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SAN DIEGO—As Project Green, the multiyear—and multiwave—plan to revamp Microsoft’s business applications around a services-oriented architecture and unified code base, takes shape, it may be only a matter of time before Microsoft enters the hosted applications services space.

That possibility was discussed by Microsoft Corp. executives at the Microsoft Business Solutions Convergence show here this week.

Microsoft currently relies on partners to host its business applications and sell access to them as subscription services. But as the Microsoft applications move to a componentized model on a services-oriented architecture—planned for 2008—hosted applications services from Microsoft could soon follow.

Doug Burgum, the Microsoft senior vice president who heads the Microsoft Business Solutions group, noted that the company has already had success with hosted services such as its Hotmail e-mail service and Microsoft Network Internet service.

The model could some day be applied to Microsoft Business Solutions applications, he said.

“There may become a time in the future when Microsoft Business Solutions has the platform to make applications available as hosted services,” Burgum said, during a question-and-answer session with reporters and analysts Monday.

But he said Microsoft planned to upgrade its applications infrastructure through Project Green before it made such a move.

Click here to read more about the history of Project Green.

“We’re not interested in a one-off move. We’re working on a broad company strategy.”

Burgum went on to say that he didn’t think the demand for hosted application services was that significant despite the success of, which has racked up 13,900 customers and 227,000 users for its hosted CRM (customer relationship management) application service since launching the service five years ago.

“ has certainly attempted to create demand, but I’m not sure that it’s really there,” said Burgum.

“They have a very underrated sales force that’s done a terrific job. If they were selling licensed on-premise software, they may have had the same success.”

Burgum said that the growth rates for Microsoft’s licensed CRM application, which has 3,500 customers and 70,000 users a little more than two years after it was first released, “are actually quite similar to’s.”

Next Page: No panic before making a move.

He reiterated that Microsoft wouldn’t “panic” in the face of’s success and would wait until its next-generation application platform was in place before making a move into the hosted space.

Lynne Stockstad, general manager of marketing strategy for Microsoft Business Solutions, said that hosted applications services had experienced only “pockets of success, not mass adoption,” but said that getting into the hosted space was likely in Microsoft’s business applications future.

“We do expect that,” said Stockstad. “As we move into a fully Web services architecture, that’s one of the scenarios we could pursue.”

If Microsoft does move into the hosted space, CRM would likely be the first space it would try.

Brad Wilson, general manager for Microsoft CRM, said that Microsoft CRM is already on a modern, unified code base and supports a fully componentized architecture.

Read more here about customers’ dissatisfaction with Microsoft’s delayed CRM release cycle.

He said most of the Project Green enhancements would come to Microsoft CRM by the end of this year, rather than in 2008 for Microsoft’s back-office applications.

“It’s important for us to be hostable,” said Wilson. “We’re not making any communications at this time about when we’ll be delivering hosted applications, but we look at as important to have the ability to support different business models.”

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