Microsoft's services transition an uphill climb

Software giant will need to overhaul corporate culture, business relationships, among other areas, to execute software-plus-services strategy

If Microsoft wants to succeed in becoming a services company it will have to undergo a major transformation in its corporate culture, business model, and partner and customer relationships.

It’s a seismic shift, one that Microsoft itself recognizes, and one that partners, analysts and users say will determine whether the software giant can turn itself from a packaged-software company into a provider of what it calls “software plus services.” And it will determine whether corporate users view Microsoft as a trusted provider of Web-based computing resources.

At last week’s Worldwide Partner Conference, CEO Steve Ballmer laid out the most complete picture yet of his company’s enterprise future, detailing the ways it plans to deliver software and services. While on-premises software won’t go away, Ballmer said services hosted by a partner or hosted by Microsoft itself — or any combination of those two — will lead a revolution that combines today’s technology with new service models.

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If Microsoft wants to succeed in becoming a services company it will have to undergo a major transformation in its corporate culture, business model, and partner and customer relationships.

It’s a seismic shift, one that Microsoft itself recognizes, and one that partners, analysts and users say will determine whether the software giant can turn itself from a packaged-software company into a provider of what it calls “software plus services.” And it will determine whether corporate users view Microsoft as a trusted provider of Web-based computing resources.

At last week’s Worldwide Partner Conference, CEO Steve Ballmer laid out the most complete picture yet of his company’s enterprise future, detailing the ways it plans to deliver software and services. While on-premises software won’t go away, Ballmer said services hosted by a partner or hosted by Microsoft itself — or any combination of those two — will lead a revolution that combines today’s technology with new service models.

Ballmer told 8,000 partners during his keynote address that the move is “a long-term migration to bring the best of the Web together with the best of the enterprise. We need to bring together rich user-interfaces, offline and online access, and what I call personal integration to go in and bring things together, integrate them, store them and link them together in unique and arbitrary ways.”

Microsoft sees an intersection between its fledgling Microsoft Managed Services business and the acceptance by smaller companies of pure online services, such as Microsoft’s Dynamics CRM Live. Ballmer envisions a world of various client devices talking to a managed services-based infrastructure that delivers all the capabilities offered in Microsoft’s packaged software, such as Windows Server, Active Directory and Systems Center Operations Manager.

“Priority No. 1 in terms of our long-term outlook is this transformation,” Ballmer said in his conference address. “It is an ambitious project for us, but it is very important.”

Ambitious is a word many outside of Microsoft also are using. “This is a huge cultural shift for Microsoft,” said Ken Thoreson, president of Acumen Management Group, who led a conference session on the skills needed by managed-service providers. “It’s okay to make products, test them, quality-assure them and send them out to someone else; but when you are on the other end of the phone talking to a business, the sensitivity level changes [especially] on the support side,” he said. The front line of defense becomes a critical issue when hosting services for large numbers of customers, he added. Microsoft has to learn that skill, and the partners that come along on the services bandwagon also must have it.

Microsoft also will have to change in other ways including redesigning software to work in a services model, according to those already in the services trenches. That means adding multitenant capabilities, which let multiple companies use a single application. Microsoft will release its first multitenant software later this year when Dynamics CRM Live is launched.