Office365 and Partners – crisis = danger plus opportunity


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Folk etymology has it that the Chinese character for crisis 危机 is a combination of “danger” plus “opportunity”. Linguists point out that this is incorrect, but its popularity lives on in speakers’ repertoires because it’s a convenient and perhaps exotic segue.

Now, perhaps the combination of Partners plus Office365 represents “opportunity”, or, might it turn out to represent an equally factious interpretation. Certainly in some partner circles and parts of the blogsphere it is seen as a danger.

So let’s simplify things, and rearrange the equation into something which is at least more than a truism in that it’s not so entirely self-evident as to not be worth mentioning. As far as Partners are concerned, Office365 is a danger and an opportunity. In any case I’m hoping that the “opportunity” component is not self-evident as if it were then I am wasting your time!

Office365 = Danger + Opportunity


As a Partner I mean a current hosting partner of Microsoft offering hosted Exchange, SharePoint and Office Communications to their clients.

From the “danger” perspective things are clear. Office365 offers the clients of these partners a compelling suite of business IT services at very attractive prices and with a 99.9% service level. In fact if you have 25 seats or less you pay only US$6 per seat. This gives you access to Office Web Apps plus hosted Exchange, Sharepoint, and Office Communications (including Live Meeting, all rebranded as Lync). You can chop this up various ways, and in every way it represents a very competitive offer, serviced direct from Microsoft to client subscribers.

For clients with more than 25 seats, the cost per seat ranges up to US$27 (or $24 per user per month without the voice capabilities for Lync (formerly Office Communicator) Online). And this also includes a license for Office Professional Plus 2010 on their desktop, and Active Directory. It also includes telephone support. Office Professional Plus 2010 is a comprehensive suite which is integrated and synchronized with the whole Office365 online service.

Is this Office in the cloud? No, but it is Office “Plus” on your desktop synchronized with the current state of Office Web Apps and supporting remote and mobile access. The fact that it’s not yet full Office in the cloud is hardly significant in the value equation given the cost and benefits this enterprise Office365 offers.

It’s a Google Apps killer for sure. I use lots of Google stuff, and appreciate their innovation, but let’s get real, this is a king hit from Microsoft as far as enterprise and small business apps are concerned. Beyond the intrinsic advantages of Office365, there is the huge partner network (not just the hosters but the developers).

What is the danger that clients will compare prices with their current hosting partner offers and then request Office365 services from their service provider as an agent of Microsoft, or worse still sign up directly with Microsoft?

The danger is clear and present – so how can it be mitigated by the opportunities?


Departing from the Hosting Partner theme for a minute, the opportunity for software developers and systems integrators (ISVs/SIs) is significant – there is now more opportunity than ever to build apps to integrate into the Microsoft Online services (think Sharepoint, Exchange, CRM, Lync) and for SIs a wave of migration opportunities and custom development. Microsoft has a showcase of these which is worth reading, and it’s more than self-promotion it is a really good opportunity space for partner solutions.

In fact throw Windows Azure into the mix and solution developers have the opportunity of a lifetime – to develop in the cloud and and integrate into Office365 and offer complete line of business cloud solutions which, marketing-wise, will piggyback on the cloud wave and marketing of Office365.

We’ll also see the development of an “Apps Store” for Azure/Office365 using what’s called the Sandboxed Solutions feature of Sharepoint Online. This will join the ranks of Google, Salesforce, Zoho, Intuit, Netsuite in having apps stores, but will start with a massive developer base familiar with the Azure environments.

So how about Hosting Partners? How will they fare when Microsoft does all the hosting? The truism is that they have to “add more value”. We want to move beyond the pregnant pause which usually follows that statement and examine what that value could be, within the context of the capabilities of hosters.

Marco Limena, vice president of business channels for the Worldwide Communications Sector at Microsoft, recently discussed the Office 365 announcement and opportunities for hosting provider partners. He highlighted these areas:

BREADTH – Growth of the userbase in SMBs, noting that hosted email was extremely fragmented and “with Microsoft Hosted Exchange accounting for only a small percentage of the space”, so hosters would go for a volume play to recruit new clients to Office365.

