Microsoft is to make bigger efforts pushing its 'software plus services' model, based on the belief that customers still want on-site applications, according to a top company executive.
During his keynote on Tuesday at Microsoft's Worldwide Partner Conference 2008 in Houston, Texas, Stephen Elop, president of the software vendor's business division, said the software-plus-services model will be a disruptive force as more customers start demanding it.
The company has been plugging this hybrid model for over a year, distinguishing it from software as a service (SaaS) by adding on-premise software to the mix. A pure SaaS model describes a hosted platform delivered entirely over the web.
Elop said Microsoft's partners will have to prepare for customers to adopt unique hybrid models of on-site software and SaaS. Citing Gartner statistics, he added that 25 percent of new business applications will be web-based by 2011.
While SaaS attracts customers who want to offload the burden of managing software onto service providers and free up capital for physical expansion, Elop noted that software demand is alive and well amid this interest in hosted applications.
"While there may be some competitors who say software is dead, most customers will want a mixed model because they have to have some [applications] on-premise," he said, adding that systems integrators must help customers decide how this mix should take form.
Michael Risse, Microsoft's vice president of the worldwide small and mid-market business group, said hosted services are also able to help smaller businesses stretch their budgets over more IT services.
"You can look like a big company with the right IT investments," said Risse.
Highlighting the top IT spends amongst SMEs (small to medium-sized enterprises) in descending order, he said basic infrastructure, productivity and collaboration tools, ERP (enterprise resource planning) and CRM (customer relationship management), collectively, make up 75 percent of global SME IT spend.
With a large part of IT budgets invested in these areas, Risse said "fewer and fewer" SMEs want to manage their applications, preferring instead to engage service providers to administer the software for them.
New SaaS services
The software giant this week announced a set of new SaaS subscription services — available under the Microsoft Online Services suite — that will be sold by reseller partners, which offer these hosted services from Microsoft's datacentres, including its new facility in Chicago.
Elop said he expects the products to add a new revenue stream and service offering to the portfolios of Microsoft's partners. Resellers of the two suites will receive 12 percent of the first year's contract value, and six percent of the subscription fee every year for the duration of the customer contract.
