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Coming From Microsoft: 'Hosted Everything'

Within a year, Microsoft plans to offer hosted implementations of SharePoint as well as its CRM and ERP applications.
Gates also telegraphed a possible move in that direction.

"You can say we've been in the hosting business forever,” he said in the interview. “Hotmail, you know, the world's biggest e-mail system, is hosted by us. And as we've put more features in there, and even have you pay for subscriptions to get some of those advanced features, that's Exchange in the cloud. So you'll have Exchange in the cloud, Exchange running in partners like mostly telcos, and then Exchange running on premises. And you've got to have a spectrum of choices people have there."

One longtime Microsoft VAR said the software behemoth is merely facing up to reality. "They have to play in every playground. That's the way of the world," said the partner, who requested anonymity. He and others also said current Microsoft products don’t necessarily lend themselves to running in a shared environment.

On the other hand, products like Salesforce.com and NetSuite were built from the ground up for such use. Microsoft would have to adapt and, probably at first, would "do so by brute force," one company insider said, adding that over time the software vendor would figure out a more elegant way.

Rival executives seem unfazed by Microsoft’s hosting aspirations. "They're eight years behind. We've been at this a long time. If the software is not multitenant, it's a losing proposition. We can put 50 companies on one resource," said Zach Nelson, CEO of NetSuite, San Mateo, Calif. "[Microsoft] tried to talk partners into hosting Great Plains, and partners lost their shirts."

Salesforce.com CEO Marc Benioff said what Microsoft has offered through hosting partners and what it would offer on its own would be the same thing. "What's the difference? It's the same single tenant product--just a rev from the 1.0 product," he said.

One thing is certain: Microsoft is exploring myriad ways to deploy and charge for software, ranging from subscription models a la MSN to easier ways for companies to buy incremental products not in their current Enterprise Agreements. Some industry observers liken the hosting move to the "turn on a dime" shift that Microsoft executed years back when it discovered the Internet.

When asked which other products and services Microsoft would host, another Microsoft insider said, "Everything. Hosted Office. Everything hosted."