Microsoft (News - Alert) recently announced its plans to offer more of its products as online services. The first step on this front is the launch of its dominant Microsoft office software as an online service.

 

The announcement paves way for Microsoft to exploit the growing Software-as-a-Service (SaaS (News - Alert)) market. In a move to further gain market share, Microsoft also has decided to offer its services to organizations of all sizes, which were earlier, restricted to companies with at least 5000 users.

 

The world’s largest software maker’s primary focus has been on packaged software. However, there has been a shift in the consumer’s preference from purchasing software and installing them on their machines, to using software that is available online. The SaaS model enables users to pay a fee to the service provider that is proportional to the software usage without the need for purchasing the software.

 

Companies are favoring this trend since they need not invest heavily on infrastructure, hardware and software. Organizations can also save on the manpower needs for setting up and maintaining the infrastructure needed to support the company’s requirements. The SaaS model offers organizations a convenient as well as a cost effective model in best meeting their software needs. Microsoft’s competitor, Google (News - Alert) and a number of other startups already have several offerings in the field of on-demand computing. Recently Google made some strategic moves like unveiling a free service to compete against Microsoft’s Sharepoint.

 

"The combination of software plus services gives customers advanced choice and flexibility in how they access and manage software," Gates said in a statement. "In the future, customers and partners should expect to see this kind of choice and flexibility for all of Microsoft's software and server products."

 

Microsoft will be initially offering Exchange Server and Office SharePoint Server software as online services. This would facilitate users in accessing email, calendars as well as participate in online conferencing. Microsoft encourages firms to register at http://www.mosbeta.com to participate in the beta test of its new services. The beta version of Microsoft Office Live Workspace would also help users access over 1000 documents online as well as share their documents with others online. Later in the year, Microsoft plans to go public with these offerings.

 

"You are going to see them get a lot more aggressive treating software as a service," said Silicon Valley analyst Rob Enderle of Enderle Group. "The trick is to move to SaaS at a rate that doesn't cannibalize their revenue streams prematurely. A company like Google can go hell-bent for leather and if their products aren't ready, it doesn't hurt them."

 

"SaaS reflects where the market is going," Enderle said. "What is holding it back right now is as much infrastructure as it is an unwillingness to change by people."

 

Market analysts had anticipated Microsoft’s entry into the realm of web-based computing. While availability and reliability of Internet connections is one deterrent to web-based computing, improved Internet reliability and the popularity of broadband connectivity will further improve the appeal of on-demand computing.