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Channel doubts Microsoft's offer of Office Live as a source of resale revenue

Microsoft is offering Office Live as a platform for VAR applications and source of subscription revenue.

Microsoft Corp. has announced another twist in its Microsoft Office Live strategy -- it's pitching the online application service to VARs and resellers as a potential new revenue stream.

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The service may have merit as a benefit for home users and, potentially, very small businesses. But it's no threat or major benefit to companies in the channel, whether or not they currently resell or host application services, according to Gary Gammon, vice president of marketing at Bell Microproducts in San Jose, Calif.

"It sounds a lot like, where you're selling a subscription to their service," Gammon said. "The question is how much the owner of the intellectual property is willing to pay to the sales organization – in this case, the reseller."

Microsoft executives weren't available to talk about the breakdown of fees. But Office Live subscriptions range from free to $39.95 a month, which includes network access to Web development tools, scheduling, database, email and marketing tools, as well as Web hosting.

Microsoft is also working on a market space on Office Live where partners will be able to post information about their own products and services, which can be offered to Live subscribers.

Just being able to offer rich functionality to subscribers at extremely low cost is a demonstration of how far online services and applications have come, according to Michael Gartenberg of Jupiter Research.

"Especially delivering it to the customer at essentially no cost is significant," he said. "Microsoft and Google and other companies will continue to deliver these kinds of functions. They all do have longer-term aspirations." The service is initially aimed at value-added resellers (VARs) and resellers interested in using it to attract new small-business customers, according to Microsoft's service descriptions.

Later, as developers get more accustomed to the service and have time to build on it, the solutions marketplace will provide the infrastructure to support almost any Microsoft partner application.

Microsoft currently has more than 75 partners building applications to sit on Office Live.

It's unlikely, at least in the near term, that the service will attract many business customers, however, Gammon said.

Those services make sense in the consumer world where issues of data protection and liability are much less intense. "But for the mid-market and the enterprise, I just don't see the economics making much sense," Gammon said.

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