Microsoft steps up on SaaS

Until now, Microsoft's tentative forays into the software-as-a-service (SaaS) arena - such as its Windows Live, Office Live and Dynamics Live CRM services - has on consumers and small and midsize businesses. But with its new Online family of applications, Microsoft is taking direct aim at enterprises.


On Monday, the software vendor will officially begin selling hosted versions of its Exchange email server and SharePoint collaboration software as well as a new product called Office Communications Server that supports so-called unified communications capabilities. In addition, Microsoft will also make available a SaaS version of Forefront, a security tool that supports both Exchange and SharePoint.

Only customers buying licences for 5,000 seats or more will be eligible to purchase the new SaaS offerings, according to Eron Kelly, director of product management in Microsoft's business online services group.

Kelly said that to reassure customers about application performance, Microsoft will offer rebates of between 25% and 100% of the subscription fees it charges if service-level agreements aren't met.

Microsoft's launch was no surprise: For the past several years, the company has been running pilot programmes with several large customers. One of those piloted services, a desktop management offering based on Microsoft's Systems Management Server software, remains in incubation.

On-demand applications, such as's customer relationship management software, have won business from many small companies because of the speed at which they can be deployed and the low upfront investment that is needed.

But large companies, especially those whose stock is publicly traded, often operate under stricter regulations that make it trickier for them to let software vendors store their data off-site.

Others have been put off by the way that SaaS subscription fees, which may look cheap with a small number of employees, can quickly add up when tens of thousands of workers are involved. Hosted software tends to make the most economic sense for companies with less than 1,500 users, according to Michael Osterman, an analyst at Osterman Research in Washington.

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