Microsoft embraces Web with hosted services

22.12.2008
Though the quest to acquire Yahoo dominated news surrounding Microsoft's Web strategy in 2008, another story was brewing quietly behind the scenes that could be even more significant for the company in the long run -- its move to offer hosted business productivity services.

The company makes much of its revenue from selling software licenses to enterprises. Those customers are starting to see value in using software that's hosted remotely on the Web -- or in "the cloud" -- and less in building out expensive IT systems in-house, which is becoming even more cost-prohibitive now as economies around the world falter.

Even as it attempts to battle Google for a share in the online advertising market by offering hosted consumer services, Microsoft is keenly aware that the needs of its business customers are changing. In 2008, Microsoft delivered on a strategy it unveiled several years ago and offered the first hosted versions of key software infrastructure -- Office Exchange Online and SharePoint Online. The company plans to roll out hosted versions of Office Communications Server and Live Meeting in early 2009.

These services, even more than its online advertising strategy, indicate that Microsoft is embracing the Web as a business model and could be more significant to the company's bottom line in the long run.

"When Microsoft says, 'We are willing to make a change in how we do our core business,' that's a pretty big deal," said Matt Rosoff, analyst with Directions on Microsoft.

He said if Microsoft can get "some of its traditional big customers to online services," that revenue stream could be far more important to the company than online advertising revenue, at least in the short term.