Microsoft on Tuesday revealed pricing for its forthcoming hosted business productivity services and unveiled its channel model for allowing partners to resell those services. However, while the company painted a rosy picture for the partner opportunity around its evolving software-plus-services business model, not all of its partners were thrilled with the idea of Microsoft competing with them in that market.

As part of its plan to transition from providing only on-premises software to a combination of software and hosted services, Microsoft early next year will begin offering a hosted business productivity suite that includes Exchange Online, Office SharePoint Online, Office Communications Online, and Office Live Meeting for $15 per user, per month.

[ Find out more about Microsoft's move into hosted services:  Microsoft's cloud forms ]

The company unveiled the pricing for its forthcoming hosted services at its Worldwide Partner Conference (WPC) in Houston this week. Microsoft's hosted services partners already can offer customers this package through Microsoft's Hosted Messaging and Collaboration 4.5, which the company released two weeks ago.

Individually, Microsoft will be selling hosted Exchange Online for $10 per user, per month; SharePoint Online for $7.25 per user, per month; Office Communications Online for $2.50 per user, per month; and Office Live Meeting Online for $4.50 per user, per month.

This means if customers buy the entire suite, they are getting a 38 percent discount than if they buy the products individually, said Microsoft director of online services Eron Kelly on a conference call Tuesday.

On top of its hosted business productivity services, Microsoft also introduced two "deskless" items that allow companies to offer workers who don't necessarily sit in front of PCs but still need access to e-mail and internal company Web sites access to those online services. Exchange Online Deskless Worker and SharePoint Online Deskless Worker will be available for $3 per user, per month early next year.

Microsoft is facing competitive pressure from Google, which is offering similar hosted services to business customers, and so had to price its hosted services competitively.

But this also puts them in direct competition with hosted-services partners that have been offering their own hosted services using Microsoft software infrastructure. And its traditional reseller partners also won't see the kind of margins in reselling services that they've seen with reselling software licensed in the traditional per-CPU way, they said.

One former Microsoft partner who asked not to be named suspects that Microsoft knew it would cause its hosting partners grief if it went ahead and offered its own hosted services, but thought it was a small price to pay compared to losing that business to Google.

"I think they looked at one hand [and] they looked at Google, which was causing all kinds of headaches and is tough competition, and looked at a set of long-term hosted Exchange partners and thought, 'Who can we afford to [tick] off more?'" he said. "It's obvious what they chose."

Danny Essner, director of marketing for Microsoft hosted Exchange partner Intermedia, said Microsoft's pricing for its hosted services is "very aggressive" and will force the company's hosted partners to "move up the stack to preserve profit margins."

For example, Intermedia can offer mobile e-mail support for BlackBerry users on a hosted version of Exchange, while Microsoft does not offer this service.

However, even if hosted partners may have to work harder now that Microsoft is competing with them, Essner said the fact that Microsoft is "bringing market education and market awareness" to the hosted services space is a good thing for anyone providing these services.

Indeed, Scott Gode, vice president of marketing for another Microsoft partner, Azaleos -- which offers managed services for Exchange customers that install the software on premises -- said many customers prefer to have their proprietary e-mail hosted on site rather than farm that out to a third party.

"There is still a huge percentage of customers that will run it locally and want to run it locally because of security concerns," he said of Exchange.

But even if Microsoft knew some partners might be unhappy with their new, yet necessary, business model, the company certainly doesn't want to cut its loyal partner channel out of its services strategy, which is where it's new customer-referral model around hosted services comes into play.

Partners can offer Microsoft's hosted business productivity services to customers and receive 12 percent per user, per month, up front for a first-year contract, and 6 percent per user, per month, of the ongoing subscription fee, the company said. So in the first year, resellers of hosted services will receive 18 percent margins on the subscription value, and 6 percent for subsequent years, Microsoft's Kelly said.

Microsoft also is encouraging partners to add value to the sale by doing what they have always done best: offering integration, consulting, and management services on top of any vendor products their customers buy, whether hosted or on-premise.

