Online Services Okay with Partners

• By theWHIR.com , March 11, 2008

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Online Services Okay with PartnersBy Liam Eagle, theWHIR.com

March 11, 2008 -- Last week, Microsoft (microsoft.com) announced that it had begun the beta program for its Online Services offering, a version of Exchange and SharePoint hosted by Microsoft and delivered as a service.

Intended for launch in October, and delivery through Microsoft's partners, the service's introduction raised some questions about the impact the service's announcement might have on existing partners currently offering hosted solutions based on Exchange or SharePoint.

According to the company and some of its partners, the Microsoft-hosted offering is no threat to those solutions. In fact, partners are optimistic about the publicity that Microsoft's added focus on the SaaS-delivered model for these prospects will inevitably bring about.

Michael van Dijken, Microsoft's marketing manager for hosted solutions, says the Online Services applications differ in a few fundamental ways from the partner-hosted solutions offered by companies like Intermedia (intermedia.com) or groupSPARK (groupspark.com), which provide hosted, or private label, versions of applications like Exchange or SharePoint.

Online Services, says Van Dijken, is designed more for the value added resellers or systems integrators that make up a significant portion of the company's network of 400,000 partners.

"Think of this," he says, "as a great way to for value added resellers or system integrators to get into the hosted space. If they serve customers through an on-premise model, this is a way for them to sort of jump into the SaaS delivery type of opportunity."

From Microsoft's perspective, Online Services is partly an opportunity to make service providers more core to the company's partner ecosystem, pursuing a model that may be essential among evolving ideas of software distribution.

"I mean really viewing service providers as potentially the OEMs of software in the future," he says. "That's not a definitive statement, but thinking about where customers will go to buy their software in the future and considering that telcos, for example, have both a billing relationship and a network connection into most small businesses, that's a good place to think about where software might be distributed in the future."

Online Services is a simple way for partners to get involved in offering their customers an entry-point into hosted IT services. The kind of hosted Exchange solution more relevant to the hosting business is really a different creature altogether, says van Dijken, and one that Microsoft is just as keen to nurture.

"We'll continue to support the partner-hosted model," he says, "and give partners the tools they need to do that. And the road map I've seen has the next two versions of Hosted Messaging and Collaboration already mapped out and discussions going beyond that. So we're going to continue to invest."

One of the key differences between Online Services and the partner-hosted version might be the shortcomings of the Microsoft-hosted offering. Online Services, says van Dijken, will be a stripped-down offering that includes all the functions of Exchange, along with some basic spam and virus filtering. But it won't meet any sort of SEC or industry-imposed standards for security or archiving, such as Sarbanes-Oxley. It won't meet some of the customization requirements many customers will have. A key example would be the lack of support for BlackBerry Enterprise Server, a feature a small business is quite likely to require, and one that Microsoft's own interest tend to preclude it from supprting.

Ravi Agarwal, CEO of groupSPARK, agrees that Online Services bodes well for his business. In particular, the marketing effort behind the new offering has the potential to bring a lot of attention to Microsoft's applications.

"The biggest challenge we have today," says Agarwal, "is that people don't know that Exchange hosting exists, and that they can get it at such great prices."

And he places a lot of faith in the fact that the opportunity to customize its offering will attract customers.

"Microsoft is going to spend a lot of money to promote its offering, but that offering does not include Blackberry Enterprise Server. And most businesses have executives that carry a Blackberry, and there's no way you're going to get them to convert to Windows Mobile Phone. So they're going to check out the Microsoft offering, and say 'it's a great concept and I'm interested,' and they're going to see Microsoft doesn't have that option."

That customization will be essential for groupSPARK's private label customers, says Agarwal, a group that quite often includes hosting providers, who sport a business model that doesn't really jibe with Online Services' mode of delivery.

"I'm not sure if any hoster's going to be able to sell it properly," he says, "because the way this whole system works, the online service will only be sold through Microsoft online partners. The partner has to create an order to their Microsoft licensing system. And quite frankly, most hosters don't have that kind of license agreement. It's going to be an enterprise license agreement. And hosters don't have the ability to sell that. They'd have to buy that from a licensed distributor of Microsoft."

Microsoft will focus on distributing Online Services through those service VARs and SIs more reliant on those in-person or on-premise relationships. Partner-hosted offerings it will promote separately. It has already started, to an extent.

"We're going to promote partner-hosted offerings with our marketing effort," says van Dijken, "so there will be a benefit to companies that do hosted Exchange themselves. In fact, if you go to the product page, you'll see toward the bottom of the 'how to buy' page, there's actually a link to a directory of hosted Exchange providers. Basically if Microsoft's offer does not meet your needs, or if you want to buy now and not wait until October, go and check out these other offers.

"We're trying to include that in our messaging, which is an important part of the strategy."

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