Have hosting companies a future competing against Office 365?

Microsoft has a habit of introducing products that suddenly set a new price point for a market. The best example I can offer is SharePoint 2001. Prior to its launch, products that allowed enterprises to build portals that allowed users to search document libraries were very expensive and usually complex to set up and manage. Although Microsoft positioned SharePoint 2001 as a “departmental” product, largely because it didn’t offer any real management interfaces and had problems scaling to deal with the requirements of very large enterprises, there was enough power and promise in SharePoint 2001 to make it a strong competitor immediately. And even better, its price point was in the low thousands of dollars at a time when CIOs were accustomed to writing large checks in the hundreds of thousands for other products. SharePoint subsequently became one of Microsoft’s most successful products and was the fastest product to make it to one billion dollars of license sales.

Moving forward to today, Office 365 is likely to cause the same disruption in the hosting market. For $6/month (in the U.S.), you can buy a subscription for a single user who can use Exchange Online, SharePoint Online, and Lync Online. Other plans offer increasing levels of functionality and are priced up to $27/month. But even the $6 plan P1 includes a 25GB mailbox.

Of course, Microsoft did not invent the hosting market and around the world there are many companies who have done an excellent job of offering hosted Exchange and SharePoint (in particular). They’ve solved some of the engineering difficulties inherent in basing a hosted service on software that was designed for traditional on-premises deployments and built out their own automation, support, provisioning, and billing platforms to serve customers. All-in-all, they’ve done a great job.

But the advent of Office 365 has changed the world. Quite apart from the pricing pressure and the need to compete against Microsoft’s marketing and sales legions, hosting companies have to prove to customer CIOs that they can do a much better job. The future is bleak if they can’t demonstrate compelling reasons for going with a third party rather than taking the simple option of signing up for Office 365.

I’ve been thinking about what hosting companies can do to resist the Office 365 tsunami and posted some thoughts on the matter on WindowsITPro.com. As always, I’m interested in what others have to say on the topic. Let the debate begin – and let’s hope that competition spurs innovation that we can all benefit from.

– Tony

About Tony Redmond

Lead author for the Office 365 for IT Pros eBook and writer about all aspects of the Office 365 ecosystem.
This entry was posted in Cloud, Email, Office 365 and tagged , , , , . Bookmark the permalink.

1 Response to Have hosting companies a future competing against Office 365?

  1. Mike Faster says:

    I think Microsoft’s Office 365 will have a number of consequences for the companies already hosting Exchange and Sharepoint. Microsoft’s Office 365 offering and marketing will further validate the hosted Exchange and Sharepoint business model. Some third party providers will pick up new customers who may have been uncertain. MS just indicated hosted Exchange is for real.

    MS entry will also put increased pricing pressure on the price per hosted mailbox, and should kill off most weak players offering hosted Exchange and Sharepoint.

    On the other hand Microsoft’s very visible and very embarrassing outages lately may offer the third party hosters a competitive marketing bonanza?

    It seems Microsoft’s more interested in an Office 365 land grab than ensuring the early adopters get a reliable service level?

    Strategic Business Advise for Third Party Hosting Companies: Don’t try to compete with your supplier!

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