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Microsoft’s SaaS Channel-Crossing Strategy

Crossing the English Channel might not seem like a big deal, but it can be depending on the tools you have to make the trip. Independent software vendors (ISVs) face much the same predicament when trying to cross over from their familiar on-premise, perpetual license businesses to the software-as-a-service (SaaS) model. Microsoft is launching the […]

Written By

Michael Hickins

Apr 16, 2007

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Crossing the English Channel might not seem like a big
deal, but it can be depending on the tools you have to make the trip. Independent software vendors (ISVs) face much the same predicament when trying to cross over from their familiar on-premise, perpetual license businesses to the software-as-a-service (SaaS) model.

Microsoft is launching the SaaS Incubation Center Program to help ISVs make that leap. The program is predicated on partnerships
between the Redmond, Wash.-based software vendor and hosting companies using
Microsoft’s Windows-based Hosting for Applications to provide ISVs with
business and technical guidance, consulting services, and access to an
established hosting channel.

Thus, ISVs will be able to outsource the infrastructure requirements of
providing SaaS to the hosting companies and benefit from the
experience that hosting companies have in providing service level agreements
and generating subscription revenues.

Microsoft will also provide the hosting companies with white papers on
technical issues and business strategies in order to help them consult with
their new ISV partners.

The hosting companies, for their part, get the opportunity to foster new
relationships with ISVs, expand their portfolio of services and drive
incremental revenue.

“There is a play for value-added resellers and system integrators to
aggregate and pull packages together for their customers,” Michael van
Dijken, lead marketing manager for hosted solutions, told
internetnews.com.

Van Dijken said that switching to a services-oriented business model isn’t
easy for ISVs, who have to consider a raft of factors, from how they
compensate sales people for monthly contracts, as opposed to commissions on
one-time sales, to how to negotiate service-level agreements with their
customers. In many cases, ISVs who relied on VARs to sell into their markets
will have direct contact with their end customers for the first time.

“It’s a big decision for ISVs to make that jump, but I think that trend is
going to accelerate over time,” he said.

He noted that this ecosystem is still in its infancy, but that Microsoft
wants to lay the groundwork for future efforts among its channel partners.

“Our approach is to enable the ecosystem and make investments that help to
drive that,” he said.

Microsoft has relationships with more than 20,000 ISVs developing on
Microsoft server-based platforms. Van Dijken said that internal polling
showed that a quarter of those are already doing some service-based delivery
or are actively considering it.

SaaS Incubation Center Program partners utilize the Microsoft Solution for
Windows-based Hosting for Applications, which provides the platform
architecture, guidance and sample scripts for service providers to host
SaaS-based applications.

The platform helps hosting companies monitor system
performance and health, measure system usage, automate server builds, and
manage security for ISVs. This ultimately allows ISVs to provide a strong
SLA to end users, which is a critical component of online service-based
delivery.

Mike Mankowski, senior vice president at Tier 1 Research, a division of
research firm the 451 Group, told internetnews.com that a lot of ISVs are searching for a way to expand their business. In the same way that SaaS allows companies to outsource their IT requirements, he said, this model could allow ISVs to outsource their infrastructure requirements.

The Microsoft program “also gives what I believe a lot of these smaller
companies are looking for, which is some hand-holding.”

This article was first published on InternetNews.com. To read the full article, click here.