Microsoft partners to embrace hosted application services

Microsoft's software-as-a-service plans have raised the ire of several US partners, who are less than thrilled about its entrance into the direct hosting market. But local channel representatives are predicting the services could open up a new revenue stream in the smaller business community.

Last week, Microsoft announced customer pricing for its Online Services in the US. The software giant will offer hosted Exchange, SharePoint, Office Communications and Office Live Meeting worldwide from early next year.

The bundled offering will start from $US15 per user per month. Under the US model announced, Microsoft partners will get a 12 per cent commission per user per month for the first year, followed by 6 per cent on the ongoing subscription fee.

A Microsoft Australia spokesperson said it didn't have specific dates or regions information to share at this time. They also declined to comment on Australian customer pricing.

"We have set a standard pricing structure for Microsoft Online Services to create a level playing field for the reseller ecosystem. This gives partners the opportunity to differentiate themselves based on best practices for customisation, consulting services, migration and managed services, instead of on price," the local spokesperson said.

While US and Australian partners expressed mixed views on the low commissions structure, channel players talking to ARN were largely optimistic. Although Microsoft's direct hosted service model could be seen as infringing on its own hosted software business, Emantra managing director, Ross Dewar, welcomed the news.

"This move by Microsoft, which is really about tackling Google Apps, will affect the commodity end of the market. Our customers are looking for dedicated hosting solutions, complex bundles including Exchange, identity and access management, SharePoint, Office services, single sign-on and local support," he said. "The main effect I see this having on our part of the market is negligible or indeed, positive. It will validate the hosting market to more people.

"This will get millions of small businesses to sign up, which is money for jam for Microsoft."

Other partners were cautiously optimistic about Microsoft's Online Services and agreed the idea of accessing longterm recurring revenue from smaller customers was appealing. At the small business end of town, Axxis Technology managing director, Matt Dickerson, saw specific opportunities around delivering Exchange on a hosted platform.

"Those smaller customers don't have the resources to put a dedicated server in, or don't have IT staff or maintenance agreements in place to support that equipment. Many are trying to use Pop3 services instead, which are clumsy," he said. "Exchange [as a hosted offering] is one I see having immediate benefits in our market.

"I see this as opening up a new market opportunity for us - it's a way to complement existing sales and get additional services into users that have not been purchasing these types of infrastructure or services before."

But Dickerson warned one localised challenge any provider faced offering hosted applications was Australia's haphazard Internet connectivity. "I don't think Australia's Internet speeds and reliability will make a lot of people comfortable jumping into online services," he said. "It's not unusual in the US for customers to have 50Mbps or 100Mbps throughput in both directions. Here in most environments there's not a lot of bandwidth to play with."