Coming From Microsoft: 'Hosted Everything'

Within a year, the Redmond, Wash.-based company plans to offer hosted implementations of SharePoint as well as CRM and ERP applications, several sources said.

A handful of service partners now host Microsoft applications for customers; the difference is future customers could choose Microsoft or a partner to run the infrastructure.

Microsoft declined to comment on specific hosting plans. However, Microsoft Chairman Bill Gates hinted at the strategy in an interview with CRN last month.

"SharePoint today runs primarily on premises. We have some partners who are doing hosted SharePoint. We are looking at what our role is in helping people with SharePoint,” Gates said Microsoft&'s Professional Developers Conference in Los Angeles. “So technologically, the server equals service thing year by year is making good progress."

SharePoint Portal Server and Windows SharePoint Services act as the linchpin for most of Microsoft's current and planned collaboration products and services. Microsoft's acquisition of Groove Networks last year brought the software giant the expertise it needed to bolster the security and reach of such collaboration beyond and between corporate firewalls. And Gates stressed in the interview that regardless of where the software runs--on premises or "in the cloud"--partners with domain expertise and other knowledge will be needed for implementation help.

However Microsoft proceeds, the company knows it must explore new software and service delivery modes. Microsoft faces rising competition from vendors like Salesforce.com and NetSuite on the CRM/ERP front, yet by moving ahead with hosting Microsoft also could end up taking on longtime partners that host Microsoft software. Microsoft officials have told partners that the company&'s hosting offerings will be "revenue-neutral" to them. Presumably, that means partners would sell and even customize applications for customers that could run on Microsoft servers.

Next week in San Francisco, Gates and Ray Ozzie, one of Microsoft's CTOs, are slated to talk more about the company' software-as-a-service push. Ozzie, the former chairman of Groove Networks, has been charged with leading Microsoft&'s charge in this area. This week at another San Francisco event, Ozzie said the company will rely on experience gleaned from its MSN online service.

Microsoft&'s hosting push is expected to target the gamut of users--including small companies with five to 10 PCs and no dedicated IT staff--who may want to do things like share calendar items but not worry about how that is accomplished. A hosted SharePoint could become the basis for a variety of such services.

Outsourced e-mail for companies of all sizes also would be big. "How much competitive advantage does e-mail give any company? Wouldn't those internal IT resources be better deployed elsewhere?" said one Microsoft source, who asked not to be named. Microsoft has been investigating ways to ease e-mail deployments and migrations by internal IT departments and to make e-mail more easily supported outside the firewall. Gates also telegraphed a possible move in that direction.

"You can say we've been in the hosting business forever,” he said in the interview. “Hotmail, you know, the world's biggest e-mail system, is hosted by us. And as we've put more features in there, and even have you pay for subscriptions to get some of those advanced features, that's Exchange in the cloud. So you'll have Exchange in the cloud, Exchange running in partners like mostly telcos, and then Exchange running on premises. And you've got to have a spectrum of choices people have there."

One longtime Microsoft VAR said the software behemoth is merely facing up to reality. "They have to play in every playground. That's the way of the world," said the partner, who requested anonymity. He and others also said current Microsoft products don&'t necessarily lend themselves to running in a shared environment.

On the other hand, products like Salesforce.com and NetSuite were built from the ground up for such use. Microsoft would have to adapt and, probably at first, would "do so by brute force," one company insider said, adding that over time the software vendor would figure out a more elegant way.

Rival executives seem unfazed by Microsoft&'s hosting aspirations. "They're eight years behind. We've been at this a long time. If the software is not multitenant, it's a losing proposition. We can put 50 companies on one resource," said Zach Nelson, CEO of NetSuite, San Mateo, Calif. "[Microsoft] tried to talk partners into hosting Great Plains, and partners lost their shirts."

Salesforce.com CEO Marc Benioff said what Microsoft has offered through hosting partners and what it would offer on its own would be the same thing. "What's the difference? It's the same single tenant product--just a rev from the 1.0 product," he said.

One thing is certain: Microsoft is exploring myriad ways to deploy and charge for software, ranging from subscription models a la MSN to easier ways for companies to buy incremental products not in their current Enterprise Agreements. Some industry observers liken the hosting move to the "turn on a dime" shift that Microsoft executed years back when it discovered the Internet.

When asked which other products and services Microsoft would host, another Microsoft insider said, "Everything. Hosted Office. Everything hosted."