Hosted Services Becoming Lower Priority

Hosted services will get a lower profile at Microsoft as it refocuses on its traditional business of selling software. This shift comes from a number of factors, including the inability of Microsoft to come up with compelling and lucrative hosted services, and the slow emergence of key enabling technologies, such as broadband Internet access and digital rights management. If this trend continues, ISPs and providers of Web-based services will face less direct competition from Microsoft and could receive new incentives to partner with the company, but companies and users who depend on Microsoft’s hosted services might have to turn elsewhere.

Hosted Services a Response to Internet

Beginning in 1995 when Bill Gates sent a memo urging Microsoft employees to catch the Internet “tidal wave,” the company started devoting significant resources to developing and operating hosted services—Microsoft-branded services offered over the Internet or another network. (For examples, see the chart “Examples of Hosted Services“.) It’s important to differentiate these hosted services from the more generic concept of “software as a service,” which Microsoft uses to describe many things, including software that automatically updates itself (such as Windows Update) and subscription-like licensing models for traditional packaged software. Hosted services also differ from the company’s professional service and support businesses, such as Microsoft Consulting Services.