In an interview Tuesday after her keynote at the WPC, Allison Watson, corporate vice president for Microsoft's worldwide partner group, said Microsoft studied subscription-based partner models in other markets -- such as the mobile business market -- and did extensive work with partners to help come up with the margin percentages for its hosted services

"Not only are the upfront fees fair for the referral, but the follow-on fees allow [partners] to build a rich annuity stream," she said.

However, Watson did acknowledge that some partners are worried that by reselling Microsoft's hosted services in a referral program, they will be doing a lot of the legwork to secure customers and lose control by merely turning them over to Microsoft, since the company handles the support and billing for the services.

She attributed this to fear among partners that they will not be part of the ongoing relationship with the customer, which is not the case.

"The concern you've heard is valid and I hear that as well," Watson said. "But once we sit down and walk them through the user experience of the customer and partner interaction online, it will create good optimism about their ability to be a rich part of the solution."

For instance, for partners who manage current customer Enterprise Agreements with Microsoft, the company's hosted business productivity suite will be just another product SKU in that agreement, she said. This means that partners will get existing revenue margins on Microsoft hosted services that their customers purchase just as they would on any other product, and continue to maintain their relationship with customers, Watson said.

A recently discovered security flaw that would allow access to a locked iPhone will be fixed next month, Apple said on Thursday.

"The minor iPhone security issue which surfaced this week is fixed in a software update which will be released in September," Apple representative, Jennifer Bowcock, said in an email to Macworld.

[ Special reports: IT's guide to the iPhone |  Apple launches the iPhone 3G ]

The security flaw allows access to a locked iPhone by pressing the emergency call button at the unlock screen, followed by two taps on the home button. That will take you to the iPhone's private 'favorites' page without the need to enter the unlock code. If the owner of the phone has favorite entries in their address book containing URLs, e-mail addresses, or mobile phone numbers, then those entries can be used to launch the browser, mail application or SMS software and gain access to private Web favorites, e-mail messages and text messages stored in the phone, again without entering the unlock code.

Bowcock offered some advice to protect your phone until the software update is released. She said you can set the iPhone so that double-clicking the home button will take the user directly to the home screen, which if password protection is turned on, will be the unlock screen.

Fixing performance issues that have plagued previous versions of its Windows client OS and Internet Explorer (IE) browser are key development goals for the next versions of those products, Microsoft has revealed in company blogs.

IE 7 and Windows Vista have had serious performance problems early on that have alienated users and damaged the reputations of the products. Some IE users switched to Mozilla Firefox because of IE 7's frequent crashes and performance glitches, while Vista's bugs, incompatibility problems and other issues have been well-documented.

[ Discover the top-rated IT products as rated by the InfoWorld Test Center. ]

Microsoft is paying close attention to performance in Windows 7 and IE 8 as it develops both products, the company revealed in separate internal blogs about each product, "Engineering Windows 7" and "IEblog."

"We've re-dedicated ourselves to work in this area (performance) in Windows 7 (and IE 8)," according to the Engineering Windows 7 post. "This is a major initiative across each of our feature teams as well as the primary mission of one of our feature teams."

The company has an uphill battle to improving performance, particularly with Windows 7, said one analyst.

"I'm not surprised they're going to focus on performance," said Mike Cherry, an analyst with Directions on Microsoft. "I'm somewhat skeptical how much improvement they're going to make at this point."

He suggested Microsoft consider performance for Windows 7 the way it approached security when the company decided to make that a key priority for Vista. When Microsoft decided security was integral to the OS, the company engineered Vista so "every feature has a security attribute to it," Cherry said.

Similarly, the company should make performance such a priority that "anyone checking any code into Windows 7 not only has to make sure it's the most secure code and the most reliable code, but they'd better be addressing the performance of the code as well," he said.

While performance is made up of "many elements," the Windows 7 team is focusing on six areas of improvement in Windows 7, according to the post. They are memory usage, CPU utilization, disk I/O, the boot-shutdown-standby-resume feature, the base system, and disk footprint.

