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Microsoft to take its 'mobile first, cloud first' mantra to partners

Juan Carlos Perez | July 15, 2014
Microsoft shifts its attention cross-country this week, from its Washington state headquarters, overcast with uncertainty, to Washington, D.C., where company leaders will try to make sunny optimism shine at its annual partner conference.

For example, many long-time resellers and integrators that have built businesses upon selling and implementing on-premises Microsoft software face a significant adjustment when pushing cloud services.

"A lot of these guys don't like the new model," said IDC's analyst Darren Bibby.

For starters, the nature of the deals is different. The on premises deals usually involve a one-time payment, while cloud services are sold via subscriptions, which generate a recurring revenue stream. The size of the deals tends to be smaller.

"Cloud causes partners the most issues," Bibby said. "At WPC, partners will want to discuss what their place is and what opportunities exist for them."

At the same time, Microsoft has started to attract a new type of partner which hasn't done business with the company before — the "born in the cloud" partners that never focused on selling on premises software. They face no transition pains in adopting Office 365, Azure and other Microsoft cloud services. In fact, for them, Microsoft can't go fast enough in the direction of cloud and mobile.

Then there are partners that feel equally at home with cloud and on premises products, and are able to cater to customers that want hybrid implementations.

"The channel overall is in this transformational phase," said Gartner analyst Tiffani Bova.

To sell cloud computing services, partners may need also to revamp their staff's skill sets, boosting software development capabilities, learning how to deal with Microsoft cloud APIs (application programming interfaces) and adding expertise on mobility, she said.

Likewise, salespeople will have to be trained on selling cloud services, and those who resist learning the new model may have to be let go, Bova said. Partners may need to engage in a similar pruning process of their historical customer roster, based on whether they're open to moving to the cloud or not.

Partners may also struggle with their business identity. Bova cites the hypothetical example of an on-premises software reseller that generates US$10 million in annual revenue and pockets $1 million in profit. In a cloud world, this same partner may see revenue shrink to $6 million but margins may grow so that profit doubles to $2 million.

"Culturally, the lower revenue has significance for them," she said. They need to shift their mindset and measure the success and size of the company by the higher profit, not the amount of revenue.

In addition to hearing about Office 365, Azure, Dynamics CRM Online and other cloud products, partners are likely interested in hearing about the Surface device, whose latest edition, the Surface Pro 3, is positioned by Microsoft as a tablet that can replace laptops.

Microsoft has been criticized for not making the Surface broadly available to its channel partners, opting instead to deal with a relatively small set of distributors and resellers.


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