Trend Toward SaaS & Microsoft's Hybrid Web-based Strategy

In response to the increasing adoption of Software as a Service (SaaS), Microsoft has announced its new hybrid business model strategy. The move is a careful step amid the software industry's shift in licensing and delivery models to meet growing desire for new ways of paying for services rather than software licenses.

In the recent years, SaaS is gaining more acceptance from customers, though still in limited scale. CIO Insight's survey indicated that 51% of its respondent said their companies used or would soon deploy SaaS. Half of those deployments, however, are within specific business units, functions or geographic regions; fewer are companywide. Most companies use SaaS and application service providers on a case-by-case, application-by-application basis. In addition, there is still significant concern regarding security and skepticism in the possibility of total cost reduction.

Microsoft is well aware of SaaS trend. Ray Ozzie, Microsoft’s chief software architect, has also accepted that “today the transformation toward services is the most significant one in the software industry.” However, Microsoft is still in a position not to believe that the trend will be big. They want to move into the new space while minimizing cannibalization of its existing cash-cow software market.