VARs Eye Boom in Hosted Microsoft Exchange Business

When Microsoft released its own hosted Microsoft Exchange and Microsoft Sharepoint offerings to sell directly to customers this past March, many observers expected a cold reception from the company's longstanding channel partners.

And some may indeed have felt a shiver when they heard that the world's largest software company, and one that had always been considered a friend to the channel, planned to sell such services direct.

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But several of the company's larger partners that already were selling hosted Microsoft Exchange services greeted the announcement with a qualified welcome. Were they looking forward to the competition they were about to get from Microsoft?  Not really. 

But, they said, the fact that Microsoft was getting into the game both validated the market and was sure to increase awareness that such services are a viable option for businesses.  That's the kind of promotion Microsoft partners, even the big ones, can't buy for themselves.

"The way we will benefit is for Microsoft to tout the benefits of this," said Danny Essner, director of marketing at Intermedia, one of the largest hosted Microsoft Exchange providers and a Microsoft Gold partner. "We are very excited about Microsoft entering the market."

And while the competition looks daunting – just do a Google search on hosted Microsoft Exchange and look at the long column of advertisements on the right side of the screen – it is an emerging market that has hardly been penetrated. Analysts say it is set for a boom, estimating that only a 0.5 percent to 1 percent of the market has been tapped. Gartner predicts that number will grow to 20 percent by 2012.

"The opportunity is enormous," Essner said.

Maybe that's why Ingram Micro has teamed up with yet another hosted Microsoft Exchange provider, GroupSpark, to add hosted Exchange to its Seismic portfolio of managed services and software-as-a-service offerings.

GroupSpark's CEO Ravi Agarwal says that Microsoft's own hosted Exchange offering will always be of less value than what VARs and MSPs can offer.  That's because the channel can add more value with third-party applications, such as Postini.Microsoft is extremely unlikely to ever bundle the Google-owned Postini products with its hosted applications, but that's a natural combination for VARs to offer.