When RackSpace recently announced plans to offer hosted Microsoft SharePoint, it signaled both an opportunity and a warning sign for managed services providers. Is hosted SharePoint the next commodity SaaS service. Yes and no. Here’s why.
To understand where the SharePoint SaaS market is heading, it’s wise to look at the hosted Exchange Server market.
Two or three years ago, many first-mover MSPs were first starting to figure out their hosted Exchange Server strategies. Some MSPs built sophisticated infrastructures to host Exchange on their own. Others turned to white label experts like Intermedia. And more recently, some folks have embraced Microsoft’s own Business Productivity Online Suite (BPOS), which includes Exchange Online.
The net result: Roughly 67.7 percent of MSPmentor 100 survey participants say they now offer some form of hosted or SaaS email to their customers.
But when Microsoft cut BPOS prices in November 2009, it put the squeeze on small MSPs that hosted Exchange on their own without adding much value.
Similar Story with SharePoint?
Turn your attention to the SharePoint market and I believe the cycle is set to repeat itself — but in a slightly different way.
Already, 36 percent of MSPmentor 100 survey participants say they now offer hosted or SaaS SharePoint. Much like hosted Exchange, there essentially are three ways for MSPs to get into the SharePoint SaaS market.
- Leverage Microsoft BPOS
- Partner with a third-party service provider
- Build a hosted SharePoint service completely on your own
Learning from the Exchange Server experience, I think few MSPs will spend time and money building out their own SharePoint infrastructures. Instead, MSPs that specialize in SharePoint should look at specific ISV (independent software vendor) options.
If you rewind to the Microsoft Worldwide Partner Conference (WPC) 2009, SharePoint ISVs dominated the trade show flow — demonstrating a range of collaboration applications that extend SharePoint. That ISV market should remain healthy for years to come, considering Microsoft now generates more than $1 billion in annual SharePoint licenses.
Quite a few MSPs are developing their hosted SharePoint strategies right now. Simply reselling the base application for a flat, per-user monthly fee will become a low-profit opportunity pretty quickly. Focus on writing or customizing extensions to hosted SharePoint, and you’ll have high-paying customers for life.
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Posted In: Sales | Software as a Service and Hardware as a Service
Tags: Hosted Exchange | Hosted SharePoint | Managed SharePoint Services | Microsoft BPOS | Microsoft Business Productivity Online Suite | RackSpace Cloud SharePoint
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Joe,
There is a third option. Instead of being a me-too player, service providers can opt to carve out a niche and go non-MS, i.e. targeting SMBs. While we have proof that business email, mobile collaboration, SharePoint intranets are becoming standard for knowledge worker environments – Small Businesses don’t have the internal expertise and budgets to set these environments up and they are typically too robust which makes them difficult to use. I submit that service providers should look at reselling applications that target the fastest growing segment – small businesses with applications that are slimmer and better suited to small businesses (<100 ee). Google Apps fits this profile and of course my company, HyperOffice is opening up our reseller program with some very interesting developments around mobile collaboration.
Shahab: Thanks for the HyperOffice update. When you say you’re “opening up” your reseller program… what’s the status of that program today?
-jp
ABP couldn’t agree more. We opened our SaaS/Managed Service Offerings back in 2001 with MS Team Services and rode the bubble up and now down with V2.0/3.0/MOSS as Hosted SharePoint sites and features comoditized. We re-focused our efforts on a particular public and private sectors providing cross culture and multi jurisdiction collaboration needs. Most of the time these entities already have SharePoint but lack the resources to build, manage and financially charge back their brother/sister collaborators in order to share the cost.
ABP is the easy choice for Government or Private Sector Entities to quickly place any collaboration tools into production without the headache and overhead.
ABP won several awards in 2009 with this strategy. BEST OF CALIFORNIA 2009 AND BEST WEB SOLUTION “GTC 2009″.
Anyone who has been following this market know that SharePoint hosting [either MSP or SaaS] has been commodity for at least 18 months. Phase 2 has been hosting SharePoint since 2006.
Unless you are a dev shop [or ISV] with your own plug-in or derivation, you will find hosting this product frustrating. If, however, you can find a way to add significant value and generate market demand for this value, there may be a model that makes sense. Then again, with so many others hosting the product already, you’d be well advised to leverage another providers platform and focus your resources on the software.
If I owned an MSP today I would be looking to sell only services, management and “vCIO”.
@Kevin is right. Hosting your own is a big endeavor. Truly a whole other business. Not to mention BPOS is super cheap and includes the Sign In Client which is STILL unmatched in the hosting world.
The fact that Google Docs is now allowing “any file type” to be uploaded (per Google Partner Feb newsletter) and offering dirt cheap add on storage means further eroded market share. I think a whole TB is only $300 and change PER YEAR.
Posts like this have me always contemplating… is VAR coming to and end in the SMB world?
Andy Myers
Fractional CIO, Consultant
http://www.andymyers.net
Andy@5: VARs aren’t going away. There will always be a “new” technology around which to provide IT consulting. Trying to make money purely off hardware? That’s an entirely different story.
-jp
Beware all MSP’s out there that somehow think developing “your own” SaaS, hosted, utility, etc. services is going to be different that building your own Linux-based firewall when you should just resell a trusted product. Anyone out there still building white boxes?
In 2006 we built out full Exchange/SharePoint hosting platform using Microsoft’s HMC provisioning technology. It was great until we realized that the hardware refresh and operational costs would simply increase over time and squeeze the margins. Then guess what? Microsoft, Intermedia, GroupSpark, and others said hey, you can just resell this like any other product and focus all the extra energy from managing your platform back to Clients. Guess what we did?
Remember a Managed SERVICE PROVIDER needs to focus on delivering great services to clients, not running a platform to deliver products. Simply no way to compete as this is hugely capital intensive business with decreasing margins.
Edward Stringfellow
http://www.stringfellow.com
@ Joe. I agree with what you are saying but at least on the low end (50 desktops or less) the proliferation of Do It Yourselfers out there married with these streamlined hosted offerings is terrible news for any kind of reseller.
In the 2 years leading up to my departure from the IT Service space it seemed that customers of that size were more interested in buying something direct at rock bottom prices, then paying you to put it in. It’s a shift in SMB consumer mentality in my opinion and a far bigger threat than any local competitor ever was.
It would be really interesting if MSP Mentor found a way to pull some direct feedback into topics like this to see what the “average joe” SMB business owner and manager thinks.
Andy Myers
Fractional CIO, Consultant
http://www.andymyers.net
Andy: We’ll do some work to pull those SMB owners into the conversation. Stay tuned.
-jp