Microsoft considers renting software

Consequently, the company is in the midst of several different pilot programs aimed at testing the financial and technological feasibility of hosting Microsoft operating system and server applications.

Last week, one of Microsoft's hosting partners -- FutureLink Distribution Corp. -- announced it plans to offer Microsoft's BackOffice products on a subscription, or rental, basis. With the announcement, FutureLink beat Microsoft itself to the application service provider (ASP) punch. While Microsoft has been dabbling with various ASP pricing models for almost a year and has talked up the notion of subscription pricing even longer, the company isn't expected to announce its foray into the ASP space for another couple of weeks.

Software rental is an evolving software delivery paradigm, via which service providers host and maintain applications software on servers, which customers access remotely using terminal-emulation and/or thin-client setups.

FutureLink is only one of a number of ASPs, or, as Microsoft prefers to call them, "commercial service providers" working on closed application hosting pilot tests with the company. Microsoft defines CSPs as "companies who are providing software as a service."

"We've been in closed pilots with a group of ASPs to better understand their needs since April. We've been in talks with them for over a year," says Warren Talbot, Microsoft program manager for commercial and embedded licensing programs. Talbot declined to provide details on how many ASPs with which Microsoft is working or the names of any of them. He did note, however, that participants are testing everything from pricing to product delivery in conjunction with Microsoft's Network Solutions Group (the group formerly known as the Internet Customer Unit), which is part of Microsoft's Consumer & Commerce division.

Separately, other Microsoft divisions are testing the technical and licensing aspects of the ASP model, Talbot acknowledges. The Premiere Support and Microsoft Consulting Services (MCS)divisions are involved in looking at how Microsoft needs to modify its products, "which were not developed with hosting in mind," in Talbot's words, to fit the ASP/CSP model.

In addition, Microsoft's Business Solutions Group (formerly known as the Application Developers Customer Unit) has been working with ecommerce companies under the auspices of the "Complete Commerce Pilot." Under this program, Microsoft and partners have tested the feasibility of hosting Microsoft and third-party commerce applications.

FutureLink's plans for providing BackOffice on a subscription basis are typical of how ASPs/CSPs are likely to offer for rent Microsoft's NT Server, Exchange and SQL Server. FutureLink will charge customers fees for accessing FutureLink's Server Farm. Included in these fees will be Subscription Access Licenses (SALs), which licenses end users access to Microsoft products for a set term, ranging from a month to two years. Users will be charged a monthly Server License Subscription only for the number of servers used to provide users with connections during a particular month.