InformationWeek and the VARGuy report on the heavy price cuts Microsoft just announced on their hosted "BPOS" offerings. MS Exchange drops from $10 to $5 per user, per month, the whole suite from $15 to $10, space goes up from 5 to 25 GB.

Now what does that mean to channel partners, service providers and all the other players in this market? Trouble.

Service Providers have limits to their pricing power if they sell Hosted Exchange. MS SPLA pricing is the bible and with $5 per Exchange account you are not making any money. And $5 will not be the end of the spiral. Andreas Gauger of 1&1 fame saw this coming in 2006, this was the main reason he and his successor Oliver Mauss decided that 1&1 needed an alternative offering to Hosted Exchange. This Microsoft move proves him right! I wrote in my blog back in March 2008: "Retain price control, branding, your customers, growth and profit margins by competitive Open Source based SaaS offerings to compete with the folks trying to eat your cake, and have theirs, too!"

Channel Partners that work with Microsoft are in trouble in many ways. On-Premises Exchange now looks even more overpriced, but there is no money in reselling BPOS. The VARGuy quotes one of them: “I can’t help but think this is the start of a price war with Google, and partners like me are going to get squeezed.” Yes, same thing. Channel Partners need to regain control over price to be able to compete with better service levels and customer proximity - but with Microsoft or Google based offerings it's Microsoft or Google that always can outprice. Time to move over!

The other Industry Players like IBM, with the Lotus line of offerings, Novell with Groupwise, Oracle etc. are either not playing at all or very weakly so, like IBM with their Dodo-fated (as Tier1 called it) LotusLive iNotes service. Novell just got beaten up by Google at the State of California - and we will see the bloodbath to continue for the vendors that do not have a competitive SaaS offering. As the IBM example shows, you can not convert an old client-server age Messaging and Groupware system to a scalable SaaS offering that can compete in price and function with Google. Microsoft spent billions and years to get there, the other guys haven't even started, yet. So either get out or get going!

This move of Microsoft shakes up the industry. We at Open-Xchange are ready to help. We have proven that we can provide the messaging and collaboration system that scales to millions of users at a very low cost of running it, a system that provides a business model for service providers and channel partners alike - with no channel conflict whatsoever! And we are leading edge with some really cool new stuff.

Time to move, come talk to us!