Microsoft Corp. said on Sunday it plans to introduce new software services targeted at corporate customers willing to pay a monthly subscription instead of license fees.
The new services, announced on Sunday, are Microsoft's first major attempt at delivering software over the Internet as a service to its bread-and-butter corporate customers.
The company said it will start to offer over the next few months e-mail, instant messaging and collaboration software to companies with more than 5,000 workers. Those applications will run on computer servers inside Microsoft's data centers and then be delivered to customers over the Internet.
The new strategy is a departure from Microsoft's current business model of selling licenses for software that runs locally on a customer's own computers.
We'll look back on this announcement and say that's when Microsoft really started to provide software plus services, said John Rymer, senior analyst at Forrester Research. It's the first step and there is so much more to come.
Faced with competition from Salesforce.com Inc. and Google Inc., Microsoft is attempting to roll out services to large organizations without jeopardizing the corporate agreements that underpin many of its businesses.
Some companies like Salesforce see services eventually replacing traditional software, but Microsoft is pushing a software plus services strategy with the promise that this option combines the best of both worlds.
Redmond, Washington-based Microsoft said its new Office Live Workspace is an example of the strategy.
Office Live Workspace, also unveiled on Sunday, allows workers to share Word documents, Excel spreadsheets and PowerPoint presentations on the Web for free. In the Workspace, people can invite others to view and comment on documents even if they don't own Microsoft Office.
Users can save more than 1,000 Office documents on Workspace and access them through any Web browser.
LOSS OF CONTROL
Microsoft's rivals have seen some success with selling software services to corporate customers, but Microsoft said technology administrators in large organizations are concerned about losing control over security or other features with a move to software services.
The other services Microsoft plans to introduce is Exchange Online, Office SharePoint Online and Office Communications Online. Exchange is Microsoft's e-mail application, SharePoint is its collaboration software and Communications allows for instant messaging.
The products, according to Microsoft, will work the same as existing offerings but the software will run on Microsoft's computer servers. Microsoft said administrators will maintain nearly the same level of control as if the software was on their own computers.
Microsoft has invested billions in building mammoth data centers filled with computers and storage so it can offer services to both regular consumers and customers in large organizations.
The company said some organizations will not want Microsoft hosting their e-mail or other critical software and those customers can continue to pay licenses.
Other customers may opt to pay for services, because it will be less expensive than running and maintaining the software themselves due to the scale and efficiency of Microsoft's data centers, according to the company.
Microsoft said improvements in profit margins from its services business will also rely on how efficiently it can run those facilities.