Microsoft's plunge into the hosting arena isn't sending shock waves through partners who welcome the visibility the move brings but say many corporate users will find the Exchange and SharePoint services fall short of the mark.

Partners, however, say that Microsoft's http://www.networkworld.com/news/2008/070808-microsoft-service-bundles-pricing.html?hpg1=bn structure, unveiled Tuesday, will cause some disruption, but users will quickly realize what they are paying for when they explore the need for a full complement of add-ons, integrations, customizations, support and maintenance that Microsoft will leave mostly to partners.

The biggest upside hosting partners see is that Microsoft is shining a bright light on the benefits of hosted online services.

"Initially we had a concerned reaction that Microsoft was coming into our space," says Ravi Agarwal, founder and senior executive officer of GroupSpark, Microsoft's 2008 partner of the year in the advanced infrastructure/hosting solutions category. "But as we looked at the details we saw it was a limited offering. It really is an opportunity for us. Microsoft will spend a lot of marketing money to create awareness and that solves one problem for us."

Microsoft Online Services (MOS), currently in beta and slated to come online later this year, include a Business Productivity Suite anchored by Exchange and SharePoint, and separate Exchange and SharePoint offerings targeted at users who are not always tethered to a PC.

"I think what they are going for is a simple way to get basic SharePoint," says Paul West, a principal with provider SharePoint360, which has consulting and hosting businesses built up around the collaboration server.

West says that since most of his customers customize the platform for their specific needs that he doesn't see Microsoft cannibalizing his business. "We provide the personalization and customizations a lot of people are looking for."

Microsoft has yet to divulge all the details behind the services but has stated that it does not plan to become an integrator and that the online services will be entry-level. For example, users will not be able to customize their SharePoint installations.

Burton Group analyst Guy Creese says the research firm has found that highly tuned SharePoint installations need custom coding and third-party add-ons. "The issue with the current SharePoint service is you cannot put custom Web Parts into it. This is a backward step in functionality."

What Microsoft may eventually work toward is a model that is already in action with hosting partners such as GroupSpark, Apptix and SharePoint360, who host services for customers and provide customizations, integrations with local systems and 24/7 support.

"The value proposition to the partner community is pretty low with this announcement," says Keith McCall, CTO of managed Exchange hosting provider Azaleos. "People who wanted to host Exchange before could make 30 per cent profit margins on e-mail and other services like Blackberry support."

McCall says Microsoft also is playing the role of a utility company, in which they own the relationship with the customer.

That is one issue weighing heavily on partners who would be left as a sort of subcontractor.