Toronto – Kurt DelBene, president of Microsoft’s Office division, told attendees of which 4,831 are first timers to the Worldwide Partner Conference, that the company had to make Office 365 easier to sell and more profitable for the channel.
Microsoft announced two new business models for solution providers called Office 365 Open and Office 365 Advisors Program. With Office 365 Open solution providers will own all top line revenue while being able to bill customers one time; directly. The other aspect of the model is that solution providers can present it as a single packaged solution with their own value added services.
According to DelBene, profits should increase to 23 points of margin up from just 11 for channel partners in the first year of the program.
“You bet on us and we reward you with margin,” DelBene said.The Office 365 Advisors Program will give Microsoft’s best active channel partners the ability to earn more up front with Office 365 starting at 150 seats per customer.
Michael Charter, vice-president of Software at Compugen, told CDN that he is very excited at both programs. “These programs allow a channel partner to add more to the offer and produce the correct solution for the customer,” Charter said.
He added that part of the program is replacing the agency fee Microsoft paid solution providers and treating it as margin.
David Thomson, vice-president of partner sales for Richmond Hill, Ont.-based ComputerTalk, called the programs “amazing.”
“When I heard about the programs this morning I was very surprised. I think these will open up a lot of business for Office 365,” Thomson said.
Market analyst Tiffani Bova, vice president of Gartner Research, said she did not understand why the channel got so upset over not having the ability to do direct billing. “I understand that owning the customer is important, but how does billing alone help the channel here?
Bova added that customers handle bills from many suppliers.
Thomson, said the ability to directly bill the customer breaks a barrier to selling Office 365 because solution providers want to own the end client.
Charter said that customers want one throat to choke. “Removing multiple bills is so very important and desirable for the channel partner,” he said.
Lawrence M. Walsh, CEO of The 2112 Group, a channel research and consulting firm based in New York, also said that Microsoft resolved a long-standing complaint among partners regarding billing practices of cloud services.
“By allowing partners to buy and assume responsibility for Office 365, partners now own the billing and customer engagement lifecycle.
That’s a good thing, but it does come with caveats. The program requires partners to layout capital to buy the services; that’s money they often don’t have. There’s a strong probability that partners will have to sell the service in bulk, essentially taking an OpEx service and converting back to a CapEx product sale,” Walsh said.
He added that channel partners should also question why Microsoft is increasing referral fees in the Office 365 Advisor program. “Microsoft is essentially sending a message that it will allow partners to sell Office 365 independently, but will make it more advantageous for them if simply maintain the status quo of Microsoft owning the cloud-customer lifecycle.”