The VAR Guy

SugarCRM is the latest open source application provider to jump into Microsoft’s Windows Azure cloud. SugarCRM’s move reinforce’s Microsoft’s commitment to make Azure a widely supported cloud — including both open and closed source application partners. Here are the implications for VARs and solutions providers.

As The VAR Guy previously reported, Microsoft is quietly working with SugarCRM, MySQL and other open source partners on a range of projects. This, despite the fact that Red Hat is warning customers and partners about potential Windows Azure lock-in. And as Matt Weinberger reported, Microsoft recently pulled back the curtains on a Windows Azure release schedule. Weinberger, The VAR Guy hears, is poking around and speaking with more Azure ISVs this week. Stay tuned for updates.

Partner Choices

For VARs and solutions providers, Azure represents a potential bridge from on-premise Windows servers to cloud-based Windows applications. That bridge will lead to both open source and closed source applications — a smart move by Microsoft. And the Azure cloud could generate recurring revenue for VARs and managed service providers.

Separately, Microsoft continues to promote the Business Productivity Online Suite (BPOS) — featuring hosted Exchange, hosted SharePoint and other apps — to VARs and end-customers. But here’s the twist: Microsoft ultimately controls the pricing and product margin of BPOS applications. And Microsoft has already made a big BPOS price cut far sooner than most partners had expected.

In stark contrast, VARs that move customer applications into the Windows Azure cloud potentially charge whatever they want for the ongoing online applications. Translation: The VAR Guy thinks focusing on Azure (rather than BPOS) could be a more profitable bet for solutions providers.

Still, it’s early in the Azure game and there are plenty of risks ahead. Two prime examples:

• Numerous channel partners across the world host SugarCRM on their own. Now, those SugarCRM partners could face potential competition from the Azure cloud.
• Microsoft itself will face plenty of competition from Amazon Web Services, Rackspace Cloud (where sales are growing fast) and even Microsoft hosting partners like Intermedia.

Microsoft’s competitive strategy is clear: Instead of playing favorites it’s welcoming open source partners like SugarCRM into the Azure party. Smart move. Very smart.

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