by C.G. Lynch

What Software Plus Services Means For Microsoft (and You)

May 14, 20084 mins
Collaboration SoftwareEnterprise ApplicationsSmall and Medium Business

With its new "software plus services" strategy, Microsoft is working to compete with emerging SaaS (Software as a Service) vendors while keeping users tied to its flagship Office suite.

In early March, during an annual conference in Seattle, Microsoft announced it was launching Microsoft Office SharePoint Online. While the idea was to provide a lightweight version of SharePoint as a hosted offering, analysts say the product has been presented in a way to avoid cannibalizing Microsoft’s bread-and-butter installed software product, Office.


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SharePoint, which started off as a document management system back in 2003, also now includes Web 2.0 features such as blogs, wikis and social networks, which were added in 2007. While users access SharePoint through a Web-browser, companies typically host the SharePoint server software themselves, onpremise.

You won’t find Microsoft executives calling SharePoint Online a SaaS (software as a service) offering. In fact, according to analysts, that phrase doesn’t fit into Microsoft’s lexicon of technology terms. Instead, it’s called “software plus services.” At its core, software plus services essentially means that Microsoft will provide online portals and will host the data, but in order to manipulate the files that reside there, you’ll need the Microsoft Office suite installed on your computer.

It’s a similar idea to its Office Live product, currently in public beta, which also requires users to have their versions of Office on their computer in order to work on files.

Both Office Live and Microsoft Office SharePoint Online differ from fully Web-based, SaaS offerings like those from Zoho and Google Apps, which allow users to author, edit and share documents all online.

According to Rob Curry, director of Microsoft SharePont, software plus services means letting businesses decide what data they are willing to let a vendor host and what information must never leave the company’s walls.

“It’s not all or nothing,” Curry explains. “There is certain information they want to keep offsite and certain information they want to keep onsite for compliance reasons.”

According to Rob Koplowitz, a principal analyst with Forrester, that message will resonate with CIOs who have had difficulty envisioning putting all their data into “the cloud,” but would be happy too offload less sensitive stuff that takes up server space and costs money to maintain. Sensitive financial data, for example, might not be a prime candidate for storage in the cloud.

“They can see letting certain types of users accessing certain types of data from a cloud version, and others using an on premise version,” Koplowitz says.

At the SharePoint conference in March, Microsoft Chairman Bill Gates defended the software plus services strategy in a question and answer period, dismissing Google Apps tools as too lightweight for serious business users. “They really don’t have the richness and responsiveness,” Gates noted, “and you can see that relative to the success they’ve had there.”

Few would argue with Gates that Office applications such as Word and Excel have more bells and whistles than Google Docs & Spreadsheets. The question is, what percentage of corporate end-users actually utilize all of them?

It depends on whom you ask. SaaS vendors and advocates claim that percentage is pretty low. According to a a survey of 420 large and small companies taken last month by SaaS consultants at Thinkstrategies and Triactive, nearly 99 percent of companies reported that Office was installed in 99 percent of their corporate PCs. At the 20 largest companies sampled, only 26 percent of the features in Office were being used and that use centered around basic functions in Word, Excel and PowerPoint.

“The vast majority of companies have over-provisioned Office,” saysJeffrey Kaplan, managing director of Thinkstrategies, a consulting firm that advises companies on how to use SaaS. “They’re either not really using it at all, or they’re using a version that’s far more than what they need.”

That would seem to render silly any cloud strategy holding onto Office as a primary tool. Tom Austin, a Gartner analyst, says he thinks software plus services might eventually be ditched as a priority for Microsoft in lieu of Mesh, a program that allows people to use to Web to get a unified view of their various devices and applications.

“I’m pretty impressed, conceptually, with what Ray Ozzie (Microsoft’s Chief Software Architect) is trying to do with Mesh,” Austin said via e-mail. “To me, Mesh replaces ‘software plus services.’ Software plus services was retrograde (looking backward) while mesh is forward looking. Software plus services was about defending the old revenue stream while mesh is about defining a new (and valuable) value proposition.”

Austin also made one other prediction: “Software plus services will fall into disuse in the next several months.”