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What is Software + Services?  
# Sunday, June 29, 2008
 
Exactly what Microsoft means by the term Software + Services (S+S) can be hard to puzzle out. For a good example of the confusion this can cause, see Phil Wainewright's post earlier this year about Microsoft's S+S mantra, then read the response from Gianpaolo Carraro at Microsoft and Phil's rejoinder to that. While the exchange is interesting, I'd argue that their underlying premise is inaccurate--S+S doesn't mean what Phil thinks it means.

It's easy to assume, as Phil seems to, that S+S refers only to scenarios combining both on-premises software and cloud services. Yet when Microsoft hired me to write a (now slightly dated) paper on S+S, I learned that this isn't accurate. As part of that project, I talked with lots of people in Redmond who were working in this area. Like Phil, I began with the assumption that S+S meant using both together, something that's not all that common today (although it certainly happens, as with iTunes). The truth is that Microsoft really means something broader than this.

S+S is in fact a label for the world we live in today, where individuals and businesses use both on-premises software and cloud services. Sometimes we do use the two together, but more often we use one or the other on its own. Zealots believe that pretty much everything will migrate into the cloud, while Luddites argue that almost nothing will. Neither group is right--the future actually lies somewhere between these two extremes--and so both are important.

So if S+S is actually just a term for today's broad world, why does Microsoft promote this label so strongly? The answer is simple: It plays to the company's strengths. Every vendor wants to shape this discussion (and thus our perceptions) in ways that benefit it. Salesforce.com, for example, uses its No Software slogan to tilt our thinking toward services, while vendors without a strong cloud services focus, such as IBM, continue to emphasize their on-premises offerings.

S+S is an attractive label for Microsoft because they're strong in both areas. With Windows and .NET, they provide one of the dominant on-premises platforms. At the same time, their massive collection of cloud data centers gives them services scale on par with Google, Amazon, and Yahoo.

It's certainly true that Microsoft's revenues are tilted much more toward the on-premises world, and as Phil points out, it's a safe bet that they'll work hard to maintain their position here. As the attempted Yahoo acquisition shows, they're also trying to get bigger on the services front, a business in which they're not even close to dominant.

Still, expect the company to keep promoting its strengths in both areas. As the seismic shift to services continues, every vendor will position itself in the most flattering way it can find. S+S is Microsoft's expression of how it sees itself in a world where both on-premises software and cloud services are important.

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