Intermedia: Staying Ahead of Microsoft BPOS?

How's this for ironic: As Microsoft pushes ahead with its Business Productivity Online Suite (BPOS), some of Microsoft's own SaaS partners say their hosted offerings are several steps ahead of Microsoft's internal BPOS efforts. A case in point: Consider the situation at Intermedia, a major hosted application provider that's working with nearly 5,000 channel partners.

To  be sure, BPOS has buzz at the Microsoft Worldwide Partner Conference 2009 (WPC09) this week in New Orleans. VARs and solutions providers here are trying to figure out whether they should embrace and resell the hosted Microsoft offerings.

Still, Microsoft isn't the only game in town for hosted Microsoft applications. During a wide-ranging interview at WPC09, Intermedia's VP of sales and business development, Robert Leibholz, described how the company plans to stay several steps ahead of Microsoft's BPOS suite.

Partners Sign On

First, let's rewind a bit: Intermedia started hosting Exchange in 2000, and the company now manages more than 325,000 inboxes.

But this isn't a direct sales play. Intermedia's private label partner program has generated recurring revenue for roughly 3,700 partners -- who rebrand and resell Intermedia's hosted Exchange, hosted SharePoint and other services to end-customers. Also, roughly 1,000 "referral" partners receive one-time fees for referring business to Intermedia.

To be sure, Microsoft is working hard to launch and build its own hosted software business. Branded as BPOS, the Microsoft effort allows VARs to resell hosted Microsoft applications. As Redmond Channel Partner notes:
"Those who resell the service get a 12 percent referral fee plus 6 percent of the fees for every year that the customers remains subscribed -- effectively an 18 percent margin in the first year and 6 percent every year thereafter. The fees are paid quarterly, so partners start getting the recurring fees throughout the year rather than only at the end."
Not bad. But Leibholz says Intermedia partners are doing even better. "You're really looking at about an 8.3 percent margin over the life of the deal with Microsoft. Our partners can earn about 40 percent margin, which in my mind is about five times better than 8 percent," quips Leibholz.

Who Owns the Customer?

This isn't just a margin and revenue story. Leibholz notes that partners can rebrand the hosted Intermedia services as their own. "When you work with us, you own the customer, you bill the customer and it's your brand in front of the customer," asserts Leibholz. "You set the prices. We don't dictate the prices."

Hmmm. The VAR Guy is set to meet with Eron Kelly from Microsoft's BPOS team later today. And our resident blogger will reserve judgment on the BPOS efforts until he gets the full picture from Kelly.

In the meantime, Intermedia and Leibholz seem to be doing something right. The 200-person company is self-funded, growing and has no debt. And they're not stopping at hosted Exchange and Hosted SharePoint. The company's most popular offering combines Exchange, Outlook, Office Communications Server and SharePoint into a single, integrated hosted Solution, notes Leibholz.

Next up, Intermedia is beta testing Hosted Unison, a unified communications system that runs on Linux. "In some ways Unison represents a peek at the future," says Leibholz. "It's a nicely integrated unified communication system. It's real and we expect it's only going to get better."

Intermedia expects to shift the Unison beta to a production offering within a few weeks or so. The VAR Guy will be watching.

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