Microsoft, BT team on software as services

Microsoft Corp. is ramping up its efforts to sell software as a service by teaming with U.K. telecommunications giant BT Group PLC to provide a platform for the delivery of its business applications.

In what Microsoft representatives called the most comprehensive partnership of the kind so far, the companies are targeting the small and medium-size business (SMB) market with “a la carte” applications as well as software bundled with broadband services. Under a deal due to be announced Tuesday, BT plans to offer Microsoft’s e-mail, calendar and collaboration applications on a subscription basis.

The agreement highlights the Redmond, Washington, company’s efforts to partner with telecom operators to provide its software as services. Microsoft already works with other telecom providers in the U.S. and Europe, announcing earlier this year that Telecom Italia SpA would begin testing its IP TV software, for example.

BT selected Microsoft over its incumbent middleware provider, BEA Systems Inc., to help build an application delivery platform and provide business software specifically targeted at the large and potentially lucrative SMB market, it said. The agreement, valued at US$7 million, builds on BT’s strategy of building out broadband services amid falling fixed-line revenues.

“We see this is a really great opportunity to exploit the market for both software services and broadband,” said Brendan O’Rourke, BT’s general manager of retail Internet networks. He added that BT selected Microsoft over BEA because it could easily integrate Microsoft products into its existing infrastructure, and for the applications’ sophistication.

BT plans to introduce its first service, Microsoft’s Hosted Exchange, in July, with more communication and collaboration offerings to follow.

Daren Mancini, Microsoft’s U.K. communications sector director, said that Microsoft hopes to provide BT customers with affordable and easy to use applications and then evolve the offerings to more sophisticated software that businesses can share with their partners and customers.

For BT, the software services are also clearly a way to roll out bundled broadband and Wi-Fi offerings. While 69 per cent of SMBs in the U.K. have Internet access, only 37 per cent have broadband, according to O’Rourke.

“So far SMBs haven’t really clicked on to the advantages they can gain from broadband,” O’Rourke said.

While BT sees the need for market education and development among the U.K.’s small businesses, Microsoft is seeing pockets of sophistication among customers in other markets. Some telecom companies, for example, are deploying customer relationship management offerings, Mancini said.

Given the rapid uptake of subscription software services, the companies hope that BT will soon see an opportunity to offer more comprehensive offerings.

“We are trying to help BT accelerate the launch of new Net-based services focused on SMBs,” Mancini said.

While BT plans to charge businesses per active user, per month for the services, Microsoft will be charging BT for the same, Mancini said.

BT’s new hosted application services are also being developed with the help of systems integration provider Tata Consulting Services Ltd. and Hewlett-Packard Co., which is providing services to deliver Microsoft’s Hosted Exchange infrastructure within BT.

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