With respect to Google's cavalier response to Microsoft's move, allowing businesses to host the Web applications on their own servers for their employees could bust barriers to SAAS adoption. Some enterprise customers have been reticent to move to Google Apps, Zoho or other SAAS collaboration suites because they feared relinquishing control of their sensitive business data to software vendors.
Forrester Research analyst Sheri McLeish agreed this is a valuable competitive differentiator for Microsoft.
"Absolutely - businesses like to retain control of their content, especially in more risk averse industries like financial services," McLeish said. "Microsoft's approach lets the business decide how they want to provide web access for their information workers, which will appeal to many businesses that may have been hesitant to cede control of their content.
Moreover, McLeish expects Google and Zoho to follow Microsoft into self-hosting to beat back a company she sees eating into its rivals' SAAS shares. "As they continue to mature their apps and enterprise strategy they will need to address this desire for control and flexibility."
Still, as much as the two enterprise delivery options provide alternatives to Google and Zoho, Microsoft's move into Web-based applications is a risk for the company, McLeish acknowledged.
Microsoft is used to charging some $150 for compact disks containing Office applications Word, PowerPoint, Excel and OneNote; delivering free Web-based versions of the software could kneecap those sales. In effect, Microsoft isn't just competing with Google and Zoho -- it's competing with Microsoft.
Zoho CEO Sridhar Vembu agreed, telling eWEEK in an e-mail:
"How far do they want to go with their online offerings? They clearly recognize the risk - almost $16 billion in revenue (and almost the same in gross profit) is involved here, one of the largest franchises of software. We do not believe the $16 billion in revenue/profit is defensible, but our guess is that Steve Ballmer does not want to be the CEO who gives that news to shareholders."
Vembu further argued that while Microsoft is just getting its productivity feet wet online, Zoho will work on integrating its SAAS collaboration tools into its business applications for CRM, business intelligence and project management.