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Microsoft online services could cause channel conflict

Microsoft online services could cause channel conflict

Microsoft's decision to offer its hosted applications direct to customers of any size is raising questions about the role channel partners play in the maturing software-as-a-service landscape.

Last week, Microsoft announced the trial availability of its hosted Exchange Server 2007 and Office SharePoint Server 2007 products to US customers, regardless of size. The services will be available generally in the second half of the year and are aimed specifically at organisations with 100-500 users. The software giant has also promised hosted versions of its Office Communications Server and Office LiveMeeting applications.

While Microsoft has been steadily building up its online services offering for years, it previously restricted direct hosted services to customers with more than 5000 seats.

And while it has yet to outline the local implications of the announcement, Dimension Data national Microsoft practice manager, Brian Walshe, said the news prompted questions about how the channel fits into the online services landscape.

"We've had an enormous amount of discussion internally from the point of view that this is a potential threat as well as a great opportunity," he said. "If the world is going to change, and it potentially will for us, we need to look at what we should do and what potential revenue streams there are going forward.

"If you look at the way Microsoft is investing in datacenters globally, there will be an impact. Whether it impacts all market segments, or just SMEs, or if it will be 10 per cent or 90 per cent of the market that takes these services up, no one knows. Even Microsoft isn't yet sure of what the partner's role is."

While agreeing customers will increasingly turn to hosting services, Walshe predicted it would be several years before the market fully embraced an on-demand model.

"I don't think we'll see people putting all of their systems in the cloud over the next three years. There's no doubt they'll be putting some things online, and in some cases that makes sense, such as with Exchange Server," he said.

"But organisations run hundreds of applications and they're not all going to go in the cloud. They'll need integration and interoperability between those in the cloud and those that they manage internally. That's what systems integrators like us can offer."

Managing director of Microsoft hosting partner Emantra, Ross Dewar, was unperturbed by Microsoft's plans to extend its direct online services campaign and said it could present opportunities for channel partners in the corporate and enterprise space.

"This is the battle of the giants - Microsoft needs to do what it can to meet Google on its own turf. I think that's the target. They're not doing this deliberately to take business off partners," he said.

"Vanilla volume services that Microsoft may decide to offer themselves won't impinge upon our business. The corporate and government customers we serve will always want customisation, 24/7 local support, services bundling, flexibility and virtualised and dedicated services. I would imagine there will be some limitations around Microsoft's offering because they will be based on a shared services platform."

Microsoft's online service strategy validated the hosting model for everybody, Dewar said. "This piece of the pie is only going to get bigger. Microsoft partners will always be involved in reselling these services," he said.

Dewar claimed organisations more likely to take up direct services from Microsoft would be those at the lower end of the market. He said hosting companies at that end of the market could have cause for concern.

Red Rock Consulting director, Jonathan Rubinzstein, agreed partners at the commodity end should be worried about Microsoft's move.

"Vendors - whether Microsoft, Oracle or SAP - need to start offering more differentiators. I think we're going to see more vendors increasingly having to offer more around their applications that eat into their channel partner model," he said.

"Customers are expecting more to be built into applications. There is always a partner ecosystem around each vendor's offering that facilitates the use of their applications. What these vendors need to work out is how to play in that ecosystem so they don't trample on their partners."

US Microsoft online services group director, John Betz, insisted Microsoft's move into SMB Web hosting wasn't a betrayal of long-time partners. Resellers would still be able to offer their own hosted versions of Exchange, SharePoint and others.

And similar to its upcoming hosted Dynamics CRM software, Microsoft will force companies interested in buying the Microsoft-hosted Exchange and SharePoint to go through Microsoft channel partners, Betz said. - ERIC LAI CONTRIBUTED TO THIS REPORT


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