Microsoft, HP Open Private Label SaaS To VARs


On Wednesday, Microsoft and HP unveiled plans to give VARs the tools and guidance necessary to provide their own branded, or 'private label' Microsoft SaaS offerings that are hosted by managed service providers that use HP server and storage infrastructure in their data centers.

In this scenario, VARs get to avoid upfront hardware investments and simply resell hosted services from service providers.

HP and Microsoft say the ability for SMBs to tap into services that were previously out of their financial reach will benefit them as well as the VARs with whom they've developed "trusted adviser" relationships.

"This is about helping make VARs more comfortable with -- and equipped for -- the cloud, and allowing customers to acquire capacity they would not be able to afford otherwise," said Allen Clark, industry director of hosting at Microsoft.

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Microsoft and HP also see opportunity in equipping VARs to sell hosting solutions to service providers, a strategy the two companies believe will be particularly effective in emerging markets.

To that end, Microsoft and HP will offer preconfigured solutions based on HP's BladeSystem, ProLiant and StorageWorks hardware, according to Janet Pretti, vice president of channel marketing at HP.

"Given the tight economic times, this type of joint initiative becomes more compelling to customers for obvious reasons, Pretti said. "The pay-as-you-go helps VARs exploit opportunities and get a jump-start on providing services to their SMB customer base."

When Microsoft announced the pricing structure for the Business Productivity Online Suite at its Worldwide Partner Conference in July, one of VARs' main gripes was the fact that Microsoft didn't allow them to offer private-label services, but Microsoft appears to have taken to heart the feedback it received from angry partners.

The decision to let VARs sell private-label services represents a major departure from previous Microsoft partner-driven proliferation efforts, said Chris Teets, general manager at M3 Technology Group, a Charlotte, N.C.-based solution provider.

"That's going to have a big impact, especially with companies who are large enough to brand, sell and support the offering in multiple market segments," Teets said.

Matt Makowicz, principal at Ambition Consulting, a Somerset, N.J.-based solution provider, said Microsoft's decision to allow partners to sell private-label services removes what was, for many partners, a major stumbling block.

"This is an example of Microsoft listening to partners' feedback and making a proactive decision that will help bring more channel partners on board," Makowicz said.

Most MSPs have created some type of brand for their managed services which is abstracted from the many vendors and services they use behind the scenes to deliver services to customers, says Michael Cocanower, president of Phoenix-based solution provider ITSynergy.

"This is valuable to SMBs because it gives them 'one throat to choke' by bundling our own skills and offerings with tools and equipment from best of breed third parties, and offering the entire package to customers under a single brand for which we are solely responsible," he said.

But despite the promise of SaaS, some solution providers aren't convinced that SMB customers are ready to embrace hosted applications just yet.

"I don't see immediate impact in the SMB space with cloud computing, but the economy could drive more companies to make the jump rather than a capital investment," said Arlin Sorensen, CEO of Heartland Technologies, a Harlan, Iowa-based solution provider.

Added Sorensen, "Microsoft and HP are providing us tools to enable us to engage in this new playground that takes out a significant portion of the cost of entry. There is a definite trade-off in revenue opportunity as an expected result, but at least we can go to market with trusted technology partners."

Although the private label approach lets VARs avoid the barrier of up-front expenditure, the move to services still comes with significant costs, according to solution providers.

"This isn't an actual solution that will let partners offer private-label services, and it certainly doesn't help the little guys who want to sell Microsoft services," said one source, who asked not to be named.

"There's a cost to get in the services game if you're not already in it," said another source. "There's investment, both hard and soft, and anyone who's small and tries to build that up themselves is going to get gobbled up."

However, an HP spokesperson pointed out that with the private-label initiative, VARs don't need to set up their own hardware hosting environments.

This article updated on 12/10/2008 at 10:20 a.m. Pacific Time to clarify the terms of the HP-Microsoft initiative and add VAR comment.