One very interesting thing about Gates' announcement was the decision to offer the service to all businesses–not just large ones. I wonder whether that was in response to market reaction to the earlier offerings? It seems to me, initially, small businesses (say, under $50 million in revenue) may benefit the most from this type of software-as-service offering. IT departments at many smaller businesses are able to provide adequately core business services such as those being offered, but they lack the funds and resources to provide redundant systems with rapid fail-over capabilities.

Microsoft is offering 99.9 percent availability (for its SharePoint Service). That probably is better than most small IT shops could handle. Many smaller companies constantly are battling for new hardware. Once they get that hardware, they battle for rack space or power. Small companies may have all mission-critical systems at a hosting facility with limited space available. Freeing up additional space by outsourcing may be a viable solution.

Larger organizations tend to have more funding and resources available, so server capacity isn't the real issue. In fact, many large organizations already outsource their infrastructure and then pay a negotiated "lease." Some of the charge schedules for a Wintel server always struck me as excessive, but I have been assured by those who should know the TCO for an outsourced server is less than the TCO for an "owned" server.

Why that is puzzles me. IT cost should be a wash. When IT infrastructure is outsourced, then the outsourcing business must charge more than its actual costs or it won't make a profit, which is why it is in business in the first place. So, if we won't accept the raison d'?tre for IT outsourcing as cost savings, then the only reasonable rationale for doing so has to be something along the line of core competency.

Microsoft's modest plan isn't to provide infrastructure outsourcing. Its plan is to replace virtually everything on the IT side of the fence for certain core business services. What you get for the price of your subscription is a turnkey operation.

Let's consider the Microsoft Office SharePoint Online subscription. SharePoint is Microsoft's intranet and collaboration platform. The local server version (MOSS–Microsoft Office SharePoint Server) enjoyed extraordinary success in 2007. It provides a stable and versatile platform for corporate portals, search, content management, and collaboration. A large SharePoint Server farm serving a large organization (25,000 users) easily could involve a half-dozen front-end and application servers with a clustered SQL Server providing back-end support. Disaster recovery and business continuation plans may necessitate a mirrored SQL Server for fail-over and some front servers ready to be rolled in.

The feature list for the SharePoint Online Service includes the following: unlimited number of sites; 250 MB per user; SSL; virus protection; business continuity and disaster recovery; SSO access; 24×7 Tier 2 Support (6 a.m. to 6 p.m. PDT for Beta); and that 99.9 percent availability we spoke of before. All in all, this is a pretty impressive list. That 250 MB for 5,000 users figures out to about 1.25 terabytes and is right in line with typical needs for SharePoint. Consider the cost of providing all these services for the 10 to 12 servers described in the previous paragraph. Consider the cost of purchasing and maintaining those servers. Consider the licensing costs necessary to run a MOSS farm (server licenses, MOSS licenses, CALs, and SQL Server licenses). I suspect Microsoft would not need to be extremely aggressive in its pricing model to make this a very attractive proposition.

I am not going to cite any numbers, but from what I have heard, this is going to be a no-brainer financially. The biggest stumbling block to this type of operation is the reluctance of business to cede control of its data. Are you really ready to have all of your corporate communications hosted by a third party? How does Sarbanes-Oxley work when someone else has all your data? Do you trust a third party to host your data? Do you trust Microsoft?

That last question probably was uncalled for, but there exists a recurrent paranoia regarding big business in general and Microsoft in particular. Forget Microsoft. The simple fact is there is some corporate data no organization is going to allow to be hosted on a third-party site. Corporate data centers often have servers that contain highly sensitive data located in a separate area of the data center under lock and key and with limited access.

What needs to happen to make a hosted solution palatable is to allow a mix of hosted and local solutions under the same licensing agreement or subscription. You may be perfectly comfortable with 85 percent of your data on a hosted intranet portal. But the other 15 percent, which never will leave the building, still may need to be accessed using a platform such as SharePoint. Microsoft should be willing to allow organizations to host internal SharePoint solutions without additional licensing fees. That would overcome a major hurdle for most organizations. No organization will relinquish absolute control over all its data–but a company might relinquish some of it.

Earlier I was talking about an organization with 10 to 12 servers for production and fail-over servicing about 25,000 users. So, what would you get if you ponied up the subscription fees for all those users? Would you really be assigned a number of actual (virtual or physical) machines with the appropriate configuration (check out the Microsoft recommendations for servers if you are doing your own hosting). And if I have my own servers, just how much access do I have to those servers? Can I get on the box and install some custom .NET code? What logs do I have access to? Can I see server event logs? Can I see SharePoint logs?

If all I get for the price of my subscription is plain-vanilla, out-of-the-box SharePoint, then Microsoft should aim for the smaller business market. Virtually every SharePoint installation I have seen requires custom code to perform some necessary business function. Take away customization, and many businesses will continue to host and roll their own SharePoint. As for messaging and communication, Exchange and Office Communicator generally don't require any customization and may make more sense for most organizations.

Many server applications have access models built on Active Directory. How is that configured when the application is configured as a service? Is a trust established between the business domain and a matching domain at the hosting site? Just what is the SSO "Sign In Tool"?

One simple modification that is frequently desired in SharePoint is alternate authentication. A business may need to open up some of its information to external partners. This often is configured by extending an existing Web application to a different zone and changing the authentication for the zone to use forms authentication, which may range from simple .NET database lookups to sophisticated single sign-on systems. Is anything such as this even possible, or are we restricted to using the Microsoft SSO?

Microsoft promises "Web form and phone-based Tier 2 support of IT Admin." Notice that does not include user support. Each business apparently still is responsible for its own internal support, which, of course, will necessitate Tier 1, 2, and 3. Level 2 and 3 support probably will need to go through Microsoft support for resolution, which may well increase help-desk SLAs. And there is the additional matter of "faith" in Microsoft support. Although it may not be justified, there is the perception Microsoft technical support is not particularly efficient or responsive. If I am relying on Microsoft for admin support for my Exchange server or corporate intranet, I must have total confidence in the level of support I can expect to receive.

We have touched on just a few decisions to be made when considering adoption of an online service model for core business needs. If the price is right, it is a solution that definitely merits further consideration. Once we move beyond cost, though, there are a myriad of questions to be answered and decisions to be made before we can make a recommendation. I think the answer is going to be easier for smaller organizations because it will allow them to offer more to the organization for the same or less cost. Larger businesses have a more difficult decision. No matter how you feel about the Microsoft solutions, online software services definitely will be in your future. Take the time to see how they may benefit your company.

Beta subscriptions to both the SharePoint and the Exchange services were available at press time.