March 15, 2005 4:00 AM PST

Microsoft gets outside the box with software

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A decade ago, Bill Gates and other executives at Microsoft decided that traditional packaged software was dead--all software would eventually be delivered via the Internet.

Microsoft's thinking was premature, but not necessarily incorrect, Gates told CNET last week.

"Like many things around the Internet that were predicted to happen quickly, they're not wrong, they're simply things that take more time," Gates said in a recent interview.


What's new:
Microsoft is quietly working on the technological innards that will one day let the company offer corporate customers what is known in the industry as "software as a service."

Bottom line:
Delays in Microsoft's Project Green--an effort to modernize and unify several different business applications--show how tough the effort could be. And developing a workable pricing model presents a particular problem. But the popularity of Microsoft's products is a plus: Because Office, for example, is so widely employed, business customers could use it as a familiar interface to connect to online applications.

More stories on Microsoft

Now, Microsoft is quietly working on the technological innards that will one day let the company offer corporate customers what is known in the industry as "software as a service." Some of Microsoft's competitors in the business software market, such as and NetSuite, have been offering software as a service products for years.

For Microsoft, the transformation is substantial, and will involve two key changes: subscription pricing, and software that's stored remotely, or "hosted," rather than installed directly on a business' own servers.

"You'll see us do more hosted things with our business and professional offerings," Gates said, adding that Microsoft is already in the game on the consumer side with Hotmail and other MSN services.

Although the company is not talking in detail about its plans, one definite area of interest is the Microsoft Business Solutions unit, which specializes in business management applications for small and medium-size business.

Gates said Microsoft definitely considers Salesforce a rival and looks "intensely" at where that company is seeing success.

The head of Microsoft Business Solutions, Doug Burgum, said last week that his unit is planning for a day when it delivers its software as a hosted service, but the division doesn't plan to create the infrastructure for that itself. Rather than try to develop something unique to his unit, Burgum said, he intends to work off of a broader Microsoft-developed platform.

Without offering specifics, Gates confirmed that plan.

"You'll see us do more things like hosted SharePoint (portals) and hosted environments that the MBS applications can then sit on top of," Gates said.

An unsmooth transition?
The problem is that many of Microsoft's applications, particularly the MBS products, are not very well suited to the changeover, Summit Strategies analyst Paul Wainewright said. Microsoft is making some moves through Project Green--an effort to modernize and unify several different business applications--but that project is taking longer than planned. "The delay of Green shows just how difficult it is," Wainewright said.

Indeed, Microsoft still releases and updates most of its products in the traditional way. Software is developed in cycles, with enhancements

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Software as a service? Puh-lease! This is another Microsoft attempt to impose their criteria on the end user (who doesn't have much of a choice anyway). IF Microsoft thinks that such a strategy will work, they must be smoking something (I wonder in fact, why many people still use Office2K instead of 2003...). There will be those who subscribe and use their software while connected to MS's servers, but I think most clients prefer a one-time purchase, the traditional way. It is far more economic for the end user (but then again, MS doesn't care, all they want is the users' money). Oh, but what about the piracy problem, it's hurting poor Microsoft, isn't it? Well, this strategy may help somewhat, but I believe that hackers will most likely try to go against the "hosted application" servers. And then Microsoft will have a bunch of angry clients calling because they can't write the project they need to hand in tomorrow. Or what happens when the "server is too busy" (like happens with Hotmail sometimes)?

Microsoft: instead of forcing users to pay over and over for the same crappy software, maybe you should think about bringing down your prices a little. Why will I pay over $300 for MS Office when OpenOffice is free, is a one-time download and does basically everything else MS Office does. And even the HTML it generates is much better than Microsoft Office's propietary "Save as Web Page" feature.
Posted by Sentinel (199 comments )
Reply Link Flag
Who is M$ Kidding?
What?! Is this a joke? If so, it's possibly the biggest "joke" on the net!
Yea, piracy, virii, & crackers are a problem, but is this the way to solve the problem ? NOOOOO!
If you want to see a mass exodus by the mass market constituancy switch to open source code, and OS X & the Tux on top of the dogpile, then by all means do this! It would be like committing corporate hara-kiri!
Everybody wants the convenience of download, but I know that I will NOT pay $2-$300 annually for this software! Omar's right! Somebody in the boardroom must be smoking somethin'!
Posted by Jon N. (182 comments )
Reply Link Flag
They ain't smokin': They is developin' .NET for LoooongHorn
The strategy is clear enough. This is.NET reprhrased. Shame on CNet for not reporting the obvious.

