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Some Partners Are Up for S+S

It's not all bad news, this Microsoft Software Plus Services strategy. In fact, for some partners, it's very, very good news.

This week's freak-out about the partner model for S+S isn't universal. RCPU spoke to one partner who was just fine with the notion of Microsoft competing with his business -- and, in fact, he welcomed it.

Eilert Giersten Hanoa -- who, in the tradition of great Norwegians such as Johan Olav Koss and Tore Andre Flo, does the three-name thing -- isn't just a doppelganger for a guy your editor went to high school with. No, he's much more: He's CEO and founder of Mamut, an Oslo-based SaaS provider...and he couldn't be happier about Microsoft getting serious about S+S.

Hanoa's company is a hosting provider and, as such, will soon be in competition with Microsoft for application hosting, specifically around Exchange. But that doesn't bother Hanoa because he's got a lot more than just hosting going on. Mamut provides a whole range of services on top of simple application hosting, and that's where the company's real revenue comes from. As such, Hanoa is just as happy to let Microsoft run the actual datacenter that do the hosting as he is to run them himself. Happier, in fact.

"If you put yourself in a hoster perspective, no customer will give you credit if you have 100 percent uptime, but they will give you a hard time if you don't have 100 percent uptime," Hanoa told RCPU at the Worldwide Partner Conference in Houston this week.

"The easier it is for us to provide premium uptime, the better," he said. "If you're a partner delivering your own IP on top of Microsoft offerings, the more Microsoft does to ensure quality of service, the better. Our customers are not giving us any added value for us hosting Exchange. They don't care who hosts. Basically, today, we are spending too much time from a resource and money and headcount perspective on doing plumbing that we shouldn't do instead of on something we can charge for. Instead of us having a hosted environment, let's be excited about delivering that IP that no one else is delivering for small business."

The cost savings is significant. Hanoa said that he's actually been able to double his revenues on customers that have moved from his hosting platform to Microsoft's. "I'm hoping that in 10 years my datacenter will be much smaller," he said.

But what about controlling access to the customer, the issue that has so many other partners worried? What about Microsoft potentially squeezing Mamut out of accounts? Hanoa isn't worried about that.

"For a generic Exchange hoster, it's obviously a big problem," Hanoa said. "Twenty years ago, you could sell PCs and get 40 percent margin. That stopped rapidly. The same is going to happen with commodity hosting services such as Exchange. Unless you can have a stickiness on top of that, you can't have a good business model. What will be very important for us is that we can continue to bill our customers on the unique IP that we can deliver. [Microsoft's S+S strategy] resonates with partners who are confident in their own additional value but not in partners who have not taken that transition yet."

So, there you go. If you want to succeed in S+S, make your business sticky. And if you can make it as sticky as Houston in July, you'll be doing very, very well.

Posted by Lee Pender on July 10, 2008 at 11:54 AM