CPU utilization in particular is a problem in Vista, and could use improvement in Windows 7. Cherry said he runs a 32-bit version of Vista on a PC with a 64-bit processor and 2GB of RAM. However, when he starts his Outlook e-mail client, it uses 100 percent of his CPU resources for more than a minute and a half. "It blows me away," he said of the problem.

Indeed, Microsoft said a key engineering goal for Windows 7 is to "keep the CPU utilization low as that improves multi-user scenarios as well as reduces power consumption," according to the Windows 7 blog post.

The focus of IE 8 improvements, according to the IEblog post, will be how to make pages and images load faster for "everyday" browsing. This will require improvements to scripting, the rendering engine and networking improvements, among others, the company said.

Microsoft has said it expects to release Windows 7 in early 2010; however, the company has not provided a time frame for the final release of IE8, though it is safe to say it likely will be a part of the Windows 7 release. Microsoft released IE8 beta 2 on Wednesday.

Google unveiled on Thursday its plans for a store where mobile users can find Android applications, a concept similar to the iPhone's App Store.

The first handsets running Android, expected to appear later this year, will include a beta version of the Android Market, Google's Eric Chu wrote in a blog post. Initially, users will at least be able to find free applications there. After that, Google expects to update the Market to allow users to buy and download paid content.

[ Special report: Google Android: Invader from beyond ]

The Market will feature a feedback and rating system similar to that used in YouTube, Chu said.

Developers can add their applications to the market by registering as a merchant, uploading the content, and publishing it. Google expects to add features for developers after the initial launch, including a dashboard where developers can find analytics information about their content. Developers will also be able to upload different versions of their applications that might work better on different devices.

Android followers have wondered how Google might support application distribution. Its Android Market is a similar concept to Apple's App Store, but differs in some ways. For instance, because all iPhones run on the same software, developers don't have to create different versions for different phones. Android is open, and handset makers may decide to include different hardware capabilities or opt not to support all Android features, which has an effect on the way applications work.

Historically, the mobile market has struggled with how to best sell and distribute mobile applications. Prior to the iPhone, the best way for an application to become widely used was for a developer to convince an operator to pre-load it onto a phone, a challenging accomplishment. Mobile phone users only very seldom download applications to their phones.

Due to the three outages that Gmail suffered earlier this month, Google will extend a credit to all paying customers of its hosted Apps suite and has vowed to improve its problem-notification methods.

In an apologetic e-mail sent Wednesday to Apps Premier administrators, Google said it will automatically extend annual subscriptions by 15 days at no extra charge. Apps Premier subscriptions cost $50 per user per year. This 15-day extension is the maximum credit of the 99.9 percent uptime service level agreement Google offers Premier customers for Gmail.

"We're committed to making Google Apps Premier Edition a service on which your organization can depend. During the first half of August, we didn't do this as well as we should have," reads the letter.

One outage, on Aug. 11, lasted about two hours but affected almost all Apps Premier users. The other two, on Aug. 6 and Aug. 15, hit a small number of Apps Premier users, but both outages were lengthy, lasting for some affected users more than 24 hours. In all of the incidents, users were unable to access their Gmail accounts, getting instead an error message when trying to log in.

In Wednesday's letter, Google said that system reliability is a top priority and that, although it can't promise zero downtime, it commits to solving outages quickly. "More importantly, we promise you focused discipline on preventing recurrence of the same problem," the letter reads.

In addition, Google plans to improve the way it informs Apps Premier administrators about system problems via a new dashboard that will become available in a few months.

That dashboard will provide descriptions of problems, especially of their impact on users; a regularly updated estimate of when the issues will be resolved; and, if necessary, a formal report within 48 hours of the resolution. The report will describe the incident, explain its cause, list corrective and preventive actions taken, and provide an outage timeline.

Google officials will also make themselves available to participate in live discussions about the incident with Apps Premier administrators and their companies' managers.

