Microsoft says dealers need not fear hosted IT services

Microsoft believes service providers should regard hosted services as an opportunity

Hosted IT services delivered over the internet are rapidly being adopted by small to medium sized businesses (SMBs), according to new research from Microsoft, but the software giant reassured local IT shops that this trend will not put them out of business.

The findings come from research conducted by Microsoft and analyst firm Freeform Dynamics into attitudes to IT and hosted services by smaller businesses, presented at a roundtable session in London.

According to Microsoft, over 75 per cent of SMBs are now considering hosted IT services, up from as little as 14 per cent a couple of years ago.

Dale Vile, research director at Freeform Dynamics, attributed this to Microsoft's launch of its Business Productivity Online Suite (BPOS) last year, which has legitimised hosted IT services and set a "baseline" for pricing.

"There is now a lot of choice, whereas there were only one or two providers offering something like hosted Exchange before BPOS," he said.

The survey looked at over 3,000 small businesses globally, about 250 of which are in the UK, and found that most are weathering the economic storm well and looking to take advantage of the upturn when it comes.

Among the findings is that small businesses seem to be put off by talk of cloud computing, but fully understand the advantages of hosted services that might be delivered this way.

The message for service providers is "don't sell cloud to SMBs; sell them services that offer them value", said Michael Korbacher, Microsoft's director for Software Plus Services in EMEA.

Hosted services offer smaller companies a quicker time-to-market for a lower capital expenditure - often just a few pounds per user per month - and allow for easier upgrades as they are not stuck with outdated technology that could be tricky to upgrade or need replacing.

Microsoft also said that service providers should not regard hosted services as a threat to their business model, but as an opportunity.

"Some in the channel think that companies such as Microsoft are trying to cut them out of the loop, but they need to get with the times and start reselling services such as BPOS alongside their existing solutions," said Robert Epstein, head of small business at Microsoft UK.

In fact, the survey found that SMBs prefer to deal with a local supplier, a finding backed up by James Griffin, head of hosting strategy at UK service provider Star.

"We have become a trusted adviser, piecing together complex IT and selling it to customers as a service," he said, putting the company's success down to a traditional salesforce that goes out and meets customers face to face.

Further survey findings showed that UK companies are more concerned about data security in outsourced service arrangements than elsewhere in the world, which Epstein put down to the spate of very public data breaches in this country over the past few years.

In fact, Epstein claimed that datacentres operated by companies like Microsoft are locked down more securely than a small business could manage with its own infrastructure.