Microsoft moves to online delivery

Microsoft's Bill Gates says the new offerings demonstrate how software is "evolving through the power of services". Picture / Reuters

Microsoft's announcement this week of its plan to move software off the hard drive and on to the internet is being seen as a major paradigm shift in the way businesses will operate.

"Basically it's an indicator towards the end of monolithic Windows and Office desktops," says Dion Wiggins, Gartner Research vice-president and research director in Hong Kong.

Microsoft chairman Bill Gates this week unveiled Windows Live and Office Live, two new software services that will begin to migrate the company's flagship products to an internet-based distribution model.

Windows Live, which is available for beta testing at www.live.com, thus far appears to be an upgrade and integration of existing products available on services such as MSN.com, including email, messenger, virus and computer protection and access to favourite websites and information.

However, Microsoft says key points of difference from existing services include user customisation and an ability for developers to build applications for the Live platform.

Perhaps of more significance is Office Live, an online service aimed at small businesses.

With Office Live, Microsoft intends to give smaller companies - typically those with fewer than 10 employees - access to business software more commonly used by large corporates.

The basic package will include a free website and five email accounts, plus more than 20 subscription-based business applications that can be used online. These will include project, sales, customer, time, billing and expense management applications.

A beta version of Office Live will be released for testing in the US on an invitation-only basis in early 2006.

Gates said the new offerings demonstrated how software was "evolving through the power of services".

"Our goal is to make Windows, Office and Xbox further comealive for our customers at work, home and play," he said at this week's launch.

Wiggins says Microsoft's plan is a key statement of direction.

Given Microsoft's market power it is also an important indicator of the future of software overall.

Wiggins adds that although Windows Live and Office Live will target consumers and small businesses, the consumerisation of IT and impact of internet technologies will be felt by large enterprises, "maybe not directly and immediately, but pretty soon".

Microsoft New Zealand managing director Ross Peat says the move to online service delivery is a fundamental change "and clearly we see that's where the market's moving".

Peat says online services will reduce computer system complexity and give companies greater flexibility, and "that actually pays on the bottom line".

He adds the new services are ideally suited to New Zealand where the economic landscape is "heavily skewed" towards small business.

Microsoft's announcement follows plans by IBM to marry its OmniFind corporate search system with Google's free desktop search application to make a user-friendly tool for locating information in complex systems.

Google has also made a software and research pact with Sun Microsystems.

Wiggins is expecting competition to heat up, but says it's early days as rivals attempt to define their offerings.

And changing the business model - from a one-off licence payment to one based on advertising, subscription and transaction fees - may prove a challenge.

"If you can start a small business and the only thing you need is your end-user terminals and a network connection and you're operational, that's a pretty good way to start things," he says.

Online service delivery could also leave Microsoft vulnerable to infrastructure issues beyond its control.

IDC market analyst Jenna Griffin says Office Live is conceptually a "great tool", but broadband issues will challenge Microsoft in the local market.

The OECD recently ranked New Zealand 22nd out of 30 countries for broadband uptake.

"With a year to go before the release date, however," Griffin says, "this and other web-based applications could provide extra incentive for New Zealand to raise levels of broadband penetration."