DEPTH – Offering “value-added services” that “extend beyond the features offered in Office 365 Small Business such as customized services IT tools, phone support, the ability to grow beyond 50 users, sync with Active Directory, advanced IT management, enterprise-class e-mail, Web content management, business intelligence, additional storage, security features, archiving and the full Microsoft Office suite“.

Now I must admit that not all that made sense to me. For example it seems that he is only addressing one variant of Office365, for Small Business, although he says “Office 365 for small businesses is targeted at customers with up to 50 users” and yet all other announcements say 25 users? And then his “value added” services seem to me to actually be all the services a client gains by signing up to Office365 for Enterprise – and therefore not bringing any direct hosting revenue.

Three opportunity strategies

So that makes my head hurt a little, but not to worry let’s assume that I’m missing something and where to from here? The fundamental points I see are these:

Hosters are not going to be able to compete with Microsoft’s hosting capabilities, pricing, and financial guarantees against a 99.9% SLA on Office365 or any Microsoft Online products. On the other hand, clients aren’t going to shift overnight, and a certain amount of FUD and conservatism will provide adequate time for hosters to plan their way forward.

  • The most basic strategy is to build a marketing capacity to reach a large number of new clients and sign them up to Office365. This is easier said than done, in primeval terms it means turning into a GoDaddy marketing machine – which hosters can do this, and have the cashflow and talent and can they design and execute the digital engagement strategies?
  • Another is to build a more complex multi-sourced Go To Market model, whereby hosters aggregate and integrate apps and cloud services and add those into the Office365 offer. The core to this is that hosters have to have or bring on board integration skills, know how to use integration products like IBM’s Cast Iron and Cloudburst, and also have migration skills to be sold on a project by project basis to clients to transition them to the cloud.
    For example as part of that migration it’s possible now for a hoster to add Office Web Apps to their hosted Sharepoint and to take that to customers ahead of Office365’s full release.
    Here’s the trick – you have to be able to select and build a competitive portfolio of apps and cloud services, and be able to do the commercial deals to ensure both viability and servicability (support and end-to-end SLAs). The key to the portfolio is the non-Microsoft linkages which suit the target segment – Blackberry related, iPhone related, field service apps etc. Also the management of a mobile fleet can be a good value-added service.
    Another of the opportunities, over time, is as clients migrate to the Microsoft cloud and off the hoster’s domain that there is a chance to optimize investment and capital in own-facilities to support new hosted offers as part of the portfolio. This will see hosters using a hybrid cloud model.
  • Finally, hosters can use the cloud transition, what we call the Cloud Shift, as a means and vehicle to engage more closely with their client base. It’s an opportunity to talk business, enabled by the technology. Customers will have concerns about moving to cloud, and once beyond the basics these will centre on “how do we make best use of cloud/Office365”. Hosters who can help clients extract the most business value from the transition will have the opportunity to claim a fair share of that value for themselves.

Churn ain’t churn – it’s hoster churn not apps churn

In the general SaaS world, it’s crucial to manage customer churn and to optimize renewal rates. With Office365 this has a slightly different flavor. Sure some clients will migrate to Google or Zoho, but in fact Office 365 is the competitive offer to retain them or to bring them back. The real game for hosters is to ensure that their clients renew with them and not a competitive Office365 hoster – that’s all about relationships and that’s the big story in the future of hosting for SMBs (unless you follow the GoDaddy model).


In conclusion there is both danger and opportunity to Hosting Partners in Office365. To minimize the danger and to optimize the opportunity it is the time right now to start agreeing the business goals and objectives for the next 12 months and 3 years. Once that is settled, which is not necessarily easy, then a path from the current assets and capabilities needs to mapped into the future value equation. It’s probably fair to say that there are more dangers than ever, but at the same time more opportunities than ever for those Hosting Partners which get it right.

