Microsoft to Enter SaaS

Microsoft to Enter SaaS

Summary: 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.


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.

Topics: Microsoft, Browser, Cloud, Data Centers, Emerging Tech, Google, Hardware, Software, Storage

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  • How MS will enter the market

    ... ummm, let me think long and hard about this one ....

    They'll massively overhype their offerings.
    Their stuff will underperform.
    It'll lock you into Windows.
    There'll be promises of fantastic things in the future which they'll either not be able to get to work, or was pure vapourware to begin with.
    After trying to kill off all forms of competition they'll want to ratchet up the costs.
    They'll try to own all backends.

    Something along those lines. It is Microsoft of which we speak.
    • Is SaaS Microsoft's Trojan Horse?

      The approach may work the other way as well. Microsoft's SaaS is all too effective in cross-platform environments. Low and behold though it just works a wee-bit better in IE or there are features that require Office/Windows to take advantage of them. Basically, SaaS become MS's way of capturing SMBs and then migrating them to Windows/Office over time.
      Dave Greenfield
  • Google: What $400 Million?

    If you look at Google's financial statements, all revenue that is not related to either Search of the Google Network is listed under "Licensing and Other Revenue." For the year ending 12/31/07, they only had $181 million. The $400 million people are putting out there may be a forward 2008 forecast.

    <a href="">Paul Lopez</a>
    • good point

      Thanks Paul...shoot me the link you're looking at if you don't mind.

      Dave Greenfield
  • You just need three words to describe Microsoft&#347; SaaS strategy.

    Windows Desktop Dependency.

    First and foremost, it MUST depend on the Windows desktop as a client. Of course they may be very sly about it. They will try to pretend it is cross platform, but, in reality, there will be things that do not work right without Windows. If not now, in the future. Just enough that a Windows client is the only way to go if you really want to depend on it working.
    • But maybe three words is all you need....

      I hear you, Donnie, and for a lot of organizations cross-platform will be a make/break decision. But there are plenty of companies out there today who only run Windows desktops and for them don't you think this could be a viable solution?

      Here's a different spin. MS uses SaaS as a way of increasing Window/Office penetration. Under this scenario, SaaS works all to well on any platform, but provides additional features only available on Windows/Office.

      This gives MS a lower-entry point to tackle SMBs, while providing a migration to Windows/Office.

      Dave Greenfield