Windows, Office To Go 'Live'

Unveiling Microsoft&'s “live software” vision, Microsoft Chairman Gates previewed Windows Live and Office Live last week in San Francisco and pledged that virtually all of Microsoft&'s software ultimately will be offered off a server or as a service. Its initial offerings target consumers and very small businesses without IT staff and typically without even a server.

Windows Live is an advertising-supported service that lets users customize their own home pages with search content, RSS feeds, workspaces, applications and a new AJAX-based e-mail system called Live Mail; and Live Messenger, an updated version of Microsoft&'s MSN Messenger. The free service is not designed to replace the Redmond, Wash.-based company&'s, which will continue to feature programmed content.

Office Live, previewed by Microsoft General Manager of Information Worker Services Rajesh Jha, is a set of free and subscription-based services for small businesses with fewer than 10 employees.

The base-level Office Live lets small businesses sign up for a free domain registration and a free Web site, plus up to five Live Mail accounts with up to 2 Mbytes of storage and free online collaboration to enable ad hoc file sharing a la Groove Networks, code-named Mojo.

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The subscription-based service is designed for fuller-function business portals and would enable a company to set up a secure space to communicate with an accountant or among various workgroups, for example.

Microsoft&'s top worldwide channel executive said Office Live, due to beta early next year, will jump-start business for a variety of solution providers targeting very small businesses. Some of the foundational Windows Live services demonstrated last week are already in beta, said Allison Watson, vice president of Microsoft&'s worldwide partner and small business group. “This will, for the first time, widely open up a segment of the market that has been underserved by technology,” Watson said. She estimates the potential market to be about 5.2 million businesses that run four PCs or fewer and are without servers.

While the service emanates from Microsoft, third-party partners—ISVs in particular—can build vertical applications atop the collaboration and mail infrastructure. RE3W, a Santa Ana, Calif.-based ISV specializing in Web-based applications for the real-estate industry, demonstrated one such application on stage with Microsoft, although not without glitches.

Last week&'s event did not touch on hosted business applications for larger companies, but Gates acknowledged that offerings such as CRM could be added to Office Live at a premium subscriber level in the future. Sources have told CRN that they expect Microsoft to launch hosted CRM—run on its own or partners&' servers—and expect hosted ERP to follow.

Sources inside and close to Microsoft have likened the company&'s software-as-a-service push to its belated discovery of the Internet after Netscape&'s Navigator browser threatened to make Windows irrelevant several years ago. Ray Ozzie, who joined Microsoft last year when it acquired Groove Networks, is driving this strategy. He is one of Microsoft&'s three CTOs.

Just as Netscape pushed Microsoft into new areas when the Internet took root, Google is pressuring the software behemoth in Web and desktop search development, and players such as, San Francisco, and NetSuite, San Mateo, Calif., are doing so in hosted applications, according to observers.

Solution providers, too, said Microsoft once again must make up for lost time. One longtime Microsoft solution provider, who requested anonymity, said the vendor has been quizzing key partners about software as a service.

“They&'re starting to talk about it, but they&'re way late. I&'m in multiple deals now facing, but the way [Microsoft Business Solutions] prices its product is not conducive to competing with that model,” the partner said. With the next edition of its CRM product, released to manufacturing last week, Microsoft plans to launch Service Provider Licensing Agreements (SPLAs) to ease the product&'s use in hosted scenarios. Currently, the only other Microsoft ERP product to be offered via SPLA is Axapta, the longtime Microsoft solution provider said.

Microsoft has told partners to expect a hosted CRM implementation. Plans call for the hosting to be done by Microsoft or by a hosting partner, depending on what the customer wants.

Some solution providers said they&'re pleased that Microsoft is taking an aggressive stance on hosted services, since Mountain View, Calif.-based Google has partnered with Sun Microsystems, Santa Clara, Calif.

“Microsoft needs to put more online applications in the market,” said Paul Freeman, president of Coast Solutions Group, a solution provider services organization in Irvine, Calif.

“They are well-positioned to go after established applications like and could bring new applications like Office online. This is the kind of thing that SMB buyers need in order to maintain their costs and lower the complexities of IT infrastructure,” Freeman said.

Microsoft isn&'t totally new to the Web-hosted applications arena. The company has offered Hotmail and LiveMeeting directly to businesses and consumers for several years. It also has experimented via its bCentral brand and still offers basic Web hosting services.

In 2000, Microsoft was one of the first vendors to outline a software-as-a-service strategy when it unveiled plans for the .Net MyServices platform, code-named Hailstorm, which was targeted at consumers. At the time, Microsoft also briefed partners on a set of planned Internet services, code-named Blizzard, that would provide business software over the Internet directly to enterprise customers. The effort failed partly because of customer concern over turning over their private information to the company. Ironically, Microsoft executives of late have said that Google, with some of its consumer offerings, has managed to assuage or overcome some of these concerns.

Microsoft had intended to launch its first set of XML Web services in 2002 but pulled the plug on those plans. Though neither Hailstorm nor Blizzard has seen the light of day, Microsoft has had an application hosting service planned for some time. The company also has been a big backer of the ASP model and funded some original ASPs, many of which have since ended up closing their doors, being acquired or being renamed when the dot-com bubble burst. Now, Microsoft is investing in a project, code-named Atlas, that&'s designed to bring AJAX-style, rich-client development to the Internet. Microsoft&'s planned hosted apps would compete against smaller managed service providers (MSPs), solution providers said.

“Face it, there&'s a lot of skepticism and questions about Microsoft&'s ability to transition from a licensed software company which has historically never, ever been in the customer-service business to make that switch,” said an executive at one of Microsoft&'s current hosting partners.

Even Microsoft insiders concede that the company has to overcome “trust issues” with customers and allay fears that its software and infrastructure isn&'t up to the task of supporting users 24 hours a day, seven days a week. Partners said the company will have contingency plans for partners that would be affected. Microsoft has told solution providers that any hosting plans will be “revenue-neutral” for them.

“The hosted service offerings from Microsoft will compete against partners that are focused in the small-business space. I hope that Microsoft can offer incentives to help these partners sell these services,” said Simon Chan, director of business development at Iteration2, a solution provider in Irvine. “There will be plenty of companies, at least initially, that will want to host their own infrastructure and customize for their specific needs. I haven&'t seen an offering that is hosted that can be completely customized for customers.”

PAULA ROONEY contributed to this story.