Microsoft Office 365 - Flawed Go To Market Strategy?

OK, so I have given the product, MS Office 365, a kicking as a small business. I am not happy with its implementation or value as a Cloud application and it's about as innovative as a paperclip. But how about Microsoft's plan to foist it on the world - surely that's where they will win the battle?

You might think that a company like Microsoft with all those fine minds and resources will have worked out a solid plan even if the product is ropey (some would argue they have been doing this for years anyway), given the incredible reach and brand that someone like Google has as a competitor. Hmm, we'll see.

Hosted Exchange vs Office 365

The great thing about Hosted Exchange is that it is widely available from a number of different suppliers who host it themselves. Why is that a good thing when MS Office 365 is hosted by Microsoft themselves?

Here's a few points:

• Different hosters can mean a variety of SLAs which may be more in line with the variety of business users' needs. Choice is good.
• Choice is good also from a pricing point of view. MS Office 365 has one single cost wherever you go, and it's non-negotiable. By limiting the syndication of the software, Microsoft has effectively set a standard market retail price with no option for users to shop around. You can go from reseller to reseller but they sell MS Office 365 for a fixed price which you pay Microsoft and each reseller gets a fixed commission or referral fee for doing so. How EU anti-competition Laws view this I don't know but companies have no choice in terms of cost even if they 'source' it through a reseller.
• If Microsoft suffers an outage then everyone does. Hosted Exchange is syndicated by many service providers which spread the risk - e.g. if Fasthosts has an outage only Fasthosts' customers are affected (just an example - hypothetical, of course).
• Hosted Exchange really gives all the email capabilities you require for Office so MS Office 365 has the Lync and SharePoint servers as added value. Well, look at my previous blog - value is something that is useful, neither of these are useful to most small businesses. Lync has a fundamental problem if your domain is hosted with companies that don't support its features and this is a big issue if you change from Hosted Exchange.

The Supply Chain

You can use your favourite reseller to buy MS Office 365 but you cannot shop around for the best deal for the product itself. One price fits all - I mean all the bewildering prices in the MS matrix fits all, well you know what I mean. No discount.

It makes you wonder why channel is included at all. Once they sell (no, introduce) the product to you and they get their small referral fee, their incentive to keep close to you diminishes over time as the referral fee on renewals is very low and gets lower.

Microsoft have syndicated MS Office 365 through a selection of Telecom companies but the strategy has been disastrous. Why? Because these companies are not IT resellers. They don't understand the concept of selling complex  products that need some pre and post sales support, knowledge of current IT environments and Exchange servers, Lync and SharePoint. Crikey, if even Microsoft don't have the support for the three elements in the same place, why would Telecom companies have the same?

Ah, but Telecom companies have the capability to bill on a consumptive basis, so that makes them great guys to sell this MS Office 365 as it gets billed monthly and based on the number of users. Actually, the billing side is the post sale administration and has no correlation to the ability to sell and support the product. 

This was a daft strategy.

Consumptive billing is only part of a solution and it's not the vital part to get the product sold and supported - not even close. And there are equally good, if not better ways to bill MS Office 365 and other Cloud products and services. In fact the Telecom approach is not even that good as it's raw inputs are drawn from dumb switches that just monitor consumption of minutes on given ports by individual phone numbers - that doesn't sound like software licences sold with fixed monthly fees, does it? No, it doesn't and it isn't.

The Battle with Google

Google remain the main competitor. While Google may win only the odd major corporation with a fistful of licences in a single sale, they will accumulate thousands of consumers and small business users at the kind price, capability and ease of use they offer. It's simple, easy and cost effective.

Microsoft's long tail of small business users are the real battle ground - students and consumers too. Millions of them - all up for grabs. All of whom face the upgrade nightmare that Microsoft regularly foists on them in terms of cost and disruption. Each time that dilemma is faced, Google has a chance.

Microsoft, meanwhile has a global army of thousands of enabled Microsoft resellers and OEMs who know and love them (well it's a business thing) and yet they have been cut out of the loop in terms of being able to continue to own their customers and recognise the revenue they make fully. Further, they have been forsaken for the likes of Telecom companies in being able to syndicate the software. 

But most importantly, is the implied threat to their future relationship with Microsoft. If the big machine is going to deal direct in the Cloud market, where is the future of the channel? If that's the case, why should the channel be committed to the mature product sets where margins are so small?

I can't help feeling that a trick has been missed. Certainly, as an Office 365 customer, I'm pretty cheesed off with the disparate billing I have from suppliers and it would be great to have one neck to choke and one monthly bill - that I can negotiate on if it's aggregated. Right now, the power of negotiation has gone away and I have to track my own renewals while becoming more of an IT manager than before.

This threatens the Cloud's future and neither Google nor Microsoft have got this right by a long chalk - yet.

They need some sound advice. But would they listen? I doubt it. When you're that big you kind of get used to everyone listening to you.

Calx Europe is Business Acceleration Company and helps vendors and channel companies to develop and implement strategies in the Cloud. Call +44(0)207 103 2356 for more information. For healthy Cloud debate read the Calx Europe Cloud Debate Daily newspaper.