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 ZDNet UK sister site CNET News.com 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.
Now, Microsoft is quietly working on the technological innards that will one day let the company offer corporate customers "software as a service". Some of Microsoft's competitors in the business software market, such as Salesforce.com 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 hosted.
"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 specialises in business management applications for small and medium-size business.
Gates said Microsoft definitely considers Salesforce.com 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.
A rough 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 modernise 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 delivered in large measure by way of paid upgrades and, to a lesser extent, via smaller patches.
In recent months, though, Microsoft has shown that it's willing to experiment.
