Microsoft: losing the software + services game

Heaven forbid someone give Microsoft credit for being a technology pioneer, so I won't because they aren't, at least not in the SaaS and cloud computing arena. But the company is giving the clearest voice to the innovative idea of mixing packaged software with services in the cloud.

Although I chided the company for trying to bridge the two much as Sun tried to merge personal computers and Unix workstations back in the 1980s, some examples of the software + service model are compelling.

Look at Google Earth. Vast amounts of data that reside inside Google's data centers could not be kept up to date on every user's machine. Likewise, rendering the screen from afar would kill Google Earth's impressive performance. So Google smartly separated the application into, for all intent and purpose, a client-serve app in the cloud.

Apple's wildly successful iTunes program works in part on a local Mac and a remote server farm located in an Apple data center somewhere online. The service could not have worked if the company tried to deploy it without its desktop component.

The problem for Microsoft is not that it has the concept wrong. Software + services is the right approach for many ground-breaking applications. Rather, Microsoft's problem is that it lacks the applications that need the bifurcation. As Google Docs, Zoho and others have ably proven, desktop productivity apps like Microsoft Office work just fine in the cloud. CRM, of course, works well by itself in a SaaS model. And Microsoft's attempt to force CRM into a hybrid model falls short.  In fact, virtually every product in Microsoft's portfolio would work just fine as pure SaaS.

For Microsoft to prove its hybrid model beats the competition, it will need to offer compelling, new applications not half-baked hybrids. As it stands now, software + service will be embraced by Microsoft developers and users tactically for one-off applications they want to run in a hybrid fashion. Nothing wrong with that, it's just not game-changing technology.

Whereas a few trail-blazing CIOs are embracing SaaS and cloud computing at a strategic level. They are building their IT infrastructure around tools that exist primarily in the cloud. Unless there is a good reason to have apps run locally, they're not deploying them. If Microsoft is going to pioneer the software + service hybrid, it will need to pioneer new products and not wait for its ISVs or customers to do it for them.