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Why So Cheap?

Microsoft’s BPOS: Cloud Computing’s Silver Lining?

We don’t want to bust out the pom-poms, but it’s hard to argue with cost numbers like those. If anything, they beg one glaring question: why would Microsoft cut the legs out from under its own cash cows? Two answers seem sensible. First, a monthly service has huge benefits for both parties. Users get lower costs and a steady, predictable expense item. Microsoft also gets a steady, dependable cash stream. The issue of “well, times are tough so maybe we can stretch this software another year or two” vanishes. The software becomes more of a utility. Unlike changing from, say, MS Office to OpenOffice, the process of changing cloud platforms across an organization can be far more difficult and disruptive. Once you’re in, you want to stay in, and Microsoft knows it.

Second, as we said early on, the cloud is the future. If Microsoft doesn’t carry this service model to fruition, someone else, Google being first in line, will. The rewards for being the early winner in cloud services will be massive, in part because of the viral nature of the applications. Once you share collaborative apps internally, you want to leverage the same tools and benefits with partners outside your company, and that requires giving them a license. They catch the bug, want to start using it themselves internally, and so on.

And let’s not forget the rest of the world. Microsoft’s battles against emerging market piracy are legendary. You can’t pirate a cloud application.

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