Microsoft teams to offer software as a service

Businesses could soon have more hosted applications to choose from following a new program from Microsoft Corp. being launched initially in Europe this week.

The software maker is partnering with managed hosting companies to set up “incubation centres” that will offer services to ISVs (independent software vendors) to help them adapt their applications and business models to the software-as-a-service (SAAS) model.

The first incubation centres in Europe are being opened this week, by NTT Europe Online in the U.K. and France, and by 7global in the U.K. Other incubation centres will follow in Asia and North America in the coming months, Microsoft said.

To take part, ISVs have to be enrolled in Microsoft’s Service Provider License Agreement (SPLA), which lets them license Microsoft software on a monthly basis to their end-user customers. Microsoft will also help them to find a hosting partner and offer discounts on some of its software for the first year.

The hosting partners will use Microsoft’s hosting platform to deliver the applications. The platform includes tools for setting up service-enabled applications and for tasks like user provisioning, performance monitoring and usage tracking.

It’s the latest effort by Microsoft to profit from the software as a service model, which is seen as a threat to its applications business and which Microsoft is now gradually starting to embrace.

Pioneered by companies such as Inc., the hosting model can help end-users to reduce software deployment costs by outsourcing tasks like patching and upgrading applications. They often can also purchase software in smaller increments.

The partnerships aren’t exclusive, and NTT Europe will continue to offer hosted applications on Linux and other platforms, said Robert Steggles, marketing director for NTT Europe Online.

The new program will probably appeal most to smaller ISVs, some of whom are trying the software as a service model for the first time, Steggles said. The task is a significant one for vendors that have grown accustomed to selling software with one-off annual licenses.

“Changing their licensing model, their sales channel, their commission and their financial structure all to a monthly recurring model is quite a change,” Steggles said.

To help with the transition, the incubation centers will offer two days of architectural design training and two days of business development training, provided jointly by Microsoft and the hosting partner.

The charge for the training will be “nominal,” according to Steggles, because Microsoft and its hosting partners are subsidizing the services to attract new business.

NTT Europe is opening its incubation centers in the U.K. and France this week. It will open further centers in Spain and Germany, where it also operates, if it sees enough demand, Steggles said.

The program is focussed mainly on helping ISVs to launch their own applications, although they could also deliver Microsoft applications such as the hosted versions of Exchange and SharePoint, Microsoft said.

Hosted applications aren’t for everyone, Steggles said, but demand for them is increasing.

“At our Web site on Friday, we got 10 times as many hits for software-as-a-service as we did for managed hosting,” he said.

The hosting partner program is called the Microsoft SaaS Incubation Centre Program, while the ISV program is called the Microsoft SaaS On-Ramp Program. More information is here.

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