Yesterday at the Worldwide Partner Conference Steve Ballmer announced that Microsoft will be entering the software services space and launched MSCRM Live. The reaction seems to run the gamut from downright surprise to outright consternation even though this has been a stated intention since the dotcom era.

Lloyd Ketchum summarized the situation very well:

"Microsoft has a problem - a big one and as software and services inverts to services and software [and that will happen], those in the channel are going to either drown, or make it to shore and do something else.

There is a cat fight the likes of which we have never seen before that is brewing between Microsoft and Google. Where services over software will win out over software and services, because it is cheaper, easier to deploy and easier to support, and because it requires fewer "partners" (it may not happen over night, but it is going to happen)

As networks and software begin to communicate with one another more, there is less room for partners as there is less need for them - there is less to set up and less to break."

I really like how Ketchum inverts the words "software" and "services" which I think is very illuminating. Software is maturing to the point where you plug-and-play technology to cater to a specific service need by a significant customer segment.

AND, you can expect Microsoft to go after an opportunity like this in a big way. I almost want to say this again, but I'm sure you get the point.

How big is the opportunity?

Dick Weisinger claims:

"Gartner is predicting that the worldwide SaaS market will grow from $6.3 billion in 2006 to reach $19.3 billion by the end of 2011.  In 2006 the growth rate was 26 percent and the prediction is for growth to continue at 25 percent a year through the end of 2011." 

A growth rate of 25% a year is staggering. Every large ISV is thinking about their services strategy, not just Microsoft. If they are not, they should be.

In the words of Mick Jagger and Keith Richards:

"I said
Hey, you, get off of my cloud
Hey, you, get off of my cloud
Hey, you, get off of my cloud
Don't hang around 'cause two's a crowd on my cloud, baby"

Not anytime soon…. Not anytime soon, baby.