Microsoft's plunge into the hosting arena isn't sending shock waves through partners who welcome the visibility the move brings but say many corporate users will find the Exchange and SharePoint services fall short of the mark.
Microsoft hosting partners welcome the visibility that the company's plunge into the hosting market brings, but they say many corporate users will find the Exchange and SharePoint services fall short of the mark.
The partners say that Microsoft’s pricing structure will cause them some disruption, but that users will realize Microsoft’s prices don’t include a full complement of add-ons, integrations, customizations, support and maintenance that they must purchase from partners.
The biggest upside hosting partners see is that Microsoft is shining a bright light on the benefits of hosted online services.
“Initially we had a concerned reaction that Microsoft was coming into our space,” says Ravi Agarwal, founder and senior executive officer of GroupSpark, Microsoft’s 2008 partner of the year in the advanced infrastructure/hosting solutions category. “But as we looked at the details we saw it was a limited offering. It really is an opportunity for us. Microsoft will spend a lot of marketing money to create awareness and that solves one problem for us.”
Microsoft Online Services (MOS), currently in beta and slated to come online later this year, include a Business Productivity Suite anchored by Exchange and SharePoint, and separate Exchange and SharePoint offerings targeted at users who are not always tethered to a PC.
“I think what they are going for is a simple way to get basic SharePoint,” says Paul West, a principal with provider SharePoint360, which has consulting and hosting businesses built up around the collaboration server.
Service station Microsoft last week revealed the pricing for its corporate collaboration services expected to ship this year. The Business Productivity Suite is a combination of e-mail and collaborative services that also can be purchased ˆ la carte. Options for Exchange and SharePoint services targeting workers who spend little time at PCs also are being offered. Microsoft plans a base service, and many corporate users will require augmentation from a third party for add-ons or customizations. | ||||||||||||||||||||||||
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West says that since most of his customers customize the platform for their specific needs that he doesn’t see Microsoft cannibalizing his business. “We provide the personalization and customizations a lot of people are looking for.”
Microsoft has yet to divulge all the details behind the services but has stated that it does not plan to become an integrator and that the online services will be entry-level. For example, users will not be able to customize their SharePoint installations.
Burton Group analyst Guy Creese says the research firm has found that highly tuned SharePoint installations need custom coding and third-party add-ons. “The issue with the current SharePoint service is you cannot put custom Web Parts into it. This is a backward step in functionality.”
What Microsoft may eventually work toward is a model that is already in action with hosting partners such as GroupSpark, Apptix and SharePoint360, who host services for customers and provide customizations, integrations with local systems and 24/7 support.
“The value proposition to the partner community is pretty low with this announcement," says Keith McCall, CTO of managed Exchange hosting provider Azaleos. “People who wanted to host Exchange before could make 30% profit margins on e-mail and other services like Blackberry support.”
McCall says Microsoft also is playing the role of a utility company, in which they own the relationship with the customer.
That is one issue weighing heavily on partners who would be left as a sort of subcontractor.
In the Microsoft model, companies sign up for MOS via a portal where they also indicate their partner contact, according to Mitchell Ashley, CEO of Converging Network and a Network World blogger, who examined the Microsoft contract.
Microsoft then provides the service, the billing and Tier-1 support only to the customer’s IT staff.
The partner can then add value services, such as directory synchronization or platform customizations.
Microsoft feels that is where the real value will come for partners, who will get 12% of the revenue from an online subscription contract the first year and 6% each subsequent year.
“The opportunity is less about the 12% and 6% and more about the work partners can do on top of the solution,” says Eron Kelly, director of product management for Microsoft’s business online services group. “One of the great value propositions that partners will get familiar with is the power and flexibility of SharePoint as a platform. They don’t spend time and money on deployment but on customization and implementation.”
Of course, those customization options won’t be there initially.
“I can’t say if [the revenue sharing] is worthwhile, we have a different model” says Chris Damvakaris, vice president of sales and business development for Apptix, which provides hosted Exchange and SharePoint services but also has partners who offer private-label varieties. “Whether it is worthwhile or not will depend on what the provider is looking to do with the customer. Is it an ancillary service or something that cements the customer relationship?”
Others say the target group of partners will be those that offer other services beyond collaboration.
“I think the set of partners will be those that think this is nonstrategic to them and they won’t mind referring away this business,” says GroupSpark’s Agarwal.
Users say what will be important is how their needs are met beyond the technology.
“Service is paramount for us,” says Kevin Sonney, director of IT for iFloor, who is exploring use of SharePoint. “I will look at Microsoft as a hosting provider, but every customer has things they do uniquely and the provider needs to be flexible to handle these one-offs. I don’t know if Microsoft has that flexibility.”
Sonney, who already uses managed Exchange services from Azaleos, also says integration with other platforms is key for his environment that includes Apache Web servers and Linux. “We need to make sure Microsoft or any provider has the ability to tie together the cloud services and our [local] systems.”
