Comments on: Confirmed: Microsoft Cuts SaaS Pricing

By: Pankaj Taneja

Pankaj Taneja — Thu, 05 Nov 2009 17:14:14 +0000

I don’t think MS partners need to be particularly worried. BPOS is the kind of product that needs implementation and other support, and a lot of people will be looking MS partners to provide this support. If this price cut pushes up enterprise demand, MS partners may also see increased demand for their services.

We did the following features/cost comparison of BPOS and Google Apps from an SMB perspective – http://www.hyperoffice.com/google-apps-vs-microsoft-bpos/

By: Joshua Beil

Joshua Beil — Thu, 05 Nov 2009 01:45:31 +0000

As I have previously commented about reseller programs for cloud services:

“The primary benefit to this approach is the minimized investment needed to get to market. The primary risk to this approach is vendor or technology lock-in, which over time may dictate how a VAR does business.”

It sure looks like this risk is manifesting sooner than later for VARs in the case of BPOS.

By: The VAR Guy

The VAR Guy — Wed, 04 Nov 2009 19:45:25 +0000

MSreseller@9, Mike Dunham@10: Thanks for weighing in. Most of the email The VAR Guy has received from readers indicates growing SaaS concern among Microsoft’s channel base. But a few readers have sent The VAR Guy notes that defend Microsoft.

Our resident blogger will try to deliver a balanced follow-up later this week. In the meantime, thanks for the continued comments.
-TVG

By: Mike Dunham

Mike Dunham — Wed, 04 Nov 2009 03:59:00 +0000

This makes no sense to me. If greater efficiences actually exist, why not plow the extra money back into the product or channel? Selling a SaaS product on price is a scary prospect for an enterprise offering. MS has thousands of successful installations globally of the licensed versions. If the SaaS offering has value, it seems to me the point of a service is to sell on value delivered, not price. If the service is not delivering, look at the value to the end user and figure out what will make it more valuable.

Honestly, the price is already low. The per user cost is less than three cheap lunches a month. Is the productivity in these products not orders of magnitude greater than that? As the price is lowered, what is happening to the installed base? Is this eating a paid for cash cow in the long run? Will the adoption curve really meet the licensed profitability in a positive way? or are we just guessing with a whole lot of partners key assets?

To me this does not bode well for MS in the cloud/SaaS market. If they are valuing numbers of adopters more than their lifetime value as subscribers, they have missed the point. If users are not satisfied, MS and VARS will never recover their cost of customer acquisition. Customers will move to whatever they perceive to be the better value, nevermind the price.
The barriers are orders of magnitude smaller than we’re used to in the licensed market.

Just my two cents.

By: MSreseller

MSreseller — Wed, 04 Nov 2009 01:00:59 +0000

MS is making a big mistake, dropping prices in almost half says to me the BPOS and MS online program is not working for them. With MS if it doesnt make a crap load of money quickly its a bust, so the price drop is dead on about this. When you squeeze out VARs, MSPs, and companies that resell hosted exchange – you bit the hand that feeds you!! I highly doubt google apps AKA Gmail for enterprises! LOL is why they did this, its only GREED my friends AKA Bernie Madoff

By: The VAR Guy

The VAR Guy — Tue, 03 Nov 2009 21:55:44 +0000

Jacob: You’re on the mark. If Microsoft gets a critical mass of ISVs on Windows Azure, it would be quite a cloud story worth watching…

By: Jacob

Jacob — Tue, 03 Nov 2009 19:43:56 +0000

Another great insight reading your article – is the point on WHEN Microsoft will move Azure into the battle of vCloud and Amazon. Announce that and you probably have a winning lotto ticket…

By: The VAR Guy

The VAR Guy — Tue, 03 Nov 2009 19:08:55 +0000

Mark: The VAR Guy has been trading email with Microsoft today and plans to post an update by Wednesday (if not sooner). The VAR Guy will try to raise some of the questions you mentioned.

By: Mark

Mark — Tue, 03 Nov 2009 11:44:29 +0000

Hey VAR Guy, make sure you discuss with Microsoft the relationship between the upgraded margins on the BPOS versus the unchanged price on the SPLA and Open license side. It’s no just BPOS Then versus Now discussion–MS is hoping that you’d limit your analysis to Then versus Now, rather than dig into the issue.

By: The VAR Guy

The VAR Guy — Tue, 03 Nov 2009 05:23:04 +0000

Frankie: Thanks for the note.
Mark: The VAR Guy will withhold judgment until Microsoft has a chance to discuss its margin strategy for resellers under the new pricing model.
Rick: Keep The VAR Guy posted as you consider which baskets to put your eggs in.

By: Rick Measham

Rick Measham — Tue, 03 Nov 2009 04:56:49 +0000

> … consider the following: Has a SaaS price war started
> with Google Apps? And if so, will channel partners feel
> their own SaaS margins squeezed?

Microsoft and Google may price-war each other, but they have plenty of fat on their service as (IMHO) their support is thin on the ground. They make a one-product-fits-all-or-you-can-go-away service.

Smaller SaaS players provide much better support as every single customer really does matter. There’s little-to-no fat to cut there, so I wouldn’t expect a price-war that pinches channel partners.

MSPs onselling SaaS solutions from the big end of town will be squeezed as the giants go to war, but there is and always will be profits to be made from smaller SaaS providers. MSPs, like any business, need to make sure they have eggs in more than one basket. Make sure your customers have other services that can cover the margin squeeze from the big boys.

By: Mark

Mark — Tue, 03 Nov 2009 03:59:59 +0000

Microsoft is desperately trying to keep Google from eating its corporate lunch, and MS’s partners are merely collateral damage. What theyve done is bad for the industry: commoditized a key product, killed their partners’ ability to survive and forced partners to become a mere sales outlet for MS products and services. No credible VAR would touch this offering.