Microsoft, BT Sign $7 Million Hosted Software Deal

British Telecom plc announced today that it will roll out a new suite of hosted online services for smaller businesses, beginning with an e-mail plus shared calendaring and contacts offer, based Microsoft Hosted Exchange. The carrier has signed a $7 million deal with Microsoft Corp. to create a Microsoft.NET-based architecture for hosting software applications and selling access to them as a service for small businesses.

“Our aim is to offer these businesses a way to reduce or eliminate the initial capital outlays and ongoing maintenance costs that are associated with managing IT in-house,” says Duncan Ingram, managing director of BT Openworld. “By offering an a-la-carte menu of services that can be tailored to the diverse needs of a smaller business, we can deliver a level of customer service and support that we believe will help [BT and Microsoft] to drive new revenue streams.”

Microsoft will realize a licensing commission per user per month for the hosted e-mail application, but the move also is significant as it heralds the move by Microsoft to supporting the software-as-a-service market – an as of yet untapped but key area of growth for telecom operators looking to open up additional revenue streams, according to the IDC, which expects worldwide revenue growth of 25 percent from 2005 to 2008.

“In the telecom market, fixed-line and mobile operators have recognized that incremental revenues will be driven by their ability to deliver a range of value-added services particularly to smaller businesses,” says Daren Mancini, U.K. director of the Communications Sector at Microsoft.

And so, behind the scenes, a suite of Microsoft.NET-based packages will enhance connectivity and streamline the back office requirements for BT’s launch, says the carrier. The operator will for instance use Microsoft BizTalk Server 2004 to gain a unified view of customer data and service information for provisioning and billing. Other packages are not yet public, but Michael O’Hara, Microsoft’s general manager for the service provider business, says Microsoft will unveil more aspects of the software-as-a-service architecture in the coming months. He stresses the architecture will be the key difference between the model being inaugurated by BT and the failed application service provider bubble of a couple of years ago.

“The main difference [now] is the widespread availability of broadband networks, and with this, the ability for service providers to offer the so-called triple play of services - voice, video and data,” he notes. “Hosted data services add to the bundle that service providers can offer to their customers. The battleground for service providers will be around bundling these services together in a common architecture.”

BT and Microsoft Consulting Services have been in trials for the project to verify the scalability and reliability needed to deploy these new hosted IT services on a wide scale. Microsoft Consulting Services will work with systems integrator Tata Consultancy Services Ltd. to implement the solution for BT, while Hewlett-Packard Co. will deliver a security-enhanced and scalable Microsoft Hosted Exchange infrastructure within BT for the first offer. The solution will be implemented by July 2005, says O’Hara.

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