WPC: BPOS Grows Up

Partners will get a handful of new tools, programs and benefits around the Microsoft Business Productivity Online Suite (BPOS) this year in an effort that Microsoft officials hope will make the flagship Software plus Services offering more attractive to the channel.

At the Microsoft Worldwide Partner Conference (WPC) in New Orleans this week, Microsoft officials announced partner-specific internal use rights, customer management tools and partner branding on billing to encourage partner adoption of BPOS, which was unveiled a year ago at the WPC in Houston.

Since the program went live in the United States in November and more broadly in April, 5,000 partners have signed up to sell BPOS, which gives customers access to Exchange and SharePoint services for a low monthly price per user.

The headline change was the internal use rights. "Partners will have 250 free seats of internal users for BPOS. Our partners will be the first best users [of BPOS services]," said Allison Watson, corporate vice president of the Microsoft Worldwide Partner Group.

Microsoft also introduced "Order on Behalf," which allows a partner to set up the sign-up process for a customer, both simplifying the customer sign-up process and automatically registering the partner as the partner of record for that order.

Another new feature is a Commerce Dashboard, which allows a partner to view in one place all the customers that have that customer listed as their partner of record. The Dashboard includes partner fee information and renewal dates, Microsoft officials said.

In the third quarter, Microsoft plans to launch a feature called Delegated Administration, through which a customer will be able to hand over administrative tasks for things like setting up new accounts or managing SharePoint sites, to partners.

Delegated Administration will be offered first to partners who sign up for what Microsoft is calling an Accelerated Initiative. Partners will become eligible for that program by committing to sell at least eight BPOS deals of 25 seats or more. Other benefits of joining the Accelerated Initiative will include deeper technical training on things such as complex migrations from Lotus Notes or Novell Groupwise and comarketing dollars for putting up Web sites with the partner "Order on Behalf" feature.

While Microsoft has 5,000 partners signed up, the number is less than it seems. Microsoft officials suspect a large percentage are partners who signed up to try the BPOS service out and haven't made any customer sales. The internal use rights will give partners a way to try out the service before signing up to sell it, and the Accelerated Initiative should help Microsoft identify its cadre of partners who are committed to selling BPOS.

Microsoft also announced its intention to include partner information on customer invoices by the end of the 2009 calendar year.

Putting partner information on customer bills is an attempt to address one of the two major complaints partners have had about the BPOS business model. Partners have expressed serious concerns about Microsoft's ownership of customer billing, which provides Redmond with direct access to customers for potential upselling opportunities that could cut partners out. Having partner information included on the billing is more of an acknowledgement of that issue than a way to address the fundamental problem. Nonetheless, at least partners will retain some customer mindshare if their information at least appears on the invoice.

The other main partner complaint is about the business model itself. Partners say the margin opportunity is too small to cover the costs of getting a new practice ramped up.

The BPOS changes announced at WPC don't include any adjustments to the partner payment model laid out a year ago. Those who resell the service get a 12 percent referral fee plus 6 percent of the fees for every year that the customers remains subscribed -- effectively an 18 percent margin in the first year and 6 percent every year thereafter. The fees are paid quarterly, so partners start getting the recurring fees throughout the year rather than only at the end.

John Betz, director of product management for Microsoft Online Services, contends that the 18 percent and 6 percent recurring is a reasonable opportunity, but he says the real opportunity remains for partners to add services on top of the base subscriptions.

"Five and six times the subscription fee is available to [partners] as professional services fees. It's important to realize that what you get with SharePoint Online is kind of a blank slate [for customization]," he said.

But Betz adds that partners who are relying on non-S+S deployment and migration will be operating in a shrinking pool of opportunity. "Money that they make today doing deployment and management, that practice is going to slowly go away over time. We think that five years from now, 50 percent of the Exchange seats will be online as opposed to on-premises. This is an opportunity for partners to uplevel their game."

"The services transformation is happening in the market no matter what Microsoft does. I think what you hear from us is deliberate dependence on partners. As a company with 640,000 partners in the world and 95 percent of our revenues is that we would be foolish for us to try to do it without partners," Betz said.

Posted by Scott Bekker on July 14, 2009