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If you can't beat 'em – surround 'em. That may be the crux of Microsoft's emerging strategy for combating emerging software-as-a-service (SaaS) competitors.
Although Microsoft (NASDAQ: MSFT) executives continue to criticize Office competitors such as OpenOffice.org, Sun's StarOffice, and Google Docs as inadequate for most users' needs, the company is not beyond changing directions when it sees that the herd is going against it.
That includes, according to a third-party firm that claims to have been briefed, upcoming software licensing changes that will let companies stream Microsoft's Office applications to users' desktops as different parts of the programs are needed.
In that regard, Microsoft has been gradually getting its feet wet in recent months, beginning with its upcoming consumer subscription service for Office 2007, which it has codenamed Albany. Albany, which is not fundamentally a streaming service, is currently in "private beta," according to the company.
It's difficult not to draw a connection between streaming Office to users' desktops and a recent announcement by a very senior Microsoft executive regarding use of application virtualization to deliver applications to corporate customers.
"Virtualization is the key… You might have several thousand business applications in your environment, and it's really a problem to have to manage several thousand operating system images," Bob Muglia, senior vice president of Microsoft's Server and Tools Business, told attendees at the company's Microsoft Management Summit 2008 in Las Vegas last week.
"What you really want is to be able to separate those operating system images out, have a small number of operating system images that bring together the combination of the underlying operating system and the middleware that you run, and then have your applications fully separated," he added.
That is, while there are efficiencies and cost savings to be gained from operating system virtualization – as in the company's forthcoming Hyper-V hypervisor – virtualizing the applications themselves also offers benefits.
While Muglia's statements do seem to point at least in the direction of services like streaming Office to users' desktops, however, officially Microsoft has no comment.
"While we are always looking at new ways to make it easier for our customers to get Microsoft Office, at this point, we do not have any pilot in place to offer Microsoft Office through streaming," a company spokesperson told in an e-mail.
Its actions say otherwise.
The official line, however, appears to clash with what a third-party application virtualization firm said in an e-mailed statement to in April.
"Endeavors Technologies … today announced support for the Microsoft program amending the Service Provider License Agreement (SPLA). The new program allows service providers to stream Microsoft Office for delivery through a software-as-a-service (SaaS) model," the statement said. Microsoft has yet to announce changes to the SPLA that would enable customers or third parties to provide such a service, however.
Given Microsoft's reticence to talk about the alleged pending license changes necessary to make streaming Office an option, it appears that Endeavors spoke too soon. An Endeavors spokesperson was not immediately available for comment.
That still leaves open a larger question: Why would Microsoft undercut its own shrink-wrapped products by selling them on some kind of "utility" basis? – charging for what's used rather than a flat license fee or an annual license.
"With technologies like SoftGrid, that will be possible in the future, and overall what we are doing is working to move our server applications into a stateless environment so that they can be composited together at runtime so that the applications don't need to go through an installation process on top of the operating system. They can simply be copied," Muglia said. (Microsoft acquired SoftGrid, now renamed Microsoft Application Virtualization, in 2006 when it bought out Softricity.)
Roger Kay, president of Endpoint Technologies, thinks Muglia and his supporters are onto something. "You can see, in what Muglia is talking about, the seeds of that kind of [streaming Office] service," Kay said.
The reality, said Kay and two other analysts contacted by is that Microsoft probably realizes it would be better for it to change the business model for one of its two largest cash cows itself rather than wait for competitors to engage in their own high-tech version of cow tipping.
"They're putting their cash cow on a diet before someone else does," Dana Gardner, principal analyst at Interarbor Solutions, He cautioned that Microsoft has to be careful to move only when it's necessary – so as not to gut shrink-wrapped sales any sooner than necessary.
That doesn't mean that Microsoft can afford to hold off very much longer, however.
"It behooves Microsoft to get into this now, by taking a look at the different business and delivery models, so they can have a foot on the ground when things start picking up," Charles King, principal analyst at Pund-IT, told
Endpoint's Kay agrees. However, he added, there is not likely unanimity throughout Microsoft as to whether it's the right idea at the right time. "The guys who sell Office don't find Office in the cloud that compelling [so] I think you have to look at it as a conflict internally," Kay added.
Actual announcement of the possible Office streaming license change is reportedly slated for June, but the Microsoft spokesperson would not confirm that.
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