How to Compete with Office 365

I realize plenty of VARs and MSPs plan to embrace Office 365, Microsoft’s forthcoming cloud successor to BPOS (Business Productivity Online Suite). But there’s a vocal segment of VARs and MSPs that plan to compete — fiercely — against Office 365 for a range of reasons.

In recent weeks, I’ve heard from dozens — yes, dozens — of VARs and MSPs that are drawing up battle plans ahead of Office 365, which is expected to debut July 1 or sooner. Microsoft’s low-cost cloud suite will include Exchange Online, SharePoint Online and a SaaS version of Microsoft Office. Pricing will start at $6 per user in a small business. (Here’s an Office 365 FAQ with more background.)

Some Microsoft channel partners see opportunities ahead (in fact, here’s a list of Microsoft’s top 10 U.S. solutions providers embracing BPOS and Office 365). Also, many of our Talkin’ Cloud 50 survey participants are Microsoft BPOS channel partners. But I’m getting calls — daily — from readers seeking to network with other readers, forming potential alliances across the U.S. to promote alternatives to Office 365.

Battle Lines Drawn

In a clear sign of things to come, Intermedia — a hosted Exchange specialist — last week held a partner summit in New York. Roughly 100 MSPs attended. One session at the conference focused specifically on competing with BPOS and Office 365. MSPs raised numerous competitive questions during the one-hour session, and Intermedia displayed the following two slides to help MSPs formulate their competitive strategies:

(Click on the image to take a closer look at the slide.)

You’ll notice that Intermedia points out a range of potential Office 365 and BPOS limitations that MSPs and VARs can potentially exploit during customer discussions.

Two examples: At the present time, Intermedia notes, BPOS does not support Exchange 2010. And Microsoft’s cloud service apparently requires a 12-month contract with no deletions.

Standing Out in the Crowd

To counter Microsoft, Intermedia is calling on VARs and MSPs to focus on value-added differentiations — as explained in the slide below:

(Click on the image to take a closer look at the slide.)

Even Intermedia is taking steps to differentiate from Microsoft. The company has launched a hosted PBX service, as well as online backup and encryption capabilities for Intermedia’s hosted Exchange offerings.

Reality Check

I realize there are two sides to every story. As I’ve pointed out, some solutions providers plan to embrace Office 365 with open arms. Already, Microsoft’s top 10 U.S. cloud partners have moved 1,000 customers to BPOS. And Microsoft has introduced partner initiatives like Cloud Accelerate and Cloud Essentials to help educate VARs about cloud opportunities. Overall, I do believe Microsoft remains committed to its channel partners. And I am hearing from eager BPOS partners.

But there’s also unrest in some segments of the channel. Some partners want to control end-customer cloud billing — a request that Microsoft so far has not granted. (Ironically, Google offers that cloud billing capability to Google Apps Authorized Reseller Program.) Other partners say they will never move customer information into Microsoft’s data centers, despite the fact that Microsoft recognizes and rewards “partners of record” for cloud wins.

Either way, it seems clear to me that forward-thinking VARs, MSPs and cloud services providers have seen the writing on the wall. Those solutions providers are working hard — right now — to figure out whether they are going to embrace Office 365… or compete fiercely against it.

Either way, the channel will forever change when Office 365 officially debuts.

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