Microsoft Corp this week lent its weight to the growing market for application outsourcing announcing a series of closed pilot programs designed to test the feasibility of hosting its BackOffice software for companies for a fee. The pilots are being carried out in conjunction with a series application service providers (ASPs) who are testing everything from pricing to product delivery by partnering with Microsoft’s Network Solutions Group, part of Redmond’s Consumer and Commerce division. The software giant declined to say who its partners, which it refers to as commercial service providers, are, adding that the pilot schemes started back in April and that a formal announcement could be made in the next couple of weeks. Microsoft says the aim of the programs is two fold. Firstly, to allow Microsoft to work with providers and customers to gauge the level of demand for application hosting services and secondly to test program features and concepts in order to determine those that best meet customer needs.
The Redmond software giant is the latest in a long line of vendors to move into the market for outsourced applications, billed by many to be the basis of the second chapter and next wave of the internet age. While Microsoft isn’t yet committing itself to any definite plans, it seems unlikely Redmond will allow itself to be left behind. The majority of the large ERP (enterprise resource planning vendors) have already announced outsourcing strategies either hosting the software themselves, as in Oracle Corp, or partnering with third parties, such as Qwest Communications Inc, US Internetworking, Corio, Enron and Exodus. According to market analysts IDC, the ASP market is going to be worth $2bn by 2003 while application outsourcing is reckoned to be $21bn market by 2001.
At least one ASP, FutureLink Distribution Corp, has beaten Microsoft to the punch and has started offering BackOffice applications on a subscription basis. The provider is charging customers set fees for accessing its server farms which house, among other things, Redmond’s applications – Microsoft NT Server, Exchange and SQL Server. Included in the charges is a one-off subscription access license (SAL), which gives users access to the software for a given period of time ranging from two months to two years. On top of that, users will be charged a monthly server license fee according to the number of servers allocated to the company.
As well as undergoing pilots with ASPs, Microsoft is also rumored to be carrying out a number of internal projects. A spokesperson said the company’s Premiere Support and Consulting Services divisions are currently looking at how Microsoft will need to modify its products to fit the ASP model. In addition, its Business Solutions Group has been working with e-commerce companies to test the feasibility of hosting Microsoft and third- party commerce applications.
