Lower Prices for Application Hosting

Faced with wholesale collapse among its application hosting partners, Microsoft has moved to assist them with a new licensing program that will reduce their costs. At stake is not only the market for Microsoft’s current products as hosted applications but also a key channel for delivery of future .NET-based services.

The new Services Provider Licensing Agreement (SPLA) updates the Application Services Agreement (ASA) launched in Aug. 2000. The new agreement offers lower prices, more flexibility, greater price stability, and a Web-based reporting system for licensees.

Microsoft’s Hosting History

The application hosting concept, which gives users access to outsourced applications via terminal services or Web browsers, grabbed the spotlight in 1999. Because applications run on servers managed by an application service provider (ASP), they are easier to manage and upgrade, and customers require less-powerful PCs and fewer technical staff.

This model posed a quandary for Microsoft. On one hand, it threatened the company’s traditional business by reducing the need to run local copies of products such as Office and by opening business applications to Web browsers running on any operating system. On the other hand, ASPs presented a possible market for Microsoft servers and matched some of its executives’ vision of “software as a service.”