the Service Provider License Agreement (SPLA) will lift a longstanding ban on the use of technologies that stream the software code from the server to run locally on the client PC. Previously, the SPLA only allowed pay-as-you-go terms for desktop applications that run on the server and are accessed remotely using a Terminal Server client.

The change will make a huge difference to the appeal of hosted Office, according to Neil Gardner, VP of marketing for Endeavors Technologies, one of the vendors offering products that enable and manage the application streaming process. "It completely changes the model of offering Office applications to either the business or the end user," he told me yesterday. "It becomes a true on-demand or pay-as-you-go model."

Although a few providers have had some success with Office products delivered using Terminal Server, most have failed to gain significant market traction, in some cases suffering huge losses and embarrassing market retreats. The majority have chosen to concentrate on delivering Exchange and SharePoint as well as basic Microsoft web hosting, all of which are now available from Microsoft in multi-tenant versions designed explicitly for the service provider market — with Dynamics CRM soon to be added to the line-up. But many will see Office streamed to customer's PCs as the icing on the cake, Gardner believes.

"Talking to service providers, this will make a huge change to them," he said. "Many are holding back because they don't think they will have a viable offering if they don't offer the Microsoft applications. Office is the one everyone seems to be interested in."

The change will initially be for a 12-month pilot restricted to Office Standard and Office Pro Plus, but Gardner claimed the plan is to extend it to other applications. He believes Microsoft's SPLA moves may also force the hand of other desktop application vendors, especially in the case of applications whose retail price deters casual or infrequent users. "This pay-as-you-go model is more applicable to higher priced applications such as Adobe PhotoShop or Microsoft Project," he said.

The move is a controversial one internally for Microsoft, as it undermines the one-license-per-machine philosophy that underpins Microsoft's conventional software licensing, making it possible to switch a license from one PC to another effectively on demand. That controversy briefly surfaced earlier this year when UK service provider Fasthosts began running an early pilot of the new SPLA terms with prices starting from $10 per month, only to be accused of breaking its license agreement by Microsoft's anti-piracy unit. But developments such as the recent introduction of Live Mesh, which will enable applications to be associated with individual users or businesses rather than specific devices, are also challenging the conventional licensing regime.

The encryption and code packaging technologies employed by products such as Endeavors' Application Jukebox have helped to allay Microsoft's concerns about the potential for software piracy, said Gardner. Application code is streamed to the PC as needed — less than 10 percent of the code in Microsoft Word is needed to get started on editing a document, for example — and the encrypted parcels of code from all streamed applications are stored in a single cache managed by the proprietary streaming software. "The order of magnitude of computational power required to recreate the original binary is immense," said Gardner. The client PC keeps in regular contact with the streaming server, and once the licence is no longer valid, the cache is emptied, using persistence rules set by the provider.

Although the code runs on the client, the technology ensures that use of the software remains under the control of the provider, who also remains responsible for managing the implementation and any required patches. This hybrid serviced or virtual client model, as I've argued before, is one that could be extended to other cloud-provisioned architectures and (especially in the context of Live Mesh) is a potential mechanism for bringing Microsoft's desktop franchise into the cloud.