Microsoft eyes services for business

Microsoft may be rushing headlong into online services targeted to consumers. But for its all-important business customers, the software giant has been taking a more measured approach.

The company has already mapped out two online services to augment its Windows and Office desktop software franchises. Now executives are beginning to provide a few details of what online services Microsoft has in store to complement its server software.

New server-oriented online services are in the works, said Bob Muglia, Microsoft's senior vice president in charge of servers and tools. He said Microsoft is "going to be doing anti-malware services. That's an example of something that would augment Windows Server," Muglia said. Another possible service is spam filtering for messaging, he added.

News.context

What's new:
Microsoft is carefully weighing what additional online services it might offer its business customers.

Bottom line:
In addition to its already planned online services for Windows and Office desktop products, the company is developing server-oriented online services, although it has not yet disclosed how those products will be packaged and delivered.

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However, exactly how those business services will be packaged and delivered is still up for debate, Muglia told CNET News.com on Tuesday. "What we're looking at are ways in which we can augment the products that we ship with services. We're in the business space, so what are the services that will appropriately augment the products that we have in the market? You can imagine that there are many, many different areas where we can add services on top of these existing workloads."

Muglia said additional details will emerge over the coming months. "What you will probably hear is how we are going to drive forward on specific sets of services for business customers. You can expect to hear that certainly in 2006. But don't anticipate any big thing like 'Business Live' or any such thing like that. I don't think we're going to do that," he said.

Microsoft's accelerated activity around online services stems from October's internal memo that Chairman Bill Gates wrote to Microsoft employees, warning that online services from Google and other competitors "will be very disruptive" and could threaten the software giant's business in the coming years. In tone, the memo--a condensed version of a more detailed call to action authored by Chief Technical Officer Ray Ozzie--echoed the Internet Tidal Wave memo that Gates issued a decade earlier.

The company's bet on software services reflects the growing interest in Web-delivered services and the need to find new sales channels for its products. On the desktop, the company is facing a slowing pace of contract renewals and upgrades for its software, analysts said.

"It's not just consumers. A lot of it...is focused on businesses. We're giving them a choice of how they do IT, and some of it is through services."

--Bill Gates, chairman, Microsoft

In September, Microsoft announced it was reorganizing itself into three units and tapping Ozzie to lead a companywide push for services. Last month, Microsoft announced the first fruits of that effort--products called Windows Live and Office Live. Windows Live combines many of Microsoft's existing MSN services into an advertising-supported product for consumers, while Office Live is a set of services, some free and some paid, aimed for small businesses.

Many hints, few details
As for where Microsoft may be headed with services for large businesses, company executives have dropped additional hints over the past few months. Gates, in an interview with CNET News.com earlier this year, said business will play a key role in any services plan. "It's not just consumers. A lot of it, actually the majority of this, is focused on businesses. We're giving them a choice of how they do IT, and some of it is through services," he said.

CEO Steve Ballmer said in November that a Windows Server "Live" service makes sense. "Clearly, if you just look at what we have done already with identity and Active Directory federation with Passport, you start to get a Live element, if you will, of Windows Server. Perhaps the most important thing we do is to allow developers to federate their own applications running on their own servers with the rest of our cloud-based (on the network) services," he said.

Microsoft has also ventured into the managed services area. Directions on Microsoft analyst Matt Rosoff expects to see more activity in that area, following the appointment of CIO Ron Markezich to run the company's managed services business. "I suspect they are thinking of getting into some sort of service that would help with configuration of desktops and maybe deployment of software and patches. I'm not sure whether that would come from Microsoft or partners, but that's the kind of service I'd expect to see from them," he said.

In crafting new services, Microsoft has to avoid colliding with partners, which could be one reason for its careful approach, Rosoff said. "That might be why they are being so cagey on this. They haven't figured out what the partner model is going to be, and they don't want to alarm them for something that may not happen."

The other possibility is that Microsoft will stay out of the enterprise services business entirely and leave it to partners. "They may not get into this business. I mean, I think Microsoft would prefer to keep selling software and keep seeing the server and tools business grow 18 or 20 percent a year. If they can do that without getting into services, they'd probably just as soon stay out of the services business. It's a lower margin business," Rosoff said.

Overall, mapping out services that make sense to customers is challenging, Microsoft's Muglia admitted. "In some spaces it's not exactly as clear how you would add services and what would make sense for customers."

Other executives have expressed similar sentiments. Paul Flessner, Microsoft's senior vice president of server applications, told CNET News.com in September that it was still unclear how the company could deliver services to augment its SQL Server database, for instance. Services for other products, like the company's Exchange e-mail and messaging server are easier to envision, he said.

"Offering hosted versions of Exchange and Live Communication Server would make a lot of sense," Rosoff said.

E-mail seems an obvious candidate for hosting--and various companies do offer hosted Exchange services--but IT managers at many larger companies that rely on e-mail as a vital communications tool might not be keen to trust that service to an outside provider.

Right now, a services approach probably makes more sense for smaller businesses, Rosoff said. "Office Live, for small and midsize businesses, makes some sense. When you get down below a certain size--say, 25 PCs or so--I think selling servers becomes very difficult and Microsoft doesn't have the channel to do it.

"So at that point it makes more sense to offer some of these things as a service, because you're not going to sell them servers anyway," Rosoff said.

On the enterprise front, it's clear that Microsoft's plans are in flux, a point made by Ray Ozzie at a San Francisco tech conference in October: "For enterprises, I think we've just barely scratched the surface about which systems can...be brought into the cloud in some way shape or form."