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Microsoft to SaaS: We (are going to someday) have you surrounded

Microsoft rolled out a few online services for SharePoint and Exchange, got a little SaaS-y and put a little meat on its so-called software plus service strategy. Welcome to the master plan from large software vendors: Turn SaaS (software as a service) into a feature to go with their existing software--or at least join the on-demand software party.
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Written by Larry Dignan, Contributing Editor on

Microsoft rolled out a few online services for SharePoint and Exchange, got a little SaaS-y and put a little meat on its so-called software plus service strategy. Welcome to the master plan from large software vendors: Turn SaaS (software as a service) into a feature to go with their existing software--or at least join the on-demand software party.

Microsoft's announcement, which does take the software giant more into the on-demand world, is viewed as a disappointment to many pundits. Why? A bunch of folks that jumped the gun with dreams that Microsoft would take Office to the cloud over the weekend.

Mary Jo Foley has the details of Microsoft's latest move into software as a service, but here's the big picture: If you're the software giant the game plan is to turn SaaS and the cloud into a feature. In a nutshell, Microsoft will roll out SaaS features in addition to its existing software when it needs to. What would you do if you made billions off of packaged software? For sheer entertainment value it would be lovely if Microsoft ripped out Office and made it SaaS. Ditto for its other products. However, it would be an extremely bonehead business move today. All Microsoft needs right now is a hedge against SaaS.

And it could be quite a hedge. The Wall Street Journal quotes Coca-Cola Enterprises (CCE)--an independent bottler of Coca-Cola--and  noted that the company plans to switch 20,000 out of 75,000 Exchange users to Microsoft's Online Services. In the CCE example, Microsoft is taking customers from IBM and expanding share.

Perhaps decades from now Microsoft's lukewarm entry into SaaS will look like a mistake, but for now all the software giant has to do its hedge its bets. Why? It can extend into SaaS for folks that want it and go wild when its installed base demands it. There's a double bonus if Microsoft cribs incremental revenue from rivals like in the CCE example. Remember this: All Microsoft has to do is be good enough in SaaS and customers will tag along. That's Microsoft's history.

It's a safe bet that Microsoft's Exchange and SharePoint as a service plans aren't the only game in town this week at its Mix conference (see Dan Farber's preview). Nevertheless, I wouldn't completely shoot down this SharePoint and Exchange as a service announcement as a non-event. The move takes Microsoft into SMB markets where it couldn't go and plays in a space where the company is already a winner. SaaS has infiltrated many markets--CRM and ERP for instance--but mail and collaboration is an open field and it only makes sense that Microsoft defends its turf.

Overall though, Microsoft's move is just another data point in the feature vs. business model debate swirling around SaaS.

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