Web Host Industry Review Blog

Liam Eagle

March 4, 2009

One of the early presentations Wednesday was delivered by John Zanni, general manager worldwide communications sector software-plus-services.

I’ve seen a couple of sessions in the several hours since the presentation, and since I’ve had the chance to digest it a little and look at it in the context of a couple other presentations.

I get the feeling these keynotes are pretty broad-strokes discussion of philosophy and strategy. So whatever specifics might be lacking, I can only assume is material better suited to the breakout sessions later in the afternoon.

As much as this conference is about connecting with partners, this is a pretty cool aspect of that. And I get the feeling that Microsoft kind of relishes the opportunity to communicate those strategic and philosophical feelings to partners directly like that.

Enough about what these presentations aren’t about, though. I should really focus on what they are about.

Zanni’s presentation was, broadly, about “software + services,” which is really his area of focus.

Using data from IDC and Tier 1, he looked at the performance of hosting businesses in the current economic environment. Both the shared and dedicated hosting markets are still growing at about 10 percent per year (give or take a percentage point or two), and it should continue into 2011, according to Tier 1.

Growth is nothing to sneeze at in the current economy, and Microsoft is still building solutions for those markets, but it has another model in mind for hosting partners.

As Zanni puts it, the company wants to focus on driving new sources of revenue for a business with diminishing margins (even if the market is growing). Managed hosting, in addition to having better margins, is seeing more growth too, more in the 25 percent year-over-year range.

Simply put, Microsoft thinks its hosting partners should move up the value chain, by looking at new services they can build into their offerings, a philosophy that is specifically part of how the software + services strategy relates to the hosting market.

Providing more complex managed services makes you the “trusted provider” to your customers, which increases loyalty, increases revenue per customer and reduces churn.

Microsoft’s evolved model involves a lot of choice for end customers – between partner-hosted offerings, on-premise technology and Microsoft-hosted solutions.  Of course, there’s a clearly defined role for partners in that model.

As far as providing for partners in this system, Zanni says Microsoft has been building out its Service Provider Partner program to better connect the dots between hosting providers and ISVs looking for the means to distribute their applications, or a place to host them. On top of that function (which has existed for a while) the company has been working on adding functions for connecting private label partner products with resellers.

Included in a DVD distributed to attendees (something I’ll get into more once I get my hands on one – rest assured) is the Hosting Sales Kit, which includes sales scripts for email and web hosting.

It also includes the “dynamic data center tool kit,” which contains guidance, sample code, best practices and other collateral, designed to build and launch a managed service offering.

The presentation included a live demonstration of a fictional managed hosting company (called Contoso, and built for the purpose of demonstrating the managed hosting concept for these partners) built around virtualization using Hyper-V. It also showed a live demonstration of some of the concept and controls via an exploration of several virtual machines provisioned on the servers of Microsoft partner MaximumASP.

One of the things that jumps out, here, is how much of Zanni’s presentation was about encouraging hosting partners to move up the value chain. It’s not a surprising stance (I might suggest that most of the folks who have opinions about this sort of thing share this particular opinion), but it is a little surprising to me that the point still has to be made. I’m curious whether there’s some hesitation among hosts to make that move, or whether there’s actually a resistance to the idea (I sort of doubt that).

I’m also kind of curious about specifically how Microsoft plans to profit from partners moving in that direction (not that there’s anything sinister about it – but that side of the relationship wasn’t as key to the presentation). I think Larissa’s going to have a chance to talk to John Zanni later, and she’ll ask him to flesh out the give-and-take between Microsoft and partners there.

Anyhow, the presentation went on for more than an hour, and I’ve only covered part of what was said, but this post is getting very long, and I’ve got other things to cover. I’d like to think there’s enough here to make it worth reading, though. If not, you can look forward to a half-dozen more posts today.