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Get Ready for SaaS: Software as a Service Will Transform Industry Says Microsoft CEO

"Ten years from now, 80 percent of users in this room will be running software with an outside service provider."

by / March 2, 2007
Adoption numbers may be low now, but most government agencies will start using hosted software within the next decade, according to Microsoft CEO Steve Ballmer.

"Ten years from now, 80 percent of users in this room will be running software with an outside service provider," said Ballmer, speaking yesterday to government officials at the Microsoft Public Sector CIO Summit in Redmond, Wash.

He predicted growth of hosted services for e-mail, desktop management, ERP and other applications. Although some software will remain on client hardware, it often will be managed remotely by third parties, creating a hybrid of software and services to meet user needs.

"The future is a world of software and service," Ballmer said. "The software you get will be managed from the cloud. It won't all be html and Web pages. But the rich client will be managed by a service provider."

Ballmer said the hosted software model is a good fit for the state and local government market, where agencies across the nation perform similar tasks such as issuing driver's licenses or inspecting structures.

"I've always been perplexed why ISVs [independent software vendors] don't span across areas with managed services for similar functions for multiple jurisdictions," he said.

Movement toward hosted applications represents a significant shift in the way public sector agencies think about software -- and a make-or-break evolution for companies such as Microsoft.

"The transformation of our industry to software as a service is a big deal," said Ballmer, likening it to other defining moments in IT such as adoption of personal computers, the creation of a graphical user interface and the rise of the Internet.

"Transitioning software to something that's not just handed to you, but has an ongoing service relationship is another fundamental transformation," Ballmer said, adding that how well the nation's largest software provider negotiates that change will define its future.

"Ten years from now, people will talk about how well we made the transition to software as a service," said Ballmer. "We know how to deliver software very well in standard form. But now, how do we deliver it as a service?"