Microsoft adds partner cash to SaaS offerings

Houston – Microsoft (NASDAQ: MSFT) is adding onto its software plus services initiative with two suites of subscription services with their own partner pricing models, and an incentive program.

Under the Microsoft Online Services product line, the two suites are called Deskless Worker and Information Worker. Both packages have the option of accessing Exchange and Sharepoint over the Web or as stand-alone products, says Stephen Elop, president of the Microsoft Business division.

There is also a new incentive for channel partners to start selling these new suites of services. Microsoft will pay partners 12 per cent of the first-year contract value as an incentive to sell both suites. After the first year, partners receive six per cent of the annual subscription fee for the life of the contract.

Steven Fitzgerald, president of Habanero Consulting Group of Vancouver, believes the 12 per cent incentive is very generous.

“We’re much more concerned with getting the exact best solution for the client, so the idea of one potential solution having a commission associated with is great. But we have to keep that independent from our solution design process,” said Fitzgerald. “The best thing is that we see this as a fantastic alternative to on-premise software, which will be a much better fit for some of our clients.”

Microsoft’s vision here is that partners can do the same with these online services as they can do with onsite servers, Elop says.

The Deskless Worker suite offers just Exchange and Sharepoint and is targeted at users who don’t do a lot of computing, while the Information Worker suite (Exchange, SharePoint, Office Communications Server and Office LiveMeeting) is for enterprise-class communication and collaboration environments. Pricing for Deskless Worker suite is at $3 a month, while the Information Worker suite starts at $15 a month.

The company has also announced a channel program called QuickStart for Microsoft Online Services. The new program is intended as a guide for partners for this new pricing and services model.

Elop citied an IDC study pegging the software plus services market at US$21 billion; growing at a rate of 35 per cent per year.

Paul Edwards, director of SMB and channel strategies research at IDC Canada, says IDC has not yet broken down what the market for software plus services is in Canada. He did say that partners need to make money from the get-go on software plus services because it will eat into on-premise revenue and margin.

“It will bring in new customers into the fold for partners and Microsoft but partners will need to adjust the business model for a services play, so they would have to make up the money that is reduced from an on-premise implementation sale,” Edwards said.

Edwards gives software plus services only a mixed review, saying Microsoft’s online services will impact on some partners negatively even though it is basically a different way to deliver software.

“It is good for some and bad for others, but that always happens when you have a market dynamic like this. Microsoft has to participate or miss out on a market opportunity and partners have to do to it for the same reasons,” he said.

One of the potential concerns for partners under the Online Services portfolio is that Microsoft will have a customer facing role for the first time in the channel. But this doesn’t concern Mike Lopatriello, the CEO of Toronto-based solution provider Luna Development.

“I have to try to turn it into an opportunity for Luna, but at the end of the day the customer really does not care if it comes from Microsoft or Luna,” Lopatriello said.He has spoken to customers about this change and the feedback Lopatriello received is that the customer cares about someone being on call, and that the partner can handle the technology.

Gavin Steiner, president of InterProm Inc. of Barrie, Ont., a Microsoft Technology Adoption Partner, says Microsoft cannot do all the hand holding with all these smaller customers and that the customers will still view partners as trusted advisers.

*CDN‘s full Microsoft Worldwide Partner Conference 2008 coverage:

Microsoft Canada addresses the IT skill shortage
Microsoft adds partner cash to SaaS offerings
Microsoft partners get tools to sell SaaS
Channel gets a JumpStart on Forefront security offerings
VARbose: Streamlining of Microsoft licensing programs is overdue

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Paolo Del Nibletto
Paolo Del Nibletto
Former editor of Computer Dealer News, covering Canada's IT channel community.

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