Ballmer Warns Partners To Focus On SaaS

CEO Steve Ballmer, on Wednesday in a keynote speech before 12,000 solution providers at the company's Worldwide Partner Conference in Houston, made it clear that software-as-a-service applications -- what Microsoft calls "Software Plus Services" -- is a big part of Microsoft's future.

"This isn't going to happen overnight in the enterprise world. But what you need to be able to do is know that the wording, the training, the investments you are making today will seamlessly move to the new world," he told channel partners. He went so far as to predict that some businesses solution providers are in today -- he didn't get more specific -- will disappear within 10 years.

Ballmer said he believed "the cloud," applications and other computing services offered by vendors, will grow at a faster pace than hosting opportunities for solution providers. And he said Microsoft can't afford to delay its cloud computing efforts while competitors push ahead. The CEO also said Microsoft has plans to re-engineer its server products as it introduces more cloud computing services, but he didn't offer details other than saying the company would "re-invent" its server technology for cloud computing in such areas as scalability, cost and geocaching capabilities. He also said Microsoft is extending basic programming and management models "out to the cloud."

But Ballmer maintained that the evolution toward software-as-a-service "shouldn't be scary or problematic for partners." Channel partners are skeptical of Microsoft's hosting initiative, worried that the company's Online portfolio of hosted software -- including SharePoint and Exchange -- could hurt business and give Microsoft more direct ownership of customer relationships.

On Tuesday, Stephen Elop, president of the Microsoft Business Division, outlined plans to pay solution providers that sell its hosted services 12 percent of the monthly subscription fees for the first year of a customer engagement and 6 percent in subsequent years. Ballmer said he hoped those announcements "fit the bill" in meeting solution providers' needs.

"Even as the business models change, for us, the notion of partnering with all of you remains fundamental," Ballmer promised. "We build from the present. As we build on this world of software plus services, we'll build it together."

Answering written questions submitted earlier by conference attendees, Ballmer said that the new Vista Assurance program announced Tuesday, which provides free Vista assistance to small businesses in the U.S., would not take business away from channel partners. He said the service is targeted at businesses with a few employees that use Vista but are too small to rely on a solution provider. He also said Microsoft is working on developing an E-commerce site where ISVs can market their Microsoft-compatible products.