Microsoft's SaaS Strategy: A Giant Copes with Change: Page 2

The leading edge of Microsoft’s SaaS initiative is the company’s Dynamics CRM application, code-named “Titan.” Due for release this summer, Titan will be available three ways: 1) Traditional on-premise deployments, 2) SaaS deployments hosted by numerous hosting partners, and 3) SaaS deployments hosted by Microsoft.

Although it offers three deployment choices, Titan consists of a single code base.

The point of offering various deployment choices, O’Brien says, is enabling customer choice.

“If you’re a small or medium-sized company and you only need a dozen or two seats of CRM, consuming it as a service makes a lot of sense, especially if you don’t want to bear the IT overhead or you don’t have the staff to do that,” he says.

“But as your company grows…needs change, and the opportunity then exists for that customer to move that service-based application out of the cloud, out of our data center, right into their shop, using the same code base, same data set, same set of functionality, and the same set of customizations.”

The Titan release brings up a critical question: Given that Microsoft is making such a complex application available via SaaS, does that mean that other Microsoft apps will at some point be delivered as a service?

“To be determined,” O’Brien says. “We’re looking at this as: this is a fairly revolutionary approach.” At this point the focus is on CRM “because it is, for all intents and purposes – at least today – the canonical application category for a lot of people who think about software as a service.”

The concept of offering multi-choice deployment goes against the status quo, he says, in a market like CRM, in which vendors are “either 90% or 100% on-premise or, in the case of companies like Salesforce, 100% service based.”

Software plus Services

“Our view, from a software plus services perspective, is based on the premise that ‘software plus services’ is a better model than just software alone or just services alone,” notes O’Brien.

And what exactly is ‘software plus services’?

“It’s hard to think of an application today that doesn’t have at least some sort of service component,” he explains.

For instance, Microsoft Exchange. “So you have the messaging and collaboration application that lives on the server side and the back end. And you’ve got a rich client head on that, which is the thing we know of as Microsoft Outlook today. If you’re like me, you get a few hundred e-mails a day, and you use the local graphics capabilities of your PC and the local processor to rifle though all that content.

“But if you’re running through an airport trying to catch a plane and you need to check mail real fast, there’s a version of Outlook that runs in the browser called Outlook Web Access. And that touches the same backend, synchronized with the client.”

The point: “This is browser-based, basically Exchange delivered as a service through a browser,” he says. It’s an example of an application that can be accessed as a service, but also makes use of the local environment. In other words, it’s a hybrid.

Likewise, the future of software consumption will be a hybrid, O’Brien says. It will take many forms. “It’s going to be local code, it’s going to be server-side code, code consumed through the cloud, and a series of peer-to-peer interactions...You see the platform evolving from client-server, to client-server-services.”

Microsoft, ISVs, and SaaS

In addition to its Titan launch, Microsoft is also working to enable software as a service for its ISV partners.

In terms of technical enablement for ISVs, “We’re doing quite a bit on the architecture side to help them understand how to migrate from a so-called entry-level SaaS deployment into multi-tenancy,” O’Brien says, “to help them get the economics of scale from delivering one instance of an application to a broad market of users.”

On the licensing side, in 2006 Microsoft introduced the Software Provider Licensing Agreement (SPLA). “This is a means by which you can procure server licenses with no upfront costs and no minimum commitment,” he says. “It gives you, as the ISV, as the service provider, the ability to build out your infrastructure without having to pay all these upfront capital costs. So in other words, the upfront cost that it takes to get started in SaaS mirrors the revenue that you’re receiving from your customers.”

SPLA, O’Brien says, “is a way of licensing Microsoft software that aligns with the SaaS business model.”