HOUSTON, TX--Expect Microsoft to commit bigger efforts pushing its "software plus services" model, based on its belief that customers still want on-site applications, according to a top company executive.
During his keynote Tuesday at Microsoft's 2008 Worldwide Partner Conference here, Stephen Elop, president of the software vendor's business division, said "software plus services" 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 for worldwide small and midmarket 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 SMBs (small to medium-sized businesses) 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 SMB IT spend.
With a large part of IT budgets invested in these areas, Risse said "fewer and fewer" SMBs 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 data centers, including its new facility in Chicago.
Elop 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 6 percent of the subscription fee every year for the duration of the customer contract.
Victoria Ho reported from Microsoft's 2008 Worldwide Partner Conference in Houston, Texas.
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