Posted by Peter O'Neill on July 15, 2010
This week, I was at the Microsoft Worldwide Partner Conference in Washington, D.C., and it was all about THE CLOUD. Now, many colleagues argue that Microsoft will be the second-to-last major vendor to show a 100% cloud commitment, saying that “it’s too embedded in its traditional software business,” “it doesn’t understand the new world,” and “it’d be scared of cannibalizing existing and predictable maintenance revenues.” But I remember Stephen Elop, president of Microsoft Business Systems, tell me with a mischievous grin that he’ll probably earn more money from Exchange Online than the on-premise version — “firstly, it’s mainly new business from other platforms like Lotus Notes, and second, I even generate revenues by charging for things like the data center buildings, the infrastructure, even the electricity I use.” That was in Berlin last November. I suspected then that Microsoft did get it but was just getting its platform ready. This week, I am convinced — Microsoft is “all in,” as they say.
And at the Microsoft Worldwide Partner Conference, it was driving its partners to the cloud as aggressively as any vendor has ever talked to its partners at such an event. All of the Microsoft executives preached a consistent mantra: “MOVE to the cloud, or you may not be around in five years.”
Microsoft’s cloud-based Business Productivity Online Suite (BPOS) is already being promoted by 16,000 partners that either get referral incentives for Microsoft-billed BPOS fees or bundle it into their own offerings (mainly telcos). There are nearly 5,000 certified Azure-ready partners. This week, Microsoft turned up the heat with these announcements:
- It signed two distributors (Ingram Micro and Tech Data) to promote MS cloud to their reseller ecosystems.
- It provided marketing, sales, and even business-model tools to help partners make the transition to cloud.
- It launched a cloud partner program called Cloud Essentials, with a premium version called Cloud Accelerate.
- It provided numerous case studies of partners that have made transition and highlighted their experiences.
The case studies and their focus on providing business tools is the most important contribution. Many partners, just like the majority of traditional software vendors, are wary of the cloud because it changes their business model. Revenue forecasting, revenue collection, sales force compensation, and relationship management are all dramatically different with SaaS, let alone a cloud business. It’s actually the transition that scares them more than the new business model, and so Microsoft has organized its program and content accordingly. Different types of partners receive the appropriate type of materials addressing the business opportunities and challenges they face, and Microsoft has covered its bases for each partner category — from ISV, SI, OEM, reseller, LAR, disti, master, telco, and through to WebDev — to use its nomenclature.*
The partners got the message. The sessions on cloud services and cloud business models were oversubscribed. Partners told me things like: “BPOS business is good for me. It’s made my revenues predictable. Now my bank is willing to listen to me;” “We decided upon a ‘cloud first’ — we wanted to beat our competition to the market, and Microsoft was the right partner for us;” “We have transformed our business because, eventually, the whole IT industry is going that way;” “Cloud enables us to address and scale for a whole new market segment, in our case, SMB.”
Sure, other partners are a little worried about Microsoft’s emphasis on cloud here and feel a little more uncomfortable about changing. But they’re getting the products they need for their traditional business anyway. It isn’t as if Microsoft has switched off the old way. And, realistically, cloud computing is just a growing portion of the IT industry — see our forecasts organized by the Forrester cloud taxonomy in this paper. But I think it’s exactly right that Microsoft encourages its partners to embrace the change, and the materials it’s now providing are far superior to that from any other vendor, especially because it covers the business, marketing, and sales processes so well. This will mean that Microsoft will be able to wield its whole ecosystem to compete with the new upstart cloud evangelists.
Kudos to Microsoft for showing this commitment. One of my current stock statements to vendors and their partner communities reflects upon our optimistic forecast of the IT market recovering because of the project backlog, hardware and software upgrade business, and Smart Computing. I warn that they shouldn’t just rest on their laurels by milking easy revenues in 2010 and 2011. They must also change the way they find and do business, with cloud delivery being one of the major changes. Cloud computing is not a trend, it’s a disruption. Every channel partner should be grateful that its vendor-partner is making this clear as well.
Other things I noticed at the event:
- There were a lot of Germans there, both partners and press. Then again, Germany is the world’s second-largest IT market.
- After visiting many Microsoft events, the attendees now seem to be getting older — not old, just no longer so young.
- The hundreds of sessions were badly organized, documented, and signposted. Microsoft needs a better agency.
Oh, and in case you were wondering about my statement that Microsoft is the penultimate software vendor to embrace the cloud — who will be the last? Well, Oracle has just started to use the word, but it doesn’t seem to be in a hurry. And Microsoft’s COO Kevin Turner made a very interesting statement, saying that Microsoft expects Oracle’s upcoming Fusion launch to be a massive opportunity for both customer and partner recruitment.
What do you think?
Always keeping you informed!
* For clarification, the unabbreviated partner categories: independent software vendor (ISV), systems integrator (SI), original equipment manufacturer (OEM), reseller, large account reseller (LAR), distributor, master value-added reseller (VAR), telco, Web developer.