Microsoft Update

How partners will play in the new world of software plus services became much clearer at Microsoft's 2008 Worldwide Partner Conference in July, when the company announced prices and partner commissions for selling Microsoft-hosted services. Partners who currently do not provide hosted services could find that commissions on the Microsoft services provide additional income, while others will find themselves in competition with the company, particularly at the low end. Competitive pricing, as low as US$2 per month for some services, also signals to online competitors, such as Google, that Microsoft will compete seriously in the market for hosted applications and services.

The Case for Hosted Services

In Mar. 2008, Microsoft announced the components of its hosted services offering for businesses of all sizes, Microsoft Online Standard, which will begin to roll out in fall 2008. These services offer customers access to instances of Exchange, SharePoint, and Communications Server that are running in Microsoft data centers, rather than on the customers' local networks.

For many customers, hosted products offer higher reliability and lower cost than running these servers on their own network, because the hoster frequently has deeper technical skills, tighter patching and security procedures, better redundancy, fewer administrators per server, and more reliable backup than many customers have at their own sites. Hosted systems can also be provisioned more rapidly than on-premise systems, and they make it easier for customers to reduce their costs if their usage drops, unlike on-premise systems, where licenses cannot generally be returned to the vendor or resold.

For all services in the Standard version, customers use servers shared with other customers (known as "multitenant" hosting). The suite is also available in a high-end Dedicated version, which offers dedicated servers and some additional features. Microsoft Online Dedicated is available for customers with more than 5,000 seats. (For the features provided by each level of online service, see the chart "BPOS Standard and Dedicated Services".)

The hosted offerings position Microsoft to compete more effectively with other vendors such as Adobe, Google, and Salesforce.com, who have begun to offer online applications and services that compete with Microsoft's on-premise e-mail, collaboration, conferencing, and other servers, as well as with Office applications.

However, when Microsoft announced that it would provide hosted services, it did not say how much customers would pay.