Microsoft Targets SMBs With SaaS Products

Microsoft has built a nice little business for itself over the years selling packaged software through solution providers and retail channels. So with the software-as-a-service (SaaS) model catching on, what's the world's biggest software vendor going to do? And what does this mean for its channel partners?

To compete with Salesforce.com, Google, and other Web-based application vendors, Microsoft is developing SaaS products under its "Live" banner, ranging from on-demand applications for small businesses to SaaS versions of its CRM applications.

To help small businesses (with 10 employees or fewer) manage their sales and marketing tasks, Microsoft today offers its Office Live set of Internet-based accounting, contact-management and Web-site-design tools.

This summer, the software giant will debut a new release of its Dynamics CRM application, available in both on-demand and traditional "on-premise" versions. Microsoft provides Office Live directly to users while channel partners build industry-specific solutions around the on-demand applications. Microsoft's plan is to do the same with Dynamics Live CRM.

Office Live, built on Windows SharePoint Services 3.0, already has more than 230,000 small-business users, says Marja Koopmans, Office Live partner strategy director. Independent software vendors and solution providers develop vertical industry solutions around Office Live that customers either run on-site (tapping into Office Live via SharePoint) or ask Microsoft to host. Early last month, Koopmans said some 80 solution-developer partners were in an Office Live early-adopter program.

Partners also have the option of showcasing their Office Live solutions on Microsoft's recently launched Microsoft Office Live Marketplace, although customers still purchase those solutions directly from the ISV. Microsoft is also piloting a program to reward solution developers that bring customers to Office Live, although Koopmans would not disclose their value.

Last month, Microsoft provided about 300 solution provider partners with an early version of Microsoft Dynamics CRM for testing and to give them an early start on developing complementary solutions. The application, code-named Titan, uses a single code base to support on-premise and SaaS deployments.

The on-demand version of Dynamics CRM, based on a multitenant architecture, will be hosted by solution providers or through Microsoft's Dynamics Live CRM service, says Christian Pederson, senior director for Microsoft Dynamics CRM. Some partners are also expected to sell subscriptions for Microsoft's hosted CRM service, earning commissions in the process.

Microsoft expects its hosted CRM service will be particularly attractive for small companies with few IT resources that need a basic CRM system, while solution- provider partners will develop applications and services that complement the CRM applications. The SaaS version of Dynamics CRM will allow partners to serve more customers with less of a drain on their resources, Pederson says. He adds: "We expect to see a great deal of creativity among our partners to create new business models in the marketplace using Dynamics Live CRM."