Microsoft courts corporates with online software

 

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By Reuters

Posted on 1 Oct 2007 at 10:12

Microsoft is introducing new software services targeted at corporate customers willing to pay a monthly subscription instead of license fees.

The company will be offering e-mail, instant messaging and collaboration software to companies with more than 5,000 workers. Those applications will run on computer servers inside Microsoft's data centers and then be delivered to customers over the internet.

The software giant says administrators will maintain nearly the same level of control they would if the software were on their own computers.

The new services are Microsoft's first major attempt at delivering software as a "service" over the internet to its corporate customers.

The move represents a significant shift in strategy from its current model of selling licenses for software that runs locally on a customer's own computers.

"We'll look back on this announcement and say that's when Microsoft really started to provide software plus services," says John Rymer, senior analyst at Forrester Research. "It's the first step and there is so much more to come."

Some companies like Salesforce and Google see services eventually replacing traditional software, but Microsoft is pushing a "software plus services" strategy with the promise that this option combines the best of both worlds.

The company says it is aware that some organisations will not want it hosting their e-mail or other critical software and can continue to pay licenses. However, it believes there are customers who will find it less expensive to pay the monthly subscription than run and maintain the software themselves due to the scale and efficiency of its billion dollar data centers.

Microsoft says profit margins from its services business will also rely on how efficiently it can run those facilities.