Services firms boost Microsoft’s SaaS

Microsoft Corp.'s late move into the hosted software business gained some headway this month when two outsourcers — Computer Sciences Corporation and Azaleos Corp. — agreed to resell its Business Productivity Online Suite (BPOS).

Analysts said the agreements could portend a gradual acceptance of Microsoft's “software plus services” plan, which has long been dismissed by rival cloud computing vendors as the rear-guard strategy of a doomed incumbent.

BPOS, which includes hosted versions of Microsoft Exchange, SharePoint, Office Communicator and Live Meeting, was unveiled last fall.

Both Falls Church, Va.-based CSC and Seattle-based Azaleos plan to offer the BPOS services in addition to their more traditional businesses of providing outsourced management of e-mail, messaging and collaboration tools that companies run in-house.

Michael Osterman, an analyst at Osterman Research Inc. in Black Diamond, Wash., said he expects that more services firms will start adding software-as-a-service products like BPOS to their arsenals.

“BPOS is clearly picking up steam, and I think we'll see more hybrid messaging vendors in the fairly near future,” Osterman said.

While most large organizations may be hesitant to “migrate tens of thousands of on-premises users to a hosted model, [many also have] lots of users at smaller locations” where hosted services could make sense, he said. “This would apply to just about every insurance company, realty company, bank, brokerage, retailer — we see lots of them moving toward a hybrid model.”

Expanded Offerings

Brian Boruff, vice president of cloud computing at CSC, noted that by adding the Microsoft suite, his company can now offer users access to three products: BPOS applications hosted by Microsoft; BPOS hosted within CSC's Trusted Cloud Services, with upgraded security that adds 20% to 40% to the price tag; and the company's existing Exchange and Lotus Notes e-mail management services.

CSC will be the master data administrator and will provide all Level 1 and 2 support for both the Microsoft- and CSC-hosted offerings, Boruff added.

CSC plans to sell subscriptions to the Microsoft-hosted version of the BPOS suite for $15 per user per month.

Azaleos, a provider of remote management services for on-site Exchange servers, last week announced plans to resell the BPOS services, allowing its customers to mix and match on-site and online messaging services.

Azaleos, which has 180,000 Exchange accounts under management at 150 customer sites, hopes that offering BPOS as a value-added package can help it woo more midmarket and enterprise customers, said Scott Gode, vice president of product management and marketing at Azaleos.

So far, he said, IT managers are interested in discussing hosted options but are mostly hesitant to switch from on-site messaging and e-mail systems. “Pretty much every RFP we're involved in, Microsoft is in there with BPOS,” Gode said. “All of the CIOs are considering and looking at it, but they are unsure about jumping in with both feet.”

Bill Pray, an analyst at Midvale, Utah-based Burton Group, said moving to support hosted services presents challenges to services companies like CSC and Azaleos.

“Azaleos' competency has been the management of on-premises systems,” Pray said. “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.”

Nonetheless, Boruff, a longtime Microsoft executive who joined CSC earlier this year, said he expects the addition of BPOS to the CSC product line to help the firm better compete with rivals like Electronic Data Systems Corp., Northrop Grumman Corp. and IBM in the large-enterprise and government markets.

Boruff also noted that CSC has already announced plans to offer Windows Azure, the cloud operating system under development at Microsoft, and that it is talking to IBM and Google Inc. about possibly reselling the former's LotusLive service, as well as the hosted Google Apps suite.

CSC and Azaleos are among but a few companies that have so far agreed to resell or widely use BPOS.

Last month, Paris-based Atos Origin SA agreed to resell BPOS, and in March London-based GlaxoSmithKline PLC signed a deal to migrate 100,000 employees from Lotus Notes to BPOS.