Microsoft to Enter SaaS

The blogosphere is on fire with the anticipated announcement that Microsoft will be entering the Software as a Service (SaaS) market this or next week. Just how they’ll enter the market is still uncertain. My guess is that they’ll in part blend SaaS with desktop technology much the way we’ve see Microsoft merge the Internet with desktop technology (I’m thinking Microsoft Money, for example).

Microsoft’s been very quite on SaaS front since a memo was leaked two and half years ago, notes Nicholas Carr, warning that of a "services wave of applications and experiences available instantly over the internet". (Todd Bishop has a super post listing Microsoft’s greatest internal e-mails. Don’t think this one was included, but it still makes for a good read.)

SaaS is still in its infancy, but its an important trend. Michael Arlington notes this is particularly so with Google moving into SaaS:

“….In short, they’re responding to Google Apps and Google Docs, which now account, according to analysts, for up to 2-3% of Google’s total revenue (call it $400m a year, up from $40m a year ago) (note: I can’t find a source for this, but it was quoted to me by a senior Google employee last week). That’s still pennies compared to Microsoft’s $16b or so in annual Office revenue, but the trend is pretty clear - users like free, and they like the ability to collaborate on documents. Today, Google offers what is in many ways a superior product to Office and they don’t charge users for it….”

Why now? Carr postulates two reasons:

“First, its business and marketing priority has been the rollout of the recent upgrades to its core Windows and Office programs. It's had to milk the cash cows. Second, it's been building out the backend infrastructure - the data center network - required to run web apps reliably and on a large scale. These obstacles are now coming down. The upgrades have been out for more than a year, and, despite some glitches, have generated a lot of cash for the company. As for its infrastructure, a massive new data center near Chicago is expected to come online this year, adding to the capacity of the new centers the company has built or bought in Washington, Texas, and California.

Timing of the announcement is expected to coincide with the Mix conference later this week where Microsoft is also expected to release an offline version of SilverLight.

As to what Microsoft’s foray into SaaS will look like, I think Arvino Mudjiarto had it right when he wrote this in response to Carr’s post:

“Microsoft shall take their local MS-Office kingdom as their initial start. Create document on local, but make it easy to post it on the web. If they do a "me too" approach, I seriously wonder how effective it would really be. After all, in the mind of the consumer: Google is on the web, Microsoft is on the desktop. Trying to make Microsoft the king of the web is not only an uphill battle, it is also seem "unnatural" to Microsoft's current posture.