Kiwi hosters unfazed by Microsoft’s cloud move

Microsoft's strategy may be defensive, but it could boost the market

Local hosting companies appear more positive about Microsoft’s move towards cloud computing than some of the software giant’s US partners.

Revera’s general manager of marketing, Robin Cockayne, who attended Microsoft’s Worldwide Partner Conference, in Houston, sees the strategy as being of benefit to local hosting providers.

“We see it as a positive move. It will help educate the masses on the value proposition of cloud computing,” he says.

Cockayne says Microsoft will be providing its New Zealand service out of Singapore and that won’t suit significant companies who want a direct relationship with a local provider. He says the service will only appeal to a certain slice of the market. Anyone wanting to manage data risk will not use it.

“Microsoft has crystallised the relationship and there is enough space for a reseller to operate. Revera still has a significant role to play as a Microsoft partner,” he says. “Revera is a lot higher up the food chain.”

He adds that the next logical step for Microsoft would be to “white label” the service, or allow its partners to brand the service themselves.

Microsoft says it will begin offering a hosted business applications including Exchange Online, Office SharePoint Online, Office Communications Online and Office Live Meeting early next year for US$15 (NZ$19.40) per user, per month. The applications can also be rented individually.

Microsoft New Zealand has not released any pricing, but is expected to brief media on its strategy this week.

Microsoft New Zealand’s partner group manager for markets and strategy, Nick Fletcher, says that while the launch is pencilled in for the first quarter of 2009, it may arrive a little later in New Zealand.

He says hosting is a commodity market and suppliers need to move up the value chain. He expects 70% of sales to be to new customers in smaller companies. Fletcher says partners who couldn’t deliver hosting can now do so without worrying about inftastructure.

He was not prepared to comment on Cockayne’s white-labelling suggestion.

Mike Snowden, director and founder of Auckland-based OneNet, says his company will be competing with Microsoft, but the move will add legitimacy to the market and help it to take off.

“The idea of an SME using applications in the cloud will become much more acceptable,” he says. “It will create the impetus for significant change.”

Snowden, who spoke to Microsoft’s international director for hosting two months ago, says providing cloud computing is not a zero-sum game and he expects Microsoft’s entry to build the market’s potential.

“Microsoft’s only going to offer plain vanilla. If clients need integration they’ll still go to the channel,” he says.

He says, however, that the entry could put a price ceiling into the market and other providers will have to respond to that.

In the US the service’s reception has been more varied. One former US Microsoft partner, who asked not to be named, suspects that Microsoft knew it would cause its hosting partners grief if it went ahead and offered its own hosted services but thought it was a small price to pay compared to losing that business to Google.

Danny Essner, director of marketing for US Microsoft-hosted Exchange partner Intermedia, said Microsoft’s pricing for its hosted services is “very aggressive” and will force the company’s partners to “move up the stack to preserve profit margins”.

— US reporting by Elizabeth Montalbano

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