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Microsoft to outsource BackOffice

Microsoft begins a small pilot program for its BackOffice suite, allowing a limited number of ISPs to begin leasing the products out by subscription.

Microsoft has begun a small pilot program for its BackOffice suite of software products, allowing a limited number of Internet service providers to begin leasing the products out by subscription.

The new program takes advantage of the growing trend of outsourcing business applications, where companies lease business applications that are hosted by Internet service providers (ISPs) and so-called application service providers (ASPs).

So-called ASPs deploy, host, manage, and lease packaged application software to customers from centrally managed data centers. Customers access the applications through a browser or dedicated leased lines.

"This is a pilot program to understand what different providers and customers want so we know what to do with our licensing arrangements in the future," explained Dave Malcolm, product manager for Exchange. But "this is not a public offering yet."

With a healthy dose of market evangelism, analysts believe the applications outsourcing market should kick into gear this year, laying the ground for a future growth spurt.

Microsoft competitors, including Oracle and IBM, have already thrown their hats into the applications outsourcing ring. Oracle has established Business OnLine, an application hosting service. IBM has positioned its Notes/Domino groupware as a Web-accessible application offered by ISPs.

Meredith McCarty, an analyst with International Data Corporation, said he expects spending on services offered by ASPs to reach $150.4 million worldwide this year.

Over the next several years, IDC predicts the ASP market will grow at a rapid clip to reach $2 billion by 2003, a whopping 91-percent compound annual growth rate.

Microsoft's push into the market "will evangelize this market further," said McCarty. "One of the biggest challenges to date for ASPs is that it is an emerging market."

Microsoft's interests in the hosted applications market doesn't come as a total surprise. Just last week, the software giant detailed its jump into the Internet messaging market later this year with the much anticipated convergence of its Internet-based server applications suite and corporate messaging server software.

Part of Microsoft's BackOffice family, the Microsoft Commercial Internet System (MCIS) suite of Internet-based server applications includes Internet access, Web hosting, and e-commerce software will be combined with the next version of the software giant's Exchange messaging server, called Platinum.

With the MCIS/Exchange combination, Microsoft is looking to boost the scalability of Exchange and give MCSI the marketing momentum currently behind Exchange and continue it in the ISP messaging space.

One of the first ASPs to take part in the new pilot program is FutureLink Distribution, which will offer subscriptions to Microsoft Back Office products such as Microsoft SQL Server, Microsoft Exchange, and Windows NT Server for the new software rental and/or ASP market.

"This is a pivotal development in the licensing of software for the ASP industry," said FutureLink's CEO Cameron Chell, in a statement. "This will have far-reaching effects throughout the entire software industry--most notably, the ease of use with which people will be able to access software."

Fees for accessing FutureLink's Server Farm will include subscription access licenses which enable end users to access Microsoft products for the term of the subscription, as little as a month and as long as two years.

Similarly, as the user base fluctuates, FutureLink is required to pay to Microsoft a monthly server license subscription only for the number of servers used to service users connecting in that particular month.

Although the program is expected to grow with new members, one company in Las Vegas has begun a beta program for leasing out services provided by Microsoft's Exchange messaging server version 5.5.

Not part of the new Microsoft pilot program, Las Vegas Digital Communications has introduced its "Public" Microsoft Exchange Server, for a $9.95 subscription fee.

Las Vegas Digital allows users to maintain a central location for their email inboxes, contacts, schedules, and other data used by their Exchange client. It also allows users to access information from multiple computers and sync-up mobile databases. And users can also access their data from any Web browser on the Internet.

"We purchased an Exchange server and put it on a Dell server," explained Stuart Wilhoite, a corporate sales manager for Las Vegas. "Microsoft doesn't lose anything from this. We're just reselling our licenses."

Microsoft has not yet announced pricing for the BackOffice subscription program.