Microsoft Gets Aggressive With Cloud Apps Pricing

On Monday, Microsoft cut the price of its Business Productivity Online Suite (BPOS), which includes hosted versions of Exchange, SharePoint, Office Communications Server and Office Live Meeting, from $15 per seat monthly to $10 per seat monthly. Microsoft also slashed the price of the standalone Exchange Online offering from $10 to $5 per user per month and boosted mailbox capacity from 5 GB to 25 GB.

Microsoft might deny it, but the moves are widely seen as an effort to bring the features and pricing of its hosted business applications in line with those of Google Apps Premier edition, which costs $50 per user per year and has made recent inroads. Google recently inked a $7.25 million with the Los Angeles city government involving Google Apps Premier, and given Microsoft's borderline obsession with all things Google, that can't be sitting well in Redmond.

"Google is one of Microsoft's biggest fears right now. They'll do anything they can to keep Google from getting a foot in the door of their business stack of applications," said Bob Leibholz, vice president of sales and business development for Intermedia, a New York City-based Microsoft partner.

Leibholz claims that Microsoft, in its haste to compete against Google with BPOS, has disintermediated the vast majority of its partner community. "To sell BPOS, VARs have to give up ownership of the customer to Microsoft," he said. "Although customers can choose a partner of record when signing up, the VAR has no connection to the billing and all they're doing is shipping a virtual box."

Dave Sobel, CEO of Evolve Technologies, a Fairfax, Va.-based Microsoft Gold partner, sees the BPOS price cuts as a sign that Microsoft's competition with Google is overriding its plan to deliver solutions via channel partners. "BPOS is not a partner play, and these changes continue to reinforce that," said he said.

While the BPOS price cut will make it more competitive in the market and give Microsoft a clear end user offering, the move also brings commoditization and leaves little path for partners to make money, Sobel added.

But in the opinion of other Microsoft partners, the price cuts aren't a bad thing when weighed against the benefits their customers gain from Microsoft's integration of BPOS with Office applications. For small businesses, being able to use hosted apps in conjunction with on-premise apps is a key selling point, says Stuart Crawford, business development manager at Bulletproof Infotech, a solution provider in Red Deer, Alberta.

"Price doesn't even come into play here because the value of BPOS is just too great," Crawford said.

Ever since Microsoft unveiled BPOS in mid-2008, company executives have insisted that it wouldn't cut partners out of the loop, but would actually lead to more services opportunities. For partners that can deliver these services, the more customers using BPOS apps, the more opportunities exist to make money.

Mitchell Cannady, president of Spinnaker Network Solutions, an Irvine, Calif.-based solution provider, says the same holds true for Dynamics CRM Online. Microsoft is offering Salesforce and Oracle CRM customers six months of free Dynamics CRM Online when they sign a one-year contract.

"Microsoft is getting very aggressive on CRM, and we see that as a positive sign," said Cannady. "I don't want to see apps being commoditized, but I make more money from services than I do from software, and the more people that use Dynamics CRM Online the better."

Microsoft's price cuts this week are a clear challenge to the likes of Google, Salesforce.com and Oracle, but they're also a signal to Microsoft channel partners. And the message is: It's long past time to start moving away from software and toward your services-oriented future.