Intermedia Cuts Hosted Exchange Prices; Joins Microsoft Cloud Billing Debate

By samdizzy

leibholz

I don’t have all the details but Intermedia Senior VP Robert Leibholz (pictured) confirmed the price cut over email to me. He also offered some thoughts on the Microsoft cloud billing debate. Leibholz and I are hoping to chat via phone soon to further discuss Intemedia’s hosted Exchange strategy.

Here Comes Office 365

In the meantime, some readers speculate that Intermedia is cutting hosted Exchange prices ahead of Microsoft’s Office 365 launch. Office 365 is the forthcoming successor to Business Productivity Online Suite (BPOS), which includes Exchange Online, SharePoint Online, and other SaaS applications managed by Microsoft. Entry-level pricing for BPOS is expected to be extremely aggressive.

For its part, Intermedia says its own hosted Exchange price cut has to do with economies of scale rather than countering Microsoft. “We certainly did lower pricing, but not in anticipated response to [Office] 365, which has not launched, and likely won’t for some time,” wrote Leibholz. “We have achieved a certain scale [over 50,000 seats in hosted Exchange 2010] and experience, and therefore optimized our cost structure. We wanted to pass some of that along to our partners. This was not at all a “preemptive strike.” Kinda funny, actually, but I can see how people might jump to that conclusion.”

I’ve dealt with Leibholz numerous times over the past couple of years. He’s one of the sharpest guys in the SaaS channel. I trust his word… but I still get the sneaky suspicion that Office 365 does pop into Intermedia’s mind from time to time. When Leibholz and I talk I’ll be sure to ask for new the specific hosted Exchange pricing information. And I’ll ask if the pricing pertains to new channel partners or all channel partners.

Cloud Billing Debate

Meanwhile, Intermedia is trying to capitalize on the Microsoft cloud billing debate. As you may recall, Microsoft does not allow partners to manage cloud billing for end customers, though Microsoft Channel Chief Jon Roskill has dropped multiple hints that potential changes could come after Office 365 arrives.

In the meantime, Intermedia is telling channel partners that they deserve the option to own end-customer SaaS billing. In an email, Intermedia’s Leibholz essentially said:

1. Channel partners want higher margins with freedom to price, bill and bundle. “With a “private label” program like Intermedia’s, partners set the service price and bundle it with other options – sometimes our products, other times their own,” he wrote.

2. Some VARs may prefer the “partner of record” model that Microsoft promotes. But Leibholz say the effort doesn’t go far enough. “With Intermedia, we offer the flexibility of month-to-month services with no contract or commitments,” he wrote. “Many of our partners use annual contracts with their customers, sometimes payable up front or in quarterly increments. These tactics improve the amount of cash available to a partner to fund equipment purchases and payroll. Without strong cash flow, even profitable growing businesses are sometimes forced to take financing or restrict sales. There is no other way for them to cover the gap between when bills are due and funds are received.”

3. Partners want stickier customer relationships. “With private label, partners own the customer, sell and integrate multiple services, and deepen their relationship,” said Leibholz. “For instance, a partner can dial up their image as a metro area’s financial services expert with their own branded email service plus associated services for ongoing compliance.”

“Bottom line is that a partner of record and private label approaches have significant differences, and partners should choose the model that aligns with their business objectives,” concluded Leibholz.

So far, more than 6,000 channel partners have embraced Intermedia’s white label services, Leibholz added.

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