Why Microsoft (Yes, Microsoft) Could Dominate Software-as-a-Service

Google (GOOG) and Salesforce.com (CRM) are the poster children for Software as a Service [SaaS]. And Microsoft (MSFT) is imploding under the weight of its big, monolithic applications.

That's the popular story in the trade press. However, it's not the full story. Sure, Windows Vista missed the mark -- badly. But If you think Microsoft won't have a strong presence in the SaaS market, you're gravely mistaken.

On April 15, Ingram Micro's (IM) Seismic team will announce a major SaaS initiative focused on three hosted Microsft applications: Exchange Server, SharePoint and Dynamics.

Ingram Micro isn't alone. Dozens -- perhaps hundreds -- of Microsoft partners are lining up to offer hosted versions of those three Microsoft applications.

Microsoft announced its SaaS push -- known as Microsoft Online Services -- on March 3. That announcement has triggered a feeding frenzy in the technology market. Some Microsoft partners, such as mindSHIFT, are making SaaS-related acquisitions. Other Microsoft partners -- such as Azaleos -- are moving up the food chain by introducing security services for hosted Microsoft applications.

And now Ingram Micro, the $35 billion distributor, is leaping into the market to help Microsoft partners set up hosted applications. SaaS may upset Microsoft's development, sales and marketing strategies. And SaaS rivals may steal some of Microsoft's traditional client-server buisness. But SaaS won't kill Microsoft.

On the contrary, all of the little wounds Microsoft is suffering right now at the hands of Google and Salesforce.com could wind up making Microsoft -- and its SaaS partners -- even stronger.

Comments

[DwightWalker]

Microsoft is building tons of data centers to cater for SaaS. They won't die without a huge fight.

[RKoo]

Would be nice to see some projected number. The investors are worried as SaaS replaces server license revenue. As companies switch to hosted exchange server, the number of exchange server licenses drops. Will hosting companies stop the drop and add the # of exchange server licenses? Explosion of MID devices and cloud computing will reduce the need for Windows desktop licenses also.

[deaverb]

The author has identified the trend of old line high priced software companies moving over to the B2B space to escape pricing pressure in the consumer space, a la Clayton Christiansen's The Innovator's Dilemma, of simpler and cheaper winning (e.g., iTunes, Netflix, Google--the champion, and Simply with near free software--$1.99 to $3.99, doing an office suite, checkwriting program--both challenging MSN office on one side and Intuit Quicken on the other).

With the consumer 70% of the economy and growing, and B2B 30% and declining, and more businesses "buying" like consumers (e.g., using Quill.com not office supply companies; etickets--ehotels--cre... card payments--etc) the "real" B2B numbers are lower (Simply uses Quill.com, Expedia, Cheaptickets, hotel.com, etickets, credit card payments for business purchases--not just T & E, retail customer payments via credit card, our own openoffice suite, Simply Money checking for businesses, google.docs--instead of a fancy B2B program, etc. and so on).

Nature abhors a vacuum. As Christiansen says, "Those that come in low, move up." Canon, Toyota did this--and MSN and INTU in its youth did so too. As Robert Townsend said in Up The Organization, "If they did then, what they do now, they wouldn't have gotten to now." B2B is the siren song for MSN. Google must be throwing a very big party!

[WAKEUP]

"Hey, Joe, where you goin', with that gun in your hand?" - - - It's too late to hire out as gunslinger-in-residenc... for Microsoft. Google will run them out of town, by sundown.

[Homer]

As long as MSFT has the 'poor me' attitude of the article's responders, Google will win. Luckily, MSFT has the attitude of 'we will respond' GOOG won a battle but the war never ends.