In-Depth

SaaS: S+S Gets Private-Label Option

Joint Microsoft-HP program gives partners the option to put forward their own brand and control customer billing.

Software as a Service (SaaS) is a land-grab scenario for software vendors -- a huge small to midsize business (SMB) market for various services lies just over the horizon. The channel seems to be the key to getting the attention of those SMB customers, though, and finding a business arrangement that makes sense for both the vendors and the channel is proving challenging.

Microsoft made its first major Software plus Services (S+S) push last summer with the Business Productivity Online Suite (BPOS). But the vanilla nature of the package brought limited enthusiasm among many partners who have said they would be little more than sales agents for Microsoft. Partners were also concerned that Microsoft would directly bill customers, giving Microsoft options to muscle out the partner or upsell other services without the partner's involvement.

Connecting VARs
In December, Microsoft and Hewlett-Packard Co. tinkered with the partner model a bit. The companies jointly announced a new program that gives VARs an opportunity to sell S+S offerings such as Hosted Exchange, Hosted SharePoint or Hosted Microsoft Dynamics CRM in a private-label format. The option means VARs can put their own branding on the products and control the customer relationship.

"In that private-label scenario, that VAR also would bill their end customer for those services and have a Service Level Agreement with that end customer," says Lisa Wolfe, worldwide midmarket strategy and marketing manager for HP.

HP's role is upstream -- providing server and storage hardware to the hosters who create the private-label packages, invest in the infrastructure and bring the expertise to guarantee system uptime. Microsoft and HP will work to connect VARs with those HP hosting customers.

Some Microsoft partners have begun running with the pre-private-label BPOS offering, which includes Exchange, SharePoint, Office Communications Server and Live Meeting for $15 per user per month. The partner compensation is 12 percent of the subscription fee the first year and 6 percent per year afterward. Partner compensation in the private-label environment depends on the arrangement with a hoster and can become more complicated, and lucrative, with add-on potential for security or archiving and other offerings the hoster may carry.

John Zanni, general manager, Worldwide Software + Services Industry, Microsoft Communications Sector, says Microsoft will continue to offer customers multiple delivery options. "When we look at the market, our focus is really to enable choice for the end customer," Zanni says. "That choice also flows off through the VAR and back up to whether the customer prefers the service to be hosted by Microsoft, or hosted by a VAR or on-premises."

"With this initiative, we're going to ensure that our VARs really get a seat at the cloud table," Zanni says. "VARs will have the tools that we've been developing jointly with HP that will enable them to serve as strategic advisors to their SMB customers."

Wolfe adds that current economic conditions may make the hosted approach more attractive to customers. "What we're trying to do with our VARs is serve as a trusted advisor to help these SMBs as capital budgets are hit over the next year," she says. Wide-Open Opportunity

The largest opportunities for VARs to bring value to SMB customers under the new initiative are with e-mail and Web sites, Zanni says.

"The number of hosted mailboxes or mailboxes run by SMBs is in the hundreds of millions. About half of that is hosted today, but they're really getting a very basic experience; it's just POP mail. That opportunity is wide open in enabling those SMBs to really get a [high-quality] experience for a very reasonable price," Zanni says.

While most small businesses have Web sites, research shows that many are dissatisfied with their Web presence, Zanni says. "There's a huge opportunity to work with them to give them a much richer experience on the Web. That's an area where VARs can offer value."

The most logical place for Microsoft and HP to start building momentum for the new private-label option is in the HP/Microsoft Frontline Partnership (FLP) program. That program is primarily for SMB-focused VARs who belong to both the Microsoft and HP partner programs. No additional registration is required to access FLP marketing campaigns or apply for event marketing funds. But Wolfe adds: "It won't be exclusive to our Frontline Partners."

In addition to the private-label opportunity for VARs, Microsoft and HP rolled out a simultaneous program for VARs to sell packaged hardware and software solution configurations to companies such as managed service providers interested in expanding their hosting capabilities. The packages include HP BladeSystem, HP ProLiant and HP StorageWorks hardware and Microsoft virtualization and management software for optimizing delivery of hosted Exchange, Dynamics CRM and SharePoint.

The North American hosting market is fairly saturated, Wolfe says. "We designed [the packaged offering] for emerging markets. It's very clear that that's where the opportunity is when it comes to hosting environments," she says. Zanni says potential hosting companies in Brazil, Russia, India and China are top candidates for the solutions.

About the Author

Scott Bekker is editor in chief of Redmond Channel Partner magazine.

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