The plans for fuller disclosure of problem causes, fixes and prevention plans sound good to Gartner analyst Matt Cain, but he's confused as to why Google didn't start applying these principles with this letter, which he found slim on details.

"I'd like more transparency into what actually happened and why. They don't go into that [in this letter]. That's what they should have done in this note," Cain said. "Why start in the future and not now?"

Crediting all Apps Premier customers across the board and taking proactive steps to prevent future outages were the right actions for Google to take, said analyst Rebecca Wettemann from Nucleus Research.

"These are natural growing pains for an on-demand vendor," she said. "Google is doing what it needed to do [to respond to the outages], but in fairness to Google, it's held to a higher standard in terms of uptime and availability, as are many on-demand vendors, when you compare them to internally deployed applications."

Apps comes in various versions, including the free Basic and Education editions and the fee-based Premier edition. In addition to Gmail, it includes Google hosted services like Calendar, Sites, Talk, and the Docs word processor, spreadsheet, and presentation software.

Overall, more than 500,000 businesses with 10 million active users use Apps. Hundreds of thousands of those active users have Premier subscriptions, according to Google.

With Apps, a hosted suite of communications and collaboration applications, Google is a leading proponent of SaaS, an emerging model of software delivery that backers say represents the future.

Because vendors host applications in their own data centers, companies don't have to concern themselves with hardware provisioning and software maintenance. By living in the Internet "cloud," these hosted applications simplify sharing and collaboration among employees.

However, outages such as the one Gmail experienced are among the biggest question marks regarding SaaS applications, as IT and business managers ponder whether to ditch conventional software packages that are installed on their companies' servers.

 When applications hosted by vendors go down, there is little that IT and business managers can do to remedy the situation and respond to their angry end-users.

Google Apps critics question whether the suite can really provide enterprise-grade software availability and performance and thus be a real option in large companies to conventional, on-premise options like Microsoft's Office and Outlook/Exchange or IBM Lotus Notes/Domino.

Google acknowledges that most Apps subscribers are individuals or small and medium-size organizations. However, the company has high hopes that the Premier edition, with its IT management and enterprise software integration features, will push into the enterprise market of large companies.

Google has proved it can learn from mistakes and has improved as an enterprise IT provider, Cain said. However, Gartner's advice to enterprises is to hold off on adopting Gmail as an e-mail system, and this month's outages justify that position, Cain said.

"A 24-hour outage of e-mail for many companies would be catastrophic. That indicates that our cautious approach is warranted," he said.

Before giving the green light to its customers, Gartner wants to see at least a dozen enterprise deployments of Apps Premier with at least 10,000 Gmail seats, each running successfully for six to 12 months, Cain said.

This story was updated on August 28, 2008

Aptana, which has enabled Web 2.0 development via JavaScript, Ruby on Rails, and PHP with the Aptana Studio IDE, has added Python to the mix through its acquisition of Pydev, which was announced this week.

The company plans to combine the Pydev Eclipse-based development environment with Aptana Studio, which has supported AJAX and has been downloaded nearly 2.3 million times, Aptana said. Developers now can use Aptana Studio and Pydev side by side or plug them into Eclipse. Both are open source with commercially available extensions.

"Python kind of completes the portfolio of popular scripting languages that people use to build Web apps," said Kevin Hakman, Aptana director of evangelism.

Aptana currently has no timeframe for full integration between Aptana Studio and Pydev. The company also would not reveal how much it paid for Pydev.

With Pydev, developers get capabilities for code completion and analysis, a debug console and server, and refactoring. Aptana Studio, meanwhile, supports Web development by integrating AJAX tooling with PHP and Ruby on Rails. Ruby development is supported as well.

Aptana stressed the popularity of Python, particularly Google's selection of the language for use with its Google App Engine hosted application service. "When Google gets behind something, there tends to be a lot of attention [paid] to it. We've seen an increased utilization of the Python language," Hakman said.

Through the Pydev IDE, developers can deploy and manage applications to a computing cloud via linkup with the Aptana Cloud product for cloud-based deployments.