Keep Your Customers Close, and Keep a Closer Eye on Microsoft

For years, Microsoft has been encouraging hosting providers to offer hosted MS Exchange solutions. For almost as long, Microsoft has offered their own hosted Exchange solution that has been marketed to the same market space—albeit half-heartedly when compared to the other services. Hosting companies did not care too much because the Microsoft solution was relatively expensive, was not aggressively advertised, and offered little in the way of additional services or features that would justify such a premium.  All in all, hosting companies delivered better value and a better overall experience.

The hosting companies might be forgiven if they were to think that Microsoft “competing” in this way was actually a benefit to them—providing a reliable straw-man comparison that seemed to prove the value of their own offerings relative to Microsoft itself. Microsoft soon duplicated this strategy with a hosted SharePoint service as well and has recently added the Unified Communications service.  Again—the competition was half-hearted and expensive.

Rise of the Straw Man

Four recent stories grabbed our attention and we could not help but link them up.

• The first was a story on Cnet regarding Microsoft’s recent decision to lower the prices on their Hosted Exchange Service along with the hosted versions of SharePoint and Office Communications Server.
• The second was an article at Information Week regarding the Microsoft release of Exchange 2010 and—unlike all previous versions of Exchange—the new release was allegedly built from the ground up as an online service with multi-tenancy (that, incidentally, has been a strength of SmarterMail since its inception—we are flattered).
• The third article was found back on Cnet and highlighted “One of the largest Data Centers in the World” (Microsoft) and how they had modularized it to be able to add 2000 servers in less than a day.
• The forth is an article that we wrote for this very blog on understanding new terms related to Microsoft’s Service Provider Licensing Agreement (SPLA). In this article we explored the meanings and nuances of confusing changes to the terms that impact how much service providers pay for the underlying technology that runs Microsoft-based servers for hosting and related companies—especially email. These changes appear to be geared toward increasing prices for smaller service providers that compete directly against Microsoft Online Services.

Let’s see…a re-jiggered online service-based architecture, a new lower price for Microsoft Online Services, an aggressive and modular expansion plan for major Microsoft datacenters, and the increasing of SPLA licensing costs for Microsoft “partners”—with a specific focus on email and communication.

One wonders whether the original Microsoft Online Services were indeed a straw man or a scarecrow?  Perhaps the thousands of Microsoft customers using Exchange and related technology to provide services their customers were a risk-free proof of concept as Microsoft bided its time—leading the rest of us on down the Yellow Brick Road.  Well, there is no Emerald City and the Wicked Witch is in the details.

Bottom Line

Microsoft is now offering hosted Exchanges services with a price point and feature set that are very competitive with existing partner structures while building a vast infrastructure and raising the costs to those same existing partners .

Perhaps we should consider that the Scarecrow had a brain all along as we witness what appears to be an intensive cross-coordination between four disparate Microsoft divisions for corporate competitive advantage.  Microsoft has long given its assurances to hosting providers that this sort of thing did not and would not take place.This scarecrow appears to have a darker side indeed.

But perhaps it is all just a coincidence…

Where to turn?

Sure, Microsoft wants your customers—but so does Google. Their only difference is in the approach. Microsoft wants to own your customers outright. Google wants to access your customers and then sell them to someone else…and then sell them again at their earliest opportunity (ad infinitum).

SmarterTools recently presented at the cPanel annual conference in Houston regarding the SmarterMail integration with their new Windows control panel product: Enkompass. In that presentation we touched on Google contextual indexing and advertising by showing an example of a test email we sent to verify our automated systems that aptly demonstrated how Google uses your own marketing pieces against you. You can view a PDF of that Presentation here (see slide #4).

SmarterTools is preparing a revised version of this presentation for Partners and Hosting Companies to  demonstrate how they can compete—and win—against Microsoft, Google, and the rest of the behemoths. It is possible to offer profitable and effective email as a service without making a deal with the devil…or the Scarecrow.

Important Disclaimer: SmarterTools is an independent software vendor (ISV) not directly associated with Microsoft Corporation and we do not pretend to have inside knowledge of Microsoft’s intent or objectives. We have conducted our own additional research and inquiries into this topic. As such, this post reflects our opinions, understanding, and experience on the subject.

Microsoft, Exchange, Azure, Office Live, and Sharepoint are trademarks of Microsoft Corporations (MSFT).  Cnet is a trademark of CBS Interactive. Information Week is a trademark of United Business Media LLC (UBS). Google is a trademark of Google (GOOG). All other trademarks are the property of their respective owners and content owners are responsible for their respective material.

This post was written by Jeff H., vice-president of business operations for SmarterTools. If you liked this post, please consider subscribing to the SmarterTools Blog so you don’t miss an update.