Microsoft and BT have agreed to work together on pushing business apps with broadband.

Continuing its recent emphasis on small and medium-sized businesses (SMB), Microsoft said the two companies would offer "a la carte" applications and software with bundled broadband services. BT will offer Microsoft's e-mail, calendar and collaboration applications on a subscription basis.

The $7 million deal highlights Microsoft's strategy of partnering with big telecos to provide its software alongside its software. It already works with other telecom providers in the US and Europe, announcing earlier this year that Telecom Italia would begin testing its IP TV software, for example.

"We see this is a really great opportunity to exploit the market for both software services and broadband," said Brendan O'Rourke, BT's general manager of retail Internet networks. He added that BT selected Microsoft over current middleware supplier BEA because it could easily integrate Microsoft products into its existing infrastructure, and for the applications' sophistication.

BT plans to introduce its first service, Microsoft's Hosted Exchange, in July, with more communication and collaboration offerings to follow.

Daren Mancini, Microsoft's UK communications sector director, said that Microsoft hopes to provide BT customers with affordable and easy to use applications and then evolve the offerings to more sophisticated software that businesses can share with their partners and customers.

For BT, the software services are also a way to roll out bundled broadband and Wi-Fi. While 69 percent of SMBs in the UK have Internet access, only 37 percent have broadband, according to O'Rourke. "So far SMBs haven't really clicked on to the advantages they can gain from broadband," O'Rourke said.

BT will a per active user, per month fee for the services.