Microsoft has been readying these online offerings for nearly three years. But until today, Microsoft had maintained that its "managed services," when launched, would only be offered to enterprises buying more than 5,000 seats or more.
Rather, Microsoft had insisted it would rely on its ecosystem of partners, who since 2002 have been allowed to host and sell online versions of Exchange and SharePoint.
But with the rapid rise in interest in Google Apps, as well as in Yahoo's, Zimbra, Redmond decided to take matters into its own hands.
"It appears that this entire initiative... is driven largely in response to competitive threats from Google's Gmail and Yahoo's Zimbra," Agarwal wrote.
Microsoft's services, when commercially available in the second half of this year, will back up Redmond's claim of 99.9 per cent availability with financial guarantees, Betz said. Services and data will be redundantly hosted at Microsoft's 13 data centers.
Betz insists that Microsoft's move into SMB Web hosting isn't a betrayal to longtime partners. Partners will still be able to offer their own hosted versions of Exchange, SharePoint and others.
And similar to its upcoming hosted Dynamics CRM software, Microsoft will force companies interested in buying the Microsoft-hosted Exchange and SharePoint to go through Microsoft channel partners.
"Partners who make the sale for us will make money," he said. "We are not cutting them out, we are expanding the opportunity."
Betz said that hosting firms can also spruce up their offerings by adding integration to non-Microsoft software such as Cisco System's VoIP software, or with server software to support BlackBerry devices, to differentiate themselves from Microsoft's online software, which will integrate only with other Microsoft software.
Meanwhile, Agarwal says hosting firms should also be able to provide better support and uptime than Microsoft.
"This won't be a robust offering for at least 3-4 years, as is true with any new Microsoft offering," Agarwal said.
More than 3,000 attendees are expected at the SharePoint conference, which will run through Thursday.
Microsoft also announced the availability of the free Microsoft Search Server 2008 Express software, which complements SharePoint. It also plans to release Silverlight Blueprint for SharePoint, a toolkit aimed at helping developers create rich Web applications for corporate intranets that take advantage of the Silverlight runtime's multimedia capabilities. The Blueprint can be downloaded from Microsoft's site .