4 min read

A Live opportunity for the channel?

Microsoft will begin experimenting next year with delivering subscription-based services. VARs need more detail if they’re to be ready

Last month Microsoft announced it wants to deliver hosted online services in 2006 to small businesses and consumers. The response from the channel has been silence.
That’s understandable. Details of the “live software” initiatives, which may only debut in the U.S., have been vague and therefore seemingly have no VAR benefit.
However, in prepared statements Microsoft insists the program broadens the ability of partners to move into services.
Should the channel yawn or see a revenue possibility?
“I think there is opportunity,” says Forrester Research analyst Kyle McNabb cautiously, “but it’s unclear what it is.”
“It’s too early to say what the real benefit to VARs is.”
But he and other industry observers say the initiative is an important signal of how Microsoft is shifting part of its go-to-market strategy. And that is something every partner of the company should pay attention to.
Windows Live isn’t an operating system, but a free, ad-supported service aimed at helping consumers build home pages that include calendars, e-mail, instant messaging and information management.
Office Live will come in three versions:
• Basics, a hosted Web site for small businesses to set up home pages, 30 MB of storage, traffic analysis and five e-mail accounts. It will also be free and ad-supported.
• Essentials, which will offer for an yet unspecified monthly fee 50 e-mail accounts, deeper Web analytics, customer management, project management and document management.
• Collaboration, also a subscrption service, which will have the same features as Essentials, plus the ability to create secure portals for communicating with staff, suppliers and customers.
Microsoft said it will make application programming interfaces available so developers can customize and build on top of Windows Live and Office Live.

Partner productivity
Due to the U.S. Thanksgiving holiday, Microsoft Canada could not supply a company spokesman to offer more details about channel opportunities by press time.
But in a written statement it said Office Live “will enable Canadian partners to increase their productivity and become more profitable by removing on-site delivery costs and allowing them to focus on providing customized business functionality that is of high value to small businesses.”
Windows Live “provides the opportunity for the Canadian channel, partner, ISV and developer communities to further tap into the growing services market,” the statement added.
To industry analysts, the new online services signal Microsoft’s tentative shift into a new revenue model, one that uses advertising and subscriptions as well as licensing.
After all, Microsoft has too much invested in client-server computing to give it up.
But in a recent report, Gartner analyst David Mitchell Smith suggests one of Microsoft’s aims is to get computer users accustomed to paying a monthly fee to it for services.
Gartner also believes the expanding use of Ajax (asynchronous JavaScript and XML) technology is moving companies such as ad-supported Google and Yahoo to offer users rich online capabilities for certain functions — capabilities that could approach Microsoft’s rich client applications.
That would leave client-server computing to focus on its true value, Smith suggests — offline capabilities and access to desktop resources.
He also said most businesses won’t want Microsoft to be their systems integrator.
If this vision is true, there’s lots of room in in the future for licensed applications and partners.
VARs and service providers who want to offer small companies basic Web portals and e-mail may very well see Office Live as a threat, says Forrester’s McNabb.
“But it’s also an opportunity. If Microsoft is going to give away good functionality for relatively low cost, or even free, why wouldn’t a VAR embrace that and take its scarce R&D or marketing resources and build something on top of that?”
Office Live is targeted at helping developers build and host their own applications for SMBs, he argues. In addition, VARs could use Office Live to up-sell users to the full Office suite.
But looking ahead to next year’s release of Office 12, McNabb sees another possibility.
The new suite will be so substantial, he argues, many firms won’t want to deploy it on all desktops. Instead it will be bought just for information workers who need it. For the rest, Microsoft will launch a hosted enterprise version of Office Live.

Taking a haircut?
If this transpires the implications for VARs who sell, deploy and develop Office applications isn’t clear. Or perhaps it is: They’ll take a haircut.
And think of the implications if this sort of thinking spreads to the Business Solutions division, which includes Navision, Great Plains and Axapta.
While Microsoft is still fleshing out its strategy, it needs in the coming months to explain how partners fit in its vision. Will it make it easier for them to host applications?
In a recent memo to staff, Microsoft chairman Bill Gates warned the coming services wave will be “very disruptive.” That’s not reassuring to partners who are betting their future on his business.
To McNabb, Microsoft’s new venture is an opportunity for its partners to start looking at what they can truly offer customers as added value, as innovative, beyond selling mere infrastructure.
“Organizations that don’t embrace the continual evolution of what infrastructure vendors are going to offer the market are going to view this as competitive,” says McNabb.
But, he warns, “there are plenty of other intelligent VARs and ISVs that look at the likes of what Oracle, Sun, IBM and Microsoft are doing on the software as service area as an opportunity.”
The announcement of Microsoft “live software” has put its partners on notice.