Yahoo acquisition to boost Microsoft Saas offering

Microsoft's planned acquisition of Yahoo could boost the company's efforts to deliver software as a service over the internet.

Gartner said both Microsoft and Yahoo could benefit from a relationship. According to Gartner only a few companies can build such a business. "Google and Microsoft both have the money and the ambition to compete in such activities during the next few years. Other smaller suppliers such as Yahoo, Amazon and Salesforce.com that also want a piece of the future opportunity face pressure to ally themselves with or combine to compete with the "megavendors", Gartner said.

David Mitchell, senior vice-president of IT research at Ovum said Google Apps posed a long term threat to Microsoft Office. "Over time the functionality of Google Applications will become progressively richer and more complete, to the point that they will represent a real alternative. As a defence against this position, Microsoft needs to accelerate its own move into online services."

Mitchell said the online engineering capabilities of Yahoo will enable Microsoft to bring new services to market, to compete this Google.