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Microsoft sets hosted-services pricing, irks partners

Microsoft sets hosted-services pricing, irks partners

Some Microsoft partners are less than thrilled by the company's push into a software-plus-services model, which will compete with them.

Microsoft Tuesday revealed pricing for its forthcoming hosted business productivity services and unveiled its channel model for allowing partners to resell those services. However, while the company painted a rosy picture for the partner opportunity around its evolving software-plus-services business model, not all of its partners were thrilled with the idea of Microsoft competing with them in that market.

As part of its plan to transition from providing only on-premises software to a combination of software and hosted services, Microsoft early next year will begin offering a hosted business productivity suite that includes Exchange Online, Office SharePoint Online, Office Communications Online and Office Live Meeting for US$15 per user, per month.

The company unveiled the pricing for its forthcoming hosted services at its Worldwide Partner Conference (WPC) in Houston this week. Microsoft's hosted services partners already can offer customers this package through Microsoft's Hosted Messaging and Collaboration 4.5, which the company released two weeks ago.

Individually, Microsoft will be selling hosted Exchange Online for US$10 per user, per month; SharePoint Online for US$7.25 per user, per month; Office Communications Online for US$2.50 per user, per month; and Office Live Meeting Online for US$4.50 per user, per month.

This means if customers buy the entire suite, they are getting a 38 percent discount than if they buy the products individually, said Microsoft Director of Online Services Eron Kelly on a conference call Tuesday.

On top of its hosted business productivity services, Microsoft also introduced two "deskless" offerings that allow companies to offer workers who don't necessarily sit in front of PCs but still need access to e-mail and internal company Web sites access to those online services. Exchange Online Deskless Worker and SharePoint Online Deskless Worker will be available for US$3 per user, per month early next year.

Microsoft's is facing competitive pressure from Google, which is offering similar hosted services to business customers, and so had to price its hosted services competitively.

But this also puts them in direct competition with hosted-services partners that have been offering their own hosted services using Microsoft software infrastructure. And its traditional reseller partners also won't see the kind of margins in reselling services that they've seen with reselling software licensed in the traditional per-CPU way, they said.

One former Microsoft partner who asked not to be named suspects that Microsoft knew it would cause its hosting partners grief if it went ahead and offered its own hosted services, but thought it was a small price to pay compared to losing that business to Google.

"I think they looked at one hand [and] they looked at Google, which was causing all kinds of headaches and is tough competition, and looked at a set of long-term hosted Exchange partners and thought, 'Who can we afford to [tick] off more?' " he said. "It's obvious what they chose."

Danny Essner, director of marketing for Microsoft hosted Exchange partner Intermedia, said Microsoft's pricing for its hosted services is "very aggressive" and will force the company's hosted partners to "move up the stack to preserve profit margins."

For example, Intermedia can offer mobile e-mail support for BlackBerry users on a hosted version of Exchange, while Microsoft does not offer this service.

However, even if hosted partners may have to work harder now that Microsoft is competing with them, Essner said the fact that Microsoft is "bringing market education and market awareness" to the hosted services space is a good thing for anyone providing these services.

Indeed, Scott Gode, vice president of marketing for another Microsoft partner, Azaleos -- which offers managed services for Exchange customers that install the software on premises -- said many customers prefer to have their proprietary e-mail hosted on site rather than farm that out to a third party.

"There is still a huge percentage of customers that will run it locally and want to run it locally because of security concerns," he said of Exchange.


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