Software as a service is the delivery of computer programs over the internet. It removes the need to install software on your own computer as all the functionality is accessed through a web browser. The processing and computation occurs at the service providers' data centre, often called "the cloud". Everyday, millions of people use software as a service through web-based email offerings such as Hotmail. Businesses have also caught the bug with a recent ACA research survey showing that nearly a quarter of Australian businesses already use some form of software as a service.
This disruptive approach to delivering computer software has a number of advantages to the way software is bought and used including cost, speed of deployment and ease of management.
At the analysts meeting, everyone from Bill Gates down emphasised these advantages, and there was an acknowledgement that each segment Microsoft focuses on is undergoing transformation, from
software-based solutions to software plus services, or services alone.
However, despite the praise for software as a service, what was not spoken about was the competing nature of these services and the potential cannibalisation that a company like Microsoft may face if consumer and business preferences continue to change.
Microsoft's position is that businesses will use a combination of on-premise software and software delivered over the internet, with the level of use determined on a case-by-case basis because of the heterogeneous nature of most business computing environments.
Microsoft is eyeing the opportunity to sell additional services on top of its existing software, rather than use the service paradigm to deliver an identical product. Microsoft sees services as a "value add" to its software and it is unlikely to produce web applications that are superior to its standalone software versions, unless it is forced to by competitors. Microsoft plans to take advantage of its heritage as a platform provider when it comes to software a s a service. The most telling presentation yet came from Microsoft's chief software architect, Ray Ozzie.
Ozzie outlined the Microsoft Services Platform, which connects with all Of Microsoft's software products providing common features, which are delivered through Microsoft data centres.
The platform is expected to work across both consumer offerings, such as Xbox Live, as well as Microsoft's well-known business applications. Ozzie hints at allowing partners and developers to build applications on top of the Microsoft Services Platform making use of the shared features.
A critical component of the Microsoft platform will be the "live Platform services" or the shared software components that can potentially be integrated into other programs.
These include identity and directory services, communications and presence (such as Voice over Internet Protocol and instant messaging) as well as an advertising platform.
Advertising is set to be a big component of Microsoft's software-as-a-service revenue in the future. By integrating the advertising system into the services platform, Microsoft hopes to develop new revenue opportunities such as cut down, advertising supported, versions of Word and Excel.
Despite it being a little slow to move on software as a service, Microsoft's silver bullet remains its large user base and scale. Even converting a fraction of its millions of customers onto new services will create a community of users that could potentially dwarf the start-ups that are attacking Microsoft's dominance on a number of fronts with service-only offerings.
BRW, Fairfax Business Media
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