Microsoft Walks Tightrope Across Channel

Microsoft is skating on thin ice across the channel today after the vendor revealed it will offer its SharePoint and Exchange as hosted services to small businesses.

Microsoft Chairman Steve Ballmer announced at the CeBIT conference in Germany today that the software giant intends to offer both applications as online services to small businesses – previously something it only offered to large enterprises. By offering the services online to SMBs, VARs fear that end-users will go direct and therefore bypass the channel.

Mike Healey, CTO at Microsoft Gold Partner, GreenPages technology Solutions, said it was an interesting and reactive move by Microsoft. “[Microsoft] is reacting to the interest in the software-as-a-service market at the moment. But whether SMBs are going to be willing to make the leap onto both Exchange and SharePoint as hosted I am not so sure.”

GreenPages already offers its clients some hosted applications, anti-spam and saleforce, for example. “For us this won’t change a great deal and it gives us another option to offer customers,” he said.

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However, Healey said it could cause “some stress” for Microsoft’s more traditional channel that is not yet offering hosted services. “Microsoft is doing this as a reaction to Google and it is a valid concern that partners may be wondering if Microsoft will go direct with this strategy.” Healey said Microsoft’s real challenge that Google doesn’t have is that it is so highly dependent on the channel that it has to walk a very fine line. 

Dale Vile, senior analyst at Freeform Dynamics, agreed. He said Microsoft needs to be very clear about who it is targeting with its hosted offerings. “The last thing Microsoft needs is to undermine its channel. So it needs to be clever and be clear in exactly where partners can add value and be careful that it does not undermine what the channel offers.”

Vile said, however, that the channel is able to offer things that Microsoft can’t to SMBs. “Small businesses need enhanced support – like a surrogate IT department – and Microsoft cannot offer this itself. VARs can also offer configuration and low-end application development around this, so it can add value in that way.”

Alan Weinberger, chairman and CEO of the ASCII Group, a VAR buying group with more than 5,000 members worldwide, said some VARs could see this as a threat. “If Microsoft does take this direct and doesn’t then offer a fee for resellers who consult or implement, then it could make an enemy of the channel,” he said.

He said the ASCII Group has already started to work with Google around its online applications. “But whoever turns out to be most channel–friendly and offer rebates or a referral fee is the one the channel will support,” he said. “Google might have more simple technology – not everyone needs the bells and whistles that Microsoft offers – however, Microsoft is more channel-friendly right now.”