Do you think that Office365 represents more of a danger or opportunity to Hosting Partners?

Where do you see as the best future model for hosters in a Microsoft Online/cloud world?

What timeframes do you think are crucial in making this transition?

Republished with author's permission from original post.

Walter Adamson
I help firms create optimal customer experiences by integrating social data, teams & processes with enterprise systems. The much vaunted 360-view of the customer can be a bottomless pit without a clear data strategy. I help you deliver a greatly improved customer experience starting with a "45-degree" view of the customer, fully utilising social data analytics. I clarify your objectives and what data you need to service them, and guide you to operationalise "social at scale" to consistently deliver valuable customer experience at every social touch point.


  1. According to CRN report communications & collaboration is the largest opportunity in SaaS so channel players, VARs, hosting providers etc ought to have an offering because demand will be high. I would like to offer an alternative to team with MS, especially if you market to small businesses (under 250 users).

    HyperOffice has been in the SaaS messaging & collaboration market for 10 years and just opened up to resellers.

    You get the benefit of white-labeling so you can build your brand
    It is much better suited for SMB requirements, simpler to implement and adopt. Higher margins, and better support for Macs as well as lower cost for mobile support.

  2. Shahab, thanks for your comment. Just to be clear, I’m not selling or promoting Microsoft’s or anyone else’s products, and the more competition the better. I’m just interested in how the business ecosystem works and who makes money as far as this disruption goes.

    What I did notice about your offers is that in a rough comparison your price per seat for up to 25 seats – where Office365 Small Business fits – is about 60% higher, and for the 25Gbyte which Microsoft includes you charge another $45/month which in all makes your price around 900% higher. And furthermore your communications and collaboration is only one part of the total package of Office365, let’s say its about a quarter of what Office365 offers.

    On price alone that’s a lot of ground to make up for your sales team, and why Office365 is a game changer for hosting partners and competitors like yourself.

    Walter Adamson @g2m
    Certified Social Media Consultant
    Melbourne, Australia
    My social spaces and places:

  3. Your rough comparisons are totally wrong – 25GB is for email MS includes not document storage which is what you’re reading off the website.

    I think it’s too early to tell what the true cost will be. As you look into HyperOffice deeper, you’ll see we include HyperSynch which provides push email and over-the-air synch of calendars, contacts, tasks to Blackberry, Android, iPhone, Symbian/Nokia, Windows. Office365 will charge much extra for that ((up to $20+/month more when you get into Lync features which HyperSynch includes some of in the base license), not to mention we include all your setup, training, and support. If you’re interest in doing a thorough comparison at the feature and cost I welcome such analysis from an independent journalist. Please let me know – readers, would that be something you’d like to see?

    On a side note, the 25GB you’re reading MS includes is for email (we do include less but your comparison is incorrect). I have not found any details about how much document storage MS plans to include and how much they will charge for extra storage. My bet is that’s where they’re gonna make up some surprise gravy.

    Anyone looking for a proven solution today can check out HyperOffice which is 10 years mature, while MS will be in Beta through early next year.

  4. Thanks for correcting me, I see what you mean. So here’s a point, if I’m confused then how about your prospects? It would be interesting to see a point by point comparison, although, in the same vein as the previous comment, how are buyers going to make sense of that?

    One of the purposes of “brand” is that it takes the thought out of making the purchase. That’s the whole idea – a kind of trust. That’s why building a brand is so expensive and takes time. That’s even a bigger challenge in offering cloud desktop and comms services since people are nervous about it anyway.

    So while price is one thing, it probably needs to be a simple and compellingly better offer (read cheaper) to make inroads against the brands.

    You obviously know all that already. Competition helps. As I said in my original reply I’m more interested in the channel dynamics and how value shifts in that and especially how it shifts out of the channel or in to it as the case may be, and also how clients benefit from the “cloud shift”.

    Walter Adamson @g2m
    Certified Social Media Consultant
    Melbourne, Australia
    My social spaces and places:


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