Microsoft to Expand Web Services for Businesses

SEATTLE (Reuters)- Microsoft Corp, faced with Web rivals looking to poach its businesscustomers, said on Sunday it plans to broaden the availability of itsonline services for e-mail and collaboration software.

Last year, Microsoft started subscription-based online services torun its Exchange corporate e-mail program and SharePoint collaborationsoftware on Microsoft’s own computer systems as an alternative tocustomers buying their own hardware to run licensed software.

Microsoft initially limited those services to companies with morethan 5,000 workers, but the company said it will now offer the serviceto businesses of all sizes in the second half of 2008, after a testingperiod. The company did not disclose how much it will charge customersfor the services.

It will also begin to offer a free download of a software calledSearch Server 2008 Express that allows companies to search files anddocuments inside their network. The product will rival Google Inc’sSearch Appliance.

Microsoft plans to unveil the news during a speech on Monday byChairman Bill Gates at a conference for SharePoint, one of itsfastest-growing applications, which allows workers to share documentsand plan projects on secure Web sites.

Hosted Web services are gaining popularity among business customers,because companies do not need to spend a lot of money upfront to buyand maintain powerful computer servers.

Instead, companies can rent space on a computer server from aservice provider for a monthly fee and avoid being locked intomultiyear corporate agreements that are used by Microsoft for many ofits core software offerings.

It also lets smaller companies get applications normally reserved for large organizations.

"This is a market that is really starting to pick up. I believe itis going to going to get very large," said Karen Hobert, an analyst atBurton Group.

Google, Inc and a host of start-ups are aggressivelytargeting Microsoft’s traditional business customers with Webapplications that can be less expensive and easier to install oncomputers and run.

Last week, Google announced that it is offering a simple Web sitepublishing tool for office workers to set up and run their teamcollaboration sites.

Google Sites, as the new publishing service is known, is astripped-down version of SharePoint that is free to users of GoogleApps, a set of business applications that Google offers at a fractionof the cost of Microsoft’s comparable products.


Some companies such as Salesforce see Web services eventuallyreplacing traditional packaged software, but Microsoft is pushing a"software plus services" strategy with the promise that this optioncombines the best of both worlds.

"Microsoft is starting to feel the pressures of the Googles of this world," Hobert said.

Microsoft’s rivals have begun making inroads into the corporatemarket. Google says it has signed up more than 500,000 businesses overthe past year to use Google Apps. One appeal is the ease with whichoffice workers can get started and run their own team Web sites,without technical support.

But Microsoft said technology administrators in large organizationsare concerned about losing control over access and usage of thesoftware.

Redmond, Washington-based Microsoft said the products will work thesame as existing offerings, but the software will run on Microsoft’scomputer servers. Administrators, according to Microsoft, will maintainnearly the same level of control as if the software was on their owncomputers, but have fewer headaches managing related hardware, storageand software.

Microsoft has invested billions of dollars to build enormous datacenters packed with thousands of powerful computer servers and storagesystems to offer services to both regular consumers and customers inlarge organizations.

In order not to jeopardize corporate agreements that underpin manyof its businesses, Microsoft said any company who wants to switch overto its services will be credited for the remaining portion of anexisting contract, which can be applied toward monthly subscriptions.

Customers such as Autodesk Inc, Blockbuster Inc and Ingersoll-Randhave signed up for Microsoft’s services, according to the company.

(Additional reporting by Eric Auchard in San Francisco; Editing by Maureen Bavdek)