Microsoft has been banging the drum on its so-called software + services strategy with increasing fervor over the past several months, but I've always felt there was something missing. For example, while the company offers services like Windows Live Hotmail, Windows Live Calendar, and Windows Live Contacts to individuals, small businesses, and educational institutions, these services are not built on top of the enterprise server products that Microsoft separately sells to companies of all sizes. If Microsoft's servers are so scalable, reliable, and functional, why have the company's hosted services been such a minor player in it this age of software + services?

That's all changing this year. While Microsoft hasn't announced a complete rearchitecting of its Windows Live services, the company did announce that its Microsoft Online Services (MOS), which are based on Exchange 2007, SharePoint 2007, Office Communications Server 2007, and Live Meeting 2007, will be expanded dramatically this year to accommodate businesses of all sizes. Currently, MOS is available only to companies with 5,000 or more employees.

This is a hugely important step for Microsoft customers. Today, MOS is available in two forms, which Microsoft calls MOS Standard and MOS Dedicated. With MOS Standard, all of the MOS services are hosted remotely, but users gain access to the same Exchange and SharePoint functionality they'd get if the servers were managed in-house. MOS Dedicated is generally aimed at the largest companies that need a dedicated architecture, and it supports a wider range of client access types.

With this expansion, MOS is being brought down-market, so even small businesses will be able to access hosted Exchange and SharePoint services, over the Web. And Microsoft will give these companies simple Web dashboards to manage and monitor the services.

The most telling comment I've seen about this service echoed a concern I've had burning in the back of my head for a while now. "We don't see running the servers and networks and software as a differentiator versus our competitors," Esat Sezer, chief information officer at Coca-Cola Enterprises told "The New York Times." I read this sentence over coffee on Monday morning and had to resist the urge to cheer. He is exactly correct: For most businesses, IT is a necessity, a means to an end, not the end itself. For thousands of IT pros around the world swamped by the necessity to constantly put out technological fires and unable to proactively institute solutions that would actually save time and money, I think it's time to start thinking a bit differently. Hosted services are a viable solution along these lines, and now they're available to a far wider range of companies. Or they will be soon, at least: The new version of MOS is currently in limited beta and will ship publicly in the second half of 2008.

The picture for Microsoft partners is a bit murkier. While the software giant is pushing the opportunities that are being creating by offering its enterprise solutions as subscription services to customers of all kinds, it is in some ways undercutting some key partner revenue sources. Consider the language Microsoft uses to describe the benefits of this program to its partners, who will be able to "resell, customize and provide consulting, migration and managed services for customers." None of these seem like particularly long-term relationships to me, unlike other partner programs in this space, like remote management of Small Business Server (SBS) installations. In some ways, as Microsoft's hosted services get more sophisticated, the opportunities for partners may become a bit more constrained. They're certainly going to change.

Regardless of your position in the Microsoft ecosystem, this new MOS announcement could very well change things for you in dramatic ways. Overall, I think it's a hugely positive step, one that will both dramatically increase the user base of Microsoft's server solutions while reducing complexity many companies, regardless of size.

This article originally appeared in the March 4, 2008 issue of Windows IT Pro UPDATE.