Small business customers in the United Kingdom will soon be able to purchase a bundle that includes Internet connectivity provided by British Telecommunications (BT), Office software from Microsoft, and deployment and management services from BT services partners. Though it will reduce barriers to technology adoption by small customers, the offering is limited in scope and costly. Nonetheless, it helps Microsoft test the waters for subscription-based hosted software offerings for small businesses without having to build and host these offerings itself.

Product and Pricing

Called BT Connected & Complete, the service provides the following:

• Broadband Internet access
• Antivirus and firewall software
• Exchange e-mail, hosted by BT
• Office Small Business Edition 2003, hosted by BT
• Deployment and ongoing support from a BT services partner.

BT will use a Service Provider License Agreement (SPLA) from Microsoft to host all the software. The service will be priced on a per-month, per-user basis, and the partners estimate the price at about £50, or about US$90, for each user each month, for a five-person organization.

A Push for Hosting

The partnership exhibits how Microsoft can team up with large ISPs to deliver hosted services to small business users.

Hewlett-Packard, IBM, and Sun Microsystems, among others, are promoting hosted "utility" or "on demand" computing services, and IDC estimates that sales of thin-client systems, which use networked applications and services rather than desktop software, grew 20% in Europe in 2002. Both Red Hat and Sun have announced subscription-based desktop offerings, and Sun has announced several large customers for its Java Desktop in the United Kingdom.

Although hosted computing services could help companies with limited in-house IT skills, widespread customer demand for this model has yet to be proven. Among other factors, the cost savings of hosted Microsoft applications are not clear when compared to standard deployment and licensing models. A pricing comparison developed by Directions on Microsoft suggests that a five-employee organization using the hosted service provided by BT would pay about US$16,000 over three years, while a customer who purchased a similar package (Windows Small Business Server 2003 and Office Small Business Edition) using conventional licensing would pay about US$6,000 for equivalent software and a business Internet connection over the same time period. In addition, few organizations will be satisfied with only this bundle. They may want additional software for functions such as e-commerce or customer relationship management, for example.

The BT deal is nevertheless a way for Microsoft to test demand for subscription services centered on small business software without developing or hosting the services itself, as it has done with bCentral, a brand that will be phased out in 2004 (although existing services will continue).

For more information about Microsoft’s online plans for small business, see "Small Business Center Replaces bCentral" on page 23 of the May 2004 Update. Details about the BT offering will be made available at www.btbroadbandoffice.com starting in June 2004.