Microsoft dove deeper
into the software-as-a-service market today with the general release of
Exchange Online and Office SharePoint Online, offering the hosted
applications both directly and through solution providers.
The
general availability of hosted Exchange e-mail and SharePoint
collaboration server come as no surprise; Microsoft has carried beta
versions of the two services for months on its Microsoft Online
Services portal and each application has been in a massive channel beta
program.
While
Microsoft will sell the SAAS applications to businesses of all sizes
directly, it’s counting on solution providers to deliver value-add
migration and enhancement services that improve upon end users’
experience, says Robert Deshaies, vice president of Microsoft’s U.S.
Partner Group.
"It’s the same code base as the applications, but slightly reduced code
set from the fully on-premise offering," Deshaies said. “Our partners
can build services around it. Most of our partners and integrators
don’t see this as a big profit opportunity, but it does provide an
opportunity for more services.”
Microsoft
has been steadily building its “software+services” strategy, looking to
compete against upstarts such as Google and ZoHo, which have garnered
much momentum in the business productivity space with their online,
low-cost applications.
Traditionally a channel-centric vendor, Microsoft raised concerns about
its SAAS strategy when it announced last summer at its Worldwide
Partner Conference a discounting structure for its services that many
solution providers called inadequate. Services discounting gives
solution providers 12 percent of the first year sale, plus a 6 percent
commission and then a 6 percent annuity for each year of the
engagement.
The low discounting structure plus Microsoft’s announced intentions of
selling services direct made many solution providers fearful that the
vendor would try to squeeze them out of the SAAS market. In
the Channel Insider 2008 Managed Services Survey, Microsoft was
overwhelming rated as the top threat to solution provides’ managed
services business over the next two year.
Deshaies understands the concerns solution providers may have about
Microsoft’s ultimate intentions, which is partly why the vendor
undertook such an extensive beta program for the Exchange and
SharePoint services. More than 1,500 solution providers and 18,000
customers participated by testing the applications, learning
capabilities and customization options and working with end users on
implementations.
“Every month we’re getting more and more aligned,” Deshaies said. “Our
partners are getting the first-hand experience and knowledge.”
Microsoft believes that once a solution provider lands an account with
software or a service, it will be able to convert more professional
services and product sales with that same customer. The Channel Insider
Managed Services Survey found end users will buy more software,
infrastructure management and professional services after they’ve
experienced an initial managed services offering (see graphic, below).
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Channel Insider asked more than 300 managed service providers
with more than 18 months experience in delivering managed services what
impact managed services had on their other product and services sales.
As shown in this graphic, managed service providers saw substantial
increases in sales of software and professional services following the
initial managed services engagement. |
As part of the SharePoint beta program, Evolve Partners worked with
implementing the services offering with two customers—one that was
already using an on-premise offering and a virgin account. Based on
that experience, Evolve—a solution and managed services provider in
Anaheim, Calif.—discovered it could sell high-value, high-margin
professional migration, customization and training services to its
customers.
“In a one-time migration from Exchange 2003 to 2007 it
is no different than if you’re doing it in the cloud. But once it’s
done on-premise, you go away. With a service, you can then step back
and ask how else you can help them,” says Tim Acker, Evolve’s chief
operating officer.
“So many small and medium businesses get through the migration, but
they don’t use the application. [Services] frees up the dollars to help
them improve utilization. That’s especially good with SharePoint so we
can help them with document retention and collaboration, instead of
having them worry what version they’re on,” Acker adds. “That’s a huge
value to the customer.”
Solution providers aren’t as concerned about Microsoft or other hosted
services taking business away from their traditional product sales. The
slowing economy is forcing many businesses—particularly small and
midsized organizations—to tighten their fiscal belts. Moving the IT
solution equation from a capital expense of a product sale, in which
they pay out a large sum up front, to an operational expense, where
they pay a monthly subscription fee, makes IT purchasing easier to
handle, Acker says.
Deshaies says early adopters of Microsoft’s Online services are finding
a new ability to sell into larger accounts. PointBridget, a
Chicago-based solution provider, added three new, large accounts in
which it integrated hosted and on-premise SharePoint applications. The
net result, Deshaies says, is PointBridge receiving additional orders
for professional services from the new accounts.
SharePoint and Exchange are two of Microsoft’s best-selling
applications. While some users may shift from on-premise to host
service versions of the applications, Deshaies predicts that Microsoft
and its partners will capture more net-new business from rivals, such
as Google.
“We are not seeing cannibalization or share shift. We’re seeing a
greater adoption by more types of customers,” Deshaies says. “We’re
actually taking competitive share away from some of those online
offerings. We’re recapturing mindshare from those types of scenarios
where some customers didn’t think of us because of the lack of
offerings.”
One area where Microsoft could potentially have a competitive impact on
partners is among service providers already delivering hosted versions
of Exchange and other applications. Intermedia, Verio and 1&1 are
among the service providers that both make Microsoft applications
available as a service to solution providers.
Microsoft’s expansion into the online services market is perceivably a
threat, but these hosted service providers and Microsoft concur that
the Exchange and SharePoint Online offerings are basic compared to the
enhanced services offered by other partners.
Where Microsoft’s expansion may benefit solution providers and
hosted-services companies is raising the level of awareness and demand
among end users through its marketing muscle.
“Microsoft is putting its marketing behind services and that’s going to
benefit all their partners,” says Lisa Coleman, director of marketing
at Intermedia.
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Channel News and Analysis 
