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Microsoft Calls On Telcos for Office 365

Carol Wilson
6/28/2011

Broadband service providers are playing a critical role in Microsoft Corp. (Nasdaq: MSFT)'s Office 365 Live cloud strategy, as the software giant expects them to be a primary link to the small and mid-sized business market, offering a service that is billed and supported locally and is thus different from Google's cloud apps. (See Microsoft Unwraps New SMB Cloud Strategy.)

The Office 365 launch on Tuesday was two years in the making, and Microsoft was quick to showcase the 20 service providers already signed to offer its cloud-based business apps, including Word, PowerPoint, Excel, OneNote, Outlook, as well as collaboration tools such as Microsoft Exchange, SharePoint and Lync, the newer version of Microsoft Live conferencing.

Among those on stage at today's New York announcement were: NTT Communications Corp. (NYSE: NTT), BCE Inc. (Bell Canada) (NYSE/Toronto: BCE), Telefónica SA (NYSE: TEF), Telstra Corp. Ltd. (ASX: TLS; NZK: TLS) and Vodafone Group plc (NYSE: VOD).

"Service providers are so important to us because we see the SMB is a terrific opportunity, and telcos have been having relationships with those companies for many years," says Marco Limena, vice president of operator channels for Microsoft. "As we transition to cloud, SMBs want to have better awareness and a lot of simplicity, and so we are working with those local players to build those markets, because they already have the billing relationships and the customer relationships with those companies."

Part of that promise of simplicity is integration of the billing of Office 365 into the network operators' billing systems to produce a single bill, and customer support from the telcos' customer service departments, with which the SMBs are already familiar.

Whether Microsoft achieves greater success with Office 365 than it has with its predecessor, the Business Productivity Online Standard Suite (BPOS), may depend on other factors, including the quality of the broadband connections those service providers are offering, says Ari Banerjee, Heavy Reading analyst.

"This is designed to provide strong competition to Google apps in the business segment. Performance and security will be the biggest differentiator in this battle of apps," Banerjee says. "Underlying connectivity and speed will make these succeed or fail. Major delays while using cloud-based applications will not be tolerated by users. Unfortunately, in most situations, it is the network and Internet to be blamed, and not specific applications."

BPOS has been plagued by service outages, the most recent one happening only last week, when the service was down for several hours. Limena says Office 365 is built on a new platform that was developed as stronger and more resilient based on the two years of experience with BPOS; he also says Microsoft is offering service level agreements with financial reimbursements to back up its reliability claims.

Microsoft has trained service provider personnel to provide first- and second-tier support for the Office 365 offerings, Limena says, and Microsoft will be backing that up with additional support when needed. That kind of direct access to a telco isn't as easy to get from Google.

Microsoft also expects telcos to provide their own extras, such as additional managed security offerings, or compliance services tailored to specific areas, such as government, legal services and health care.

The telcos will also have to compete -- Microsoft Office 365 will be available directly from Microsoft and from other value-added resellers doing business in the SMB space.

— Carol Wilson, Chief Editor, Events, Light Reading

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stevecrawf
stevecrawf
12/5/2012 | 5:00:50 PM
re: Microsoft Calls On Telcos for Office 365


Good point on the fact that telcos who only sell Office 365 may wind up competing with Microsoft -- unless they aggregate the delivery of O365 with other cloud services.


A good model for telcos to examine is the Cloud Services Brokerage model, which can enable them to deliver Office 365 plus dozens of other cloud provider's offerings.


As one example, Telstra has been selling BPOS since 2009 in Australia (and starting today are offering O365) and has seen tremendous uptake, but a key reason for their success is that they also offer many other brand-name cloud services from providers such as McAfee, Mozy, Symantec, Melbourne IT, and dozens of other services.


Secondly, telcos need to view their cloud services aggregation GTM strategy along 3 lines:

<ul>
<li>Offer a rich portfolio of cloud services -- don't rely on one or two offers. &nbsp;Many are rushing into IaaS, but beware that margins will be slim, so it's important to offer breadth in their catalogs.</li>
<li>Bundle value-added services with their core offerings and deliver from a single aggregation / CSB platform to consolidate billing, provisioning, billing, support and administration across all their users.</li>
<li>View the CSB holistically as part of their overall strategy, and not as a standalone business. &nbsp;Telcos who have adopted the CSB model typically see a 50-70% increase in renewal rates with their broadband customers who purchase cloud services, vs. those that only buy broadband. &nbsp;It's also a great way to grow market share for core services, with up to 20% of their cloud customers (who are using a competitor's broadband service) eventually churning to the CSB provider's broadband service.</li>
</ul>

Telcos have a great opportunity to be the gateway to the cloud for their business customers, and while Office 365 is a game-changing service for them to offer, it's not the only game in town. &nbsp;The CSB model provides an excellent way for them to compete against the OTT providers, grow net new revenue streams, and maintain profit margins with their existing core services.


If interested in more on this, Jamcracker recently did a webinar on 'Evaluating the Cloud Services Brokerage' business case, and a recording can be viewed at www.jamcracker.com/webinars.


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