Tag Archives: Google

Microsoft’s Business Productivity Online Suite and Partners

Yesterday I attended a partner briefing at Microsoft UK for their new Business Productivity Online Suite (BPOS) which goes live in a few weeks in Europe and Japan.  The service has already been up and running since November in the US.  I was particularly impressed by the level of investment Microsoft is putting into their data centres – with a primary one in Dublin, a secondary centre in Amsterdam as well as installations in Virginia, Washington State and Singapore with plans for more in APAC.   BPOS is Microsoft’s online offering of Live Meeting, SharePoint, Office Communications Server and Exchange Server with a minimum of 5 seats and around 13,000 seats max for standard (their multi-tenanted version) and a dedicated version intended for larger installs that is also finding favour amongst small customers.  At $15/user/month it is more than three times the price of Google Apps. The types of clients interested in BPOS cluster at the low 5 to 50 seat end, and surprisingly for Microsoft, the very high end blue chip clients. 

It is plainly evident that the company has put a lot of thought and effort into this. It has clear competition from Salesforce.com and Google and is determined to get SaaS right.  It is important to note that the service is not Microsoft Office online (yet) nor does it offer full telephony (yet) or CRM (yet)  but it doesn’t take a crystal ball to predict that they will soon flesh out their offerings.  Their sales projections are, on the other hand, relatively modest.  That is the issue I have with many new Microsoft ventures.  The company is huge and experienced sales hands know how to game the system.  They know to sandbag and slightly over-achieve.  An ambitious sales target presents higher risks – and lower individual rewards.  But that can also mean a new venture fails to find support in the company, and it flounders through lack of investment. That does not seem to be the case here as Microsoft feels the hot breath of competition and still retains much of the DNA that drove them to strive for share and seek choke points. 

By extending BPOS down to 5 users, and offering 5G of mail storage per user, they are competing squarely against their own SharePoint and Exchange hosting partners.  It must be said that if you add up all the company’s hosting partner’s mailboxes it doesn’t amount to more than 20% of the total number of Exchange seats, so though significant, partners have been at that game for a number of years and haven’t grown as quickly as Microsoft or they had hoped.   And that is because hosting Exchange technically isn’t easy – as Microsoft is finding out, because these partners started small and have been  growing organically, and because, importantly – most customers mid tier and up are loathe to give up their data.  For small companies, who don’t have an IT person, there isn’t a choice, so the data issue is not significant – but those small companies can be as difficult to service as ones 10 and 100 times their size – and can have the same cost of sale.    

It looks like there are significant teething problems for Microsoft at the low end. Microsoft needs partners in that segment. Their infrastructure software out of the box needs integration and support.  And it needs a sales force, so it can’t afford to alienate its partners.  By offering partners an 18% finder’s fee the first year and 6% thereafter and pledging not to offer end user help desk support, it is hoping to sweeten the medicine.  But by transacting directly with the end customer, the company is asking the partner to become an agency, and that is a point to which many partners are openly hostile.  Partners hate to lose control of their customer and a vendor transacting is a threat.  Microsoft tried to spin it, saying it was taking the credit risk, but it wasn’t sufficient to disperse the unease in the room. Yet many partners haven’t been transacting for on-premises Microsoft licenses anyway for years. There is no margin in it and they leave that to license specialist resellers.  Microsoft point to a 7:1 partner services vs license revenue ratio of opportunity for partners.    But that is also a problem. If you have to spend another $7 to get value out of $1 of software, that is an opportunity for a competing SaaS vendor to embed value in the service directly,  lower cost of ownership and time to value.  However, if there is one thing I have learnt from 25 years of competing against and working with Microsoft, it is this – they are extremely tenacious.  Eventually, they get things right. It may take five years, it may take ten, but they are determined.  And partners, as they have always done, will first bob and weave, then adapt or close shop.

Advertisements

2 Comments

Filed under Direct, Google, Indirect, Microsoft, SaaS