Two Microsoft partners embrace the software-plus-services mantra

Say they will resell the software maker's Business Productivity Online Suite

It's no surprise that cloud computing vendors have scoffed at Microsoft Corp.'s "software plus services" game plan since the software maker first began talking it up several years ago, dismissing it as the rear-guard strategy of a doomed incumbent.

But Microsoft's loyal army of partners have also expressed doubts. Can Microsoft successfully move from the on-premises software world to the Web-hosted one? And if so, where does that leave its partners?

Their future may be in embracing the same dual-headed strategy as Microsoft.

Two Microsoft partners -- one huge, one smaller but fast-growing -- are doing just that.

Computer Sciences Corp. said last week that it will begin to resell Microsoft's Business Productivity Online Suite (BPOS) to its large government and corporate customers.

CSC will sell subscriptions to online versions of Microsoft Exchange, SharePoint, Office Communicator and Live Meeting. The full suite costs $15 per month per employee, though companies can opt for a $3-per-month version for non-desk-workers.

CSC, which already manages 700,000 Exchange and Lotus Notes e-mail accounts, will now have a trio of offerings, according to Brian Boruff, vice president of cloud computing for CSC: BPOS hosted by Microsoft; BPOS hosted in CSC's "Trusted Cloud," which will offer better security and will cost 20% to 40% more; and CSC's existing outsourced e-mail management services.

Customers will be able to opt for a mix of all three services to maximize cost savings and retain high security for certain data or employees, Boruff said. CSC will be the master data administrator and will provide all Level 1 and Level 2 support, he said.

Another company, Azaleos Corp., said today that it will also begin to resell BPOS, in addition to its existing service of remotely managing on-premises Exchange servers.

Like CSC, Azaleos will essentially offer free monitoring and limited support for workers on BPOS as a bonus for customers of its core service.

The moves put Azaleos and CSC in the forefront of market trends, according to analyst Michael Osterman of Osterman Research.

"BPOS is clearly picking up steam, and I think we'll see more hybrid messaging vendors in the fairly near future," Osterman said. "It just makes sense for organizations that are too large to be convinced to migrate tens of thousands of on-premise users to a hosted model, but that operate lots of users at smaller locations. This would apply to just about every insurance company, realty company, bank, brokerage, retailer, etc. -- we see lots of them moving toward a hybrid model."

Or as Scott Gode, vice president of product management and marketing for Azaleos, put it: "Pretty much every RFP we're involved in, Microsoft is in there with BPOS. All of the CIOs are considering and looking at it, but they are unsure about jumping in with both feet."

Azaleos will monitor a company's employees on BPOS for free no matter how few of the company's other employees are on servers managed by Azaleos' remote service, Gode said.

For Azaleos, which counts 180,000 Exchange accounts under management at 150 different customers, offering BPOS as a free, value-added package will help the company woo more midmarket and enterprise customers, Gode said.

That sounds well and good, said Burton Group analyst Bill Pray, though he anticipates two challenges for Azaleos that also seem applicable to CSC.

"Azaleos' competency has been the management of on-premises systems. This offering is management of a different kind and requires brokering a relationship and technology needs between the customer and Microsoft. It takes a different set of skills and practices that Azaleos will need to develop," Pray wrote. Second, "Azaleos should operate as an advocate for the customer to Microsoft, but being the 'man in the middle' could put Azaleos in situations where they don't want to be. This can get especially complex with regards to legal issues, like [service level agreements]."

For CSC, adding the two flavors of BPOS will help CSC compete against Electronic Data Systems Corp., now an arm of Hewlett-Packard Co., as well as Northrop Grumman Corp. and IBM in the large enterprise and government markets, Boruff said.

CSC has already announced plans to offer Windows Azure, the cloud operating system Microsoft has under development, when it is released, said Boruff, a longtime Microsoft executive who joined CSC earlier this year.

CSC is talking to IBM about offering its hosted LotusLive service, as well as Google Apps, said Boruff, though he added that no agreements are imminent.

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