It seems evident that Microsoft will simply roll out Longhorn, whose functionality will be browser indifferent and .NET subscription centric. That is, the .NET platform will be the communications vehicle for desk-to-host, obsoleting Firefox et al, and making things such that all software has to be developed on the .NET paradigm to work meaningfully on the C Sharp Looooooong Horn.

Once software makers are compelled to developed along the .NET lines, which originally specified that even developer tools and code libraries might go subscription, the market will all go subscription just to support the cost of developing .NET wares.

There is the simple fact that once software firms are forced to invest in .NET they shall need to recoup the investment, by adopting the subscription paradigm as well.

This was the stratgey with the move from VB6 to VB .NET--one had to buy the whole Visual Studio package to update to VB.NET in a way that allowed code distribution. Once one has paid for all of Visual Studio, the incentive is to go to the pure .NET language as one has bought it all.
Posted by PolarUpgrade (103 comments )
Link Flag
Potential trap for M$
If software is a service, customers might have a much better chance of holding M$ to PERFORMANCE STANDARDS!!!!

Posted by landlines (54 comments )
Reply Link Flag
Because .NET is too hard to those VB idiots
It is very very difficult to M$ to educate those VB "programmers" how to use OOP language. So M$ decide to do it on its own.
Posted by publicstatic (11 comments )
Link Flag
Network Computing is the inevitable future
Network computing is the inevitable future. Intelligent displays plugged into the network will replace dumb displays plugged into PC's. The PC will become an optional, undesireable, unneeded part of the software experience. It's aready happening. It doesn't matter that the idea of the PC being functionally uninvented gives PC lovers hemorrhoids. That's not going to matter. The software user of the future can do so much more with the network than he can with a PC that he simply does not need a PC.
Posted by genemosher (6 comments )
Reply Link Flag
And all of everybody's data... on the net too! What a grand day for big government and mega corporations! There is not, and never will be, any possibility of data privacy on a network. ANY security scheme on a net can and will be cracked; and that most easily by those who implement and oversee the implementation of the security attempts.
Posted by Michael Grogan (308 comments )
Link Flag
Blah Blah Blah
I've heard this same crap for thirty years. The truth of the
matter is this Microsofts attempt to gain more control over the
market place. We already being forced to use .Net and follow
microsofts "best practices". Networked computing is already
here. But do you want to do it the way microsoft dictactes it?
Do you want them to think for you? They seem to have a great
:-P track record so far in that category. Guess that's why they
have such a plethora of successful business apps. Oopps they
didn't buy Siebel, PeopleSoft, JDEdwards, Intuit, and a ton of
others yet. Hmmmm ... oh yeah they have great development
tools. Darn.
Posted by Thomas, David (1947 comments )
Link Flag
The Network is the Computer
64+ bits gives the power to create telco managed grids of telco supplied end user connection machines. A Unix or Plan 9 like OS would give users the unprecedented power of a supercomputer grid. End user boxes would not have to be very powerful.
The enduser pays for the grid network box, instead of the ADSL or cable modem.
The rest of money is spent on sophisticated human interface devices. Software will probably be free.
Because the network is the computer and managed by the telco, the possibilty of illegal activies would be restricted.
I don't see the MS model fitting in to this architecture, but maybe the XBox is their grid machine.
Posted by Stomfi (52 comments )
Reply Link Flag
I should have spoken more carefully.....
....when I said the data will be on the net I actually meant that it would be more inherently network accessable. These guys aren't talking about downloading programs whenever you need them, they're talking about uploading the user data to be manipulated on central computers. Now they have access to ALL of your data as well as controlling all of the processing power; you can bet the next step is keeping all the data on the server for 'faster access' I would cite gmail as the precedent.
Posted by Michael Grogan (308 comments )
Link Flag
Terminal & Mainframe...again...
Hmmm, let me programs remotely...hmmm...big iron
at one end and client/terminal/desktop/console at other end.

And this is new?? This is Bill Gates brainstorm? Puh-lease is


Bill...get your head out of the sweater dumpster and just walk
away. You have enough money now. Stick with Melinda and just
donate to those that need it. Let the real people that actually
NEED, USE and WRITE software do their thing. Enough with
putting ideas in Adobe's head what WE need versus what you

"Hmm, not only are the sheeple buying a license to even power
on their computers, they also fork over $50/month just to
connect to the net! And now, we can nickel-dime them for
content, xbox goodies and the subscriptions to even launch and
run something that isn't even there! Brilliant!"

(I should have my own (insert magazine, blog, article, tv show)
on predicting the future of computing...)
Posted by Below Meigh (249 comments )
Reply Link Flag

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