Britain's resellers revolt against Microsoft poaching

Microsoft's introduction of its business productivity online services in Britain a year ago has led to a reseller uprising there, according to one of that country's biggest hosting providers.

"There is a revolt in the UK" among Microsoft resellers, said Think Grid managing director Rob Lovell.

The three licensing factions in Microsoft were fighting for the same customers, said Lovell.

"You've got three groups in Microsoft fighting each other," Lovell said, referring to the software company's SPLA (service-provider licence agreement) hosted services group, the software licensing group and BPOS (Business Productivity Online).

"All of these guys have own revenue targets. We work very closely with Microsoft but they are competing with their colleagues."

Lovell said "Microsoft doesn't care" whether a customer was signed up through a hosted services provider such as Think Grid, sold a licence through BPOS or was paying for on-premise software.

"Microsoft are fighting themselves as well," Lovell said. "[Business Productivity Online Services] is not adding new customers - they're just moving from one P and L [profit and loss, accounting jargon for a business] to another."

The issue for resellers centred around Microsoft competing with them for customers, he said.

"[Value-added resellers] are very unhappy with Microsoft coming into the channel," Lovell said.

"Because Google has [gone direct with Google Apps], rather than enabling the channel to compete they are going direct as well.

"Microsoft are p---ing off their lifeblood, which is the channel."

One of Britain's biggest hosting providers told Think Grid it was "very hacked off" with Microsoft because the vendor was "directly stealing our customers", Lovell said.

Think Grid is a British provider of hosted applications to resellers and competes with Microsoft Online Services. It was in Australia to find managed service providers to sell applications over its delivery platform.

Lovell said "90 percent" of his resellers were Microsoft partners, and a third of those held gold status with the vendor.

Think Grid launched in Briatin 18 months ago, six months before Microsoft launched its online service. Lovell said resellers were not rushing to join Microsoft's referral program.

"Microsoft have been hammering the story home [about BPOS]. Why are they not signing up to it?" he said.

He said the margins offered through Microsoft BPOS were "pretty rubbish".

The vendor could reassign commissions easily: "If Microsoft decides they don't want to use you now they can tap in the name of another reseller and get rid of you".

Microsoft pays resellers a 12 percent commission for the first year it signs up a customer to BPOS and a 6 percent trailing commission for every year the reseller is named as the providing partner.

Think Grid offers a 10-40 percent margin based on volume. Partners that moved from silver to gold status would receive the higher margins retrospectively for current customers, said Lovell. 

Lovell said resellers wanting to provide cloud services were better off going with an infrastructure provider such as Think Grid that could white label hosted applications.

"We're old school. We have no dealings with the customer - we just do the backend," he said.

Think Grid was pitching itself as a low-risk, low-disruption way to move customers to the cloud.

Businesses wanted the advantages of cloud services but didn't want to overhaul their business processes.

Businesses "want a very smooth migration, and phased. Our stuff works like the stuff in your office but it's in the cloud," said Lovell.

Think Grid could offer resellers better response through its technical account managers, it provided tighter service-level agreements that were financially backed, Lovell said. The hoster pays up to half the monthly fee back if the service isn't up to par.

Think Grid offered "four nines" availability rather than BPOS's "three nines", Lovell said.

Lovell said resellers wanting to test the water could sell services on a monthly basis and start selling within 24 hours of signing up. In contrast BPOS has a one-year minimum contract, he said.