Reuters Summit - Microsoft braces for major customer shift

By Daisuke Wakabayashi

SEATTLE (Reuters) - Microsoft Corp sees tens of millions of corporate e-mail accounts moving to its data centers over the next five years, shifting to a business model that may thin profit margins but generate more revenue.

In an interview ahead of the Reuters Global Technology, Media and Telecoms Summit, Chris Capossela, who manages Microsoft's Office products, said the company will see more and more companies abandon their own in-house computer systems and shift to "cloud computing", a less expensive alternative.

Cloud computing is the trend by Internet powerhouses to array huge numbers of computers in centralized data centers to deliver Web-based applications to far-flung users.

Microsoft built its business selling software to run on local machines, both computer servers and personal computers, but, in recent years, it has invested billions of dollars in massive data centers, which are the basic infrastructure for a wide range of Web services.

It has started offering corporate customers the option of having Microsoft run their e-mail, collaboration or sales programs on the software giant's computers and delivering those applications over the Web as a monthly subscription service.

Capossela, a senior vice president at Microsoft, said it plans to be "agnostic" by offering customers the choice between a traditional licensing model or a subscription-based service model embraced by rivals like Salesforce.com (CRM.N: Quote, Profile, Research) and Google Inc (GOOG.O: Quote, Profile, Research).

"That's where we think we are far stronger than our service-religious competition who think it's all going to be in the cloud," he said. "A lot of companies are not ready to take their money out of the pillowcase and put it in the bank."

Exchange Online, the service offering for its Exchange mail and messaging server software, will be the primary application adopted by corporate customers, according to Capossela.