microsoft-bpos-vs-google-appsThe VAR Guy's sources were right. Microsoft's Business Productivity Online Suite (BPOS) team has cut SaaS (software as a service) prices on multiple applications -- including Microsoft Exchange Online, Microsoft SharePoint Online and Microsoft Office Communications Online. Some pundits suggest it's the start of a SaaS price war with Google Apps. Here's the scoop, and the implications for channel partners.

First, some background. The VAR Guy heard rumors in recent days that Microsoft was planning a SaaS price cut in response to heightened competition from Google Apps.

Microsoft has now confirmed the SaaS price cuts. According to a Microsoft spokesman:
"Thanks to rapid customer adoption, global scale and improved efficiencies from new software such as Exchange Server 2010, Microsoft is reducing the price of the Business Productivity Online Suite from $15 to $10 (U.S.) per user per month. This price reduction includes Microsoft Exchange Online, Microsoft SharePoint Online and Microsoft Office Communications Online."
Time for all VARs -- not just Microsoft channel partners -- to take a deep breath and consider the following: Has a SaaS price war started with Google Apps? And if so, will channel partners feel their own SaaS margins squeezed?

Microsoft's Position

Microsoft is quick to note that more than 7,000 channel partners back Microsoft's SaaS offerings -- including Microsoft Online Services and BPOS. No doubt, some early BPOS partners say they're profiting from BPOS. And other Microsoft channel partners say they're embracing Windows Azure, Microsoft's Windows-based cloud system.

But did the rules of the SaaS game just change? "If you're a reseller agent for BPOS, your price-per-user is going down so your potential profit dollars per user also look like they're falling," says one BPOS channel partner. "I can't help but think this is the start of a price war with Google, and partners like me are going to get squeezed."

The VAR Guy has an email into Microsoft requesting an update on the BPOS commission model for VARs and channel partners. Our resident blogger has also reached out to he Google Apps team for comment.

Also of note: The VAR Guy wonders if or how Microsoft plans to adjust SaaS pricing to service provider partners like Apptix, Intermedia, mindSHIFT, Rackspace Hosting and SherWeb Inc. -- which cooperate and compete with Microsoft's BPOS offerings.

Tricky Spot

In Microsoft's defense, the company is in a tricky situation.

On the one hand, Microsoft must price its SaaS services aggressively in order to gain mind share and market share against startups like Zoho, giants like Google Apps, disrupters like Yahoo's Zimbra open source email, and a growing list of virtualized applications moving into public clouds like Amazon Elastic Compute Cloud and RackSpace Cloud.

But on the other hand, Microsoft is striving to remain loyal to thousands of channel partners that made Windows desktops and servers corporate standards in the 1990s.

The big question: Can Microsoft sell SaaS direct and indirect while helping VARs to remain profitable?

Going Global

As channel partners consider the situation closely, Microsoft is expanding its SaaS strategy globally.

Later this week, Microsoft says, the company will expand the availability of the Business Productivity Online Suite, including commercial availability in Singapore and trials in Brazil, Chile, Colombia, Czech Republic, Greece, Hong Kong, Hungary, Israel, Malaysia, Mexico, Poland, Puerto Rico, Romania and Taiwan; commercial availability in India is also expected later this year.

According to a Microsoft press statement:
This will bring availability to a total of 36 countries and regions, making this the only cloud-based solution that is truly ready for global business.
The VAR Guy will continue to watch the situation closely. And he's working hard to keep an open mind: If you're a BPOS or Windows Azure partner that wants to describe your business momentum, The VAR Guy is all ears.

In the meantime, The VAR Guy thinks Microsoft just fired the first shot in a potential SaaS price war.

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