Microsoft reveals .Net pricing model

Microsoft Corp. Tuesday laid out its plans for a new business model in the emerging industry of delivering software as a service, detailing how it will charge consumers and business customers to make use of its set of Web services, called .Net My Services.

With new technology unveiled here at the company's Professional Developers Conference, Microsoft is working to convince companies to sign on to its strategy for building and deploying Web services. However, making use of the new tools will come at a cost to both developers and consumers.

As previously reported, Microsoft is developing a business model that will include everything from how Microsoft will charge consumers to use Web services, such as online storage and shared calendars, to how it will charge corporate customers and organizations that use .Net My Services with their own applications. "The point of this is that from a developers perspective we're making this very inexpensive," said Bob Muglia, vice president of Microsoft's .Net services platform, who unveiled the business details here. "Microsoft will invest hundreds of millions of dollars in the next few years to build out this platform. If this is going to cost a bunch of money, developers aren't going to bear the cost."

On the consumer side, the company said it will charge users through a subscription model, with Microsoft's Passport authentication service acting as the central point for a customer's set of services. Muglia said it will continue offering Passport and .Net Alerts, as well as .Net Presence, a service that locates an end user, for free. However, many of the services that rely on the use of more resources, such as calendars and document storage, will come with a fee.

"What we see is that the end user is at the center of this, so in the end we think we're creating a service users will be willing to pay for," Muglia said.

The MSN Web portal and Microsoft's Office productivity software suite will be two of the central platforms for Web services where Microsoft will charge a subscription fee, Muglia said. "We'll be introducing over time a deeper set of services through MSN and Office, and we'll have a subscription attached to it," Muglia said. "That's really where we think we'll generate the revenue."

On the business end, however, Microsoft is encouraging developers to begin making and deploying their own Web services based on the technology now. The company Tuesday handed out some of the early tool kits to make that possible, including the SDK (software developers kit) for .Net My Services and .Net Alerts, the first of the services to become available to consumers and developers. All the developer tools will continue to be available for free.

Once customers start deploying their applications, Microsoft will then start collecting money. At the low end of the scale, Muglia said Microsoft will charge small-scale developers US$1,000 a year to use .Net My Services and $250 for each application they create with the technology.

Most companies developing with the technology will end up paying $10,000 per year, and $1,500 for each application that is built based on .Net My Services, Muglia said.

A custom pricing plan will also be offered to business customers who have special needs for .Net My Services, including companies deploying the technology on a large scale. Customers that rely on these Web services to have high reliability and in some cases dedicated support are likely to pay more than $10,000 per year based on service agreements.

Offering four examples of how those companies can then generate money from their investments in .Net technology, Muglia said those companies can in turn charge customers on a subscription basis, with one-time fees or transaction charges. They can also generate revenue through creating Web services for advertising.

"The reality is that underneath any cool new opportunity there needs to be a way to make a good business out of it," Muglia said.

Microsoft has created 13 core parts to .Net My Services that it will roll out in the next year. Those include such services as online calendars and electronic wallets. "We'll add some over time, and in many cases we'll end up working with the industry … to develop services that are focused on specific industries," Muglia said. "They can be used and consumed by a wide variety of users."

In addition to that, customers must use Passport to manage access to all those services. Microsoft has already opened up Passport so that companies and competitors that use the same secure authentication technology can use their own single-sign-on services.

Many analysts have been skeptical about security in Passport, while privacy advocates have criticized Passport for gathering too much private information about users that could be misused for marketing purposes. Muglia tried to relieve those concerns here by reaffirming the company's claim that it won't use any of the information .Net subscribers reveal when signing up for the services for any secondary purposes.

"The user is in control of their information and they decide who they share it with," Muglia said.

The company also said it will take a "federated approach" with .Net, allowing companies that use Microsoft's Web services to store customer information on their own servers rather than a central repository. Those companies will be in control of all the data that their customers hand over to use the Web services, such as phone numbers and addresses.

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