Microsoft took a high-profile baby step in the direction of software as a service, with the expected launch last week of its Live Software strategy. A substantial change in how the company does business, however, is still years off, analysts said.
At an event last week in San Francisco, Microsoft Chairman and Chief Software Architect Bill Gates and CTO Ray Ozzie unveiled the company’s software-as-a-service plan as well as its first two services, Windows Live and Office Live.
Although Gates called Live Software a revolution in the way the industry thinks about software, analysts said Live Software merely shows Microsoft testing the waters for a long-term plan to transition packaged software to Web-based services, something the industry has been moving toward for some time.
Rob Enderle, principal analyst with the Enderle Group, said Microsoft may take 15 years to evolve its services plan, and won’t stop offering packaged software until it sees services revenue increase significantly.
“Microsoft doesn’t want to give up the product revenue before the services revenue can ramp up,” Enderle said.
In the meantime, customers can begin testing advertising-supported services that Microsoft is offering in an attempt to compete with rival Google. Microsoft, which currently has 10 percent of the online advertising market, hopes to steal advertising dollars from Google, Ozzie said.
Office Live offers services for small businesses, including Web-site and
e-mail hosting, business analytics, hosted CRM and collaborative file sharing. Microsoft will begin offering a free, advertising-supported beta of Office Live in early 2006.
Windows Live, in beta now, enables users to build a personalized Web portal that includes custom features from their local client along with e-mail, an IM client with collaborative technology for sorting contact data, and enhanced local and Internet search technology.
Microsoft plans to transition Hotmail and MSN e-mail users over to Windows Live e-mail, and analysts say they think Windows Live eventually will replace the MSN portal. “Windows Live is the next generation of MSN,” said Rob Helm, director of research for Directions on Microsoft.