The Seismic Shift
By Dhaval Valia
 Microsoft's recently concluded World Partner Conference (WPC) laid the foundation stone for the software-major's SaaS strategy which, based on early analyses, portend a seismic shift from the way software business is conducted today.
The biggest shift about Microsoft’s newly announced online services strategy is its decision to take-over control of billing, branding, pricing and service delivery of SaaS or on-demand offerings. So far, the vendor worked on composite model that gave partners the choice and flexibility of deploying on-premise software, Microsoft-hosted services, or partner-hosted services.
At WPC, Microsoft also disclosed a comprehensive pricing policy for its on-demand services. Exchange Online will be priced at $10 per user per month, SharePoint Online per user per month will be $7.25, Office Communications Server Online will be $2.50 per user per month, and LiveMeeting will be $4.50 per user per month. It will offer these services in one-year renewable agreements.
Partners selling the online portfolio of hosted services will receive 12 percent of first year's subscription value and 6 percent of the renewed service fees.
Some of the leading Microsoft's Indian partners present at the WPC informed me that the same pricing will be applicable around the globle, and the new model could be rolled out here next March.
For Microsoft partners, the impact is clear—they will have to give up control over their customers to the vendor. It would completely alter their top line, as Microsoft will bill customers directly for the online services and pay commission to partners. There can be 10-to-1 revenue difference between the on-premise and the on-demand offerings.
For hardware integrators, the SaaS model could mean a drop in opportunities in providing systems and storage infrastructure to customers as their core business applications will be hosted on a third-party data center.
The worst hit, in the immediate future, will be the hosting service providers, as under the new policy Microsoft will control the service delivery of its SaaS offerings. It will work with select hosting partners—with telecom service providers in India—and this would prove a death knell for several small and mid-size hosting companies.
The SaaS model is all set to disrupt the present business model and unless partners gear up for this seismic shift, they will find future survival tough. |