Microsoft Plays The Room

Microsoft today announced the availability of Hosted for Applications
Version 1, a set of tools and guidance intended to help its vendor partners
gain a foothold in the burgeoning software-as-a-service (SaaS) market.

The move is more than a tactical nod to the growing importance of SaaS,
where it has said it will become a player; it is also a strategic way of
reassuring its reseller community.

Microsoft announced the availability of a Web-based application, Windows
Live last November and thenlaunched Office Live, another Web-based solution aimed at small- and medium-sized enterprises, in February.

“Windows Live is our direct [SaaS] play,” said Michael van Dijken,
Microsoft manager of hosting solutions.

“But we remain committed to our partners to drive revenues for themselves,”
he told “Enabling partners is a big part of Microsoft’s strategy.”

Jeff Kaplan, managing director of Boston-based THINKstrategies, said it
makes sense for Microsoft to support its vendors in this area.

“It’s an acknowledgment that on-demand applications are really gaining
acceptance in the market, not just among users but among channel partners as
well,” he told

Ironically, Microsoft came under a lot of criticism last week for earmarking
$2.4 billion in Web-related R&D. This after it had been criticized for being
slow to see the importance of the Internet.

Omar Nawaz, senior solution product manager for hosting solutions at Microsoft, explained
that Hosting for Applications is designed to alleviate critical barriers
that applications vendors and hosting service providers face in transforming
their solutions into viable SaaS offerings.

“A lot of ISVs that we work with see that the market opportunity is there,”
he told “But they need guidance and tools.”

He said that Microsoft has identified four critical needs for any hosted
application: uptime, service provisioning, security and management.

Hosted For Applications includes Microsoft Operations Manager 2005 to help identify and resolve critical
issues in the hosted environment quickly and easily. This helps ISVs ensure
uptimes in order to satisfy service-level agreements.

The Microsoft Provisioning System automates routine administrative service
management tasks, such as adding new users, updating directory entries, and
provisioning applications and services.

Hosting for Applications also provides tools and systems to automate and
customize patch and update management.

Nawaz acknowledged that many of these vendors will be trying to shoehorn
traditional on-premise software into an on-demand service model, which may
not be accommodated by their existing business models.

But while Microsoft will offer technical guidance and best-practices type of
advice, it will not offer business advice.

Pure-play SaaS vendors will nevertheless argue that legacy software vendors
can’t provide the same level of service, nor compete on price, because their
businesses are geared to earning up-front licensing fees, not small levels
of recurring revenues, with costs distributed across a multi-tenant

But Microsoft sees its solution as addressing those concerns.

Nawaz said that Hosting for Applications mirrors the SaaS model. Just
as SaaS vendors charge end-users on a per-seat, per-month basis, so
Microsoft will only charge ISVs for usage.

“The SaaS model is an annuity-based model, and on the back end we want to
make sure the way they are paying is based on the same thing,” he said.

“It’s a success-based model. If you’re growing, you pay more usage than if
you’re not.”

Kaplan sees the merits of this solution, but also issued a caveat.

“If these steps can make it easier for users to use software and gain access
more easily to software applications, then it’s all for the better,” he

On the other hand, he noted that Microsoft’s own applications have been
“somewhat slow to keep pace” with the advent of SaaS.

“That will raise questions as to whether this new tool is really ready for
primetime,” he said.

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