How to Compete with Microsoft`s Hosted SAAS

While Microsoft's plans to sell hosted Microsoft Exchange and other applications directly to end customers has rattled solution providers, one of the software giant's largest partners is taking the announcement in stride.

Some might say that Ravi Agarwal, CEO of groupSpark, has a glass-half-full outlook about the new Microsoft play.

Sure, there will be downsides to Microsoft's entry into the market, admitted Agarwal, in that the market will become more saturated. But, he said, less than 1 percent of all Microsoft Exchange licenses are hosted today.

"The market for hosted Microsoft Exchange and Sharepoint is still pretty young," he said. "Microsoft's entry into it will create a lot of awareness for hosted Exchange and hosted Sharepoint."

Agarwal's company is one of the largest that already hosts Microsoft Exchange with more than 2,000 of its own partners that resell that service to end-user companies, so the Microsoft announcement March 3 had the potential to hit groupSpark particularly hard.

But Agarwal said that Microsoft's hosted Microsoft Exchange and Sharepoint services will always lack something that only the channel can add—third-party applications.

Take, for example, e-mail anti-spam service Postini. Now owned by Google after an acquisition a year ago, Microsoft is extremely unlikely to ever bundle Postini in with its hosted application offerings. But that is something that groupSpark has offered for some time now.

Read about recent Postini price cuts and the channel's reaction here.

"From an SMB perspective, Microsoft won't have the best-of-breed third-party apps," Agarwal said.

Another thing Agarwal has told his partners that he can offer them and Microsoft can't is support for BlackBerry and Treo. Because the operating systems behind these two popular mobile phone systems compete with Windows Mobile, Agarwal said "Microsoft will obviously not integrate them.

"You just can't resell without having the BlackBerry up sell available," he said. And because of Microsoft's market entry, groupSpark more aggressively will be seeking additional value-add third-party applications to include in the services that its VARs can offer their customers.

And besides the third-party applications partners can use to compete with Microsoft's direct service, Agarwal also noted that groupSpark's hosted offerings were available as a white-label service, letting VARs sell to clients under their own brand rather than having to use the Microsoft brand if they sell Microsoft's hosted service.

Agarwal believes all these factors give groupSpark and its resellers an edge against giant Microsoft.

"It almost seems as though the Microsoft strategy is not that well thought out yet," he added.