Microsoft makes its software plus services play

Houston – Microsoft is adding onto its software plus services initiative with two suites of subscription services with their own partner pricing models, and an incentive program.

Under the Microsoft Online Services product line, the two suites are called Deskless Worker and Information Worker. Both packages have the option of accessing Exchange and Sharepoint over the Web or as stand-alone products, says Stephen Elop, president of the Microsoft Business division.

There is also a new incentive for channel partners to start selling these new suites of services. Microsoft will pay partners 12 per cent of the first-year contract value as an incentive to sell both suites. After the first year, partners receive six per cent of the annual subscription fee for the life of the contract.

Steven Fitzgerald, president of Habanero Consulting Group of Vancouver, believes the 12 per cent incentive is very generous.

“We’re much more concerned with getting the exact best solution for the client, so the idea of one potential solution having a commission associated with it is great. But we have to keep that independent from our solution design process,” said Fitzgerald. “The best thing is that we see this as a fantastic alternative to on-premise software, which will be a much better fit for some of our clients.”

Microsoft’s vision here is that partners can do the same with these online services as they can do with onsite servers, Elop says.

The Deskless Worker suite offers just Exchange and Sharepoint and is targeted at users who don’t do a lot of computing, while the Information Worker suite (Exchange, SharePoint, Office Communications Server and Office LiveMeeting) is for enterprise-class communication and collaboration environments. Pricing for Deskless Worker suite is at $3 a month, while the Information Worker suite starts at $15 a month.

The company has also announced a channel program called QuickStart for Microsoft Online Services. The new program is intended as a guide for partners for this new pricing and services model.

Elop citied an IDC study pegging the software plus services market at US$21 billion; growing at a rate of 35 per cent per year.

Paul Edwards, director of SMB and channel strategies research at IDC Canada, says IDC has not yet broken down what the market for software plus services is in Canada. He did say that partners need to make money from the get-go on software plus services because it will eat into on-premise revenue and margin.

“It will bring new customers into the fold for partners and Microsoft, but partners will need to adjust the business model for a services play, so they would have to make up the money that is reduced from an on-premise implementation sale,” Edwards said.

Edwards gives software plus services only a mixed review, saying Microsoft’s online services will impact on some partners negatively, even though it’s basically just a different way to deliver software.
“It’s good for some and bad for others, but that always happens when you have a market dynamic like this. Microsoft has to participate or miss out on a market opportunity and partners have to do it for the same reasons,” he said.

One of the potential concerns for partners under the Online Services portfolio is that Microsoft will have a customer facing role for the first time in the channel. But this doesn’t concern Mike Lopatriello, the CEO of Toronto-based solution provider Luna Development.

“I have to try to turn it into an opportunity for Luna, but at the end of the day the customer really does not care if it comes from Microsoft or Luna,” Lopatriello said. He has spoken to customers about this change and the feedback Lopatriello received is that the customer cares about someone being on call, and that the partner can handle the technology.

Gavin Steiner, president of InterProm Inc. of Barrie, Ont., a Microsoft Technology Adoption Partner, says Microsoft cannot do all the hand holding with all these smaller customers and that the customers will still view partners as trusted advisers.

More channel changes for Microsoft

Microsoft also made some highly expected channel program changes at its Worldwide Partner Conference that are intended to support the company’s software plus services effort.

Microsoft channel chief Allison Watson said software plus services is creating a new economic business model for solution providers and the company is boosting channel resources to help partners evolve and become more profitable with this opportunity.

According to Watson’s figures, the total software market is US$77 billion and it is growing at 10 per cent per year. She believes at this rate it will reach a total of US$94 billion in three years. About 24 per cent of that market will be services, and one out of every three customers will evaluate software as a services as an option during this period of time, she said.
Partners will now have access to interactive toolsets specific for the software plus services transition. Those include case studies, analyst-led videos and a profitability modeling tool.
The modeling tool provides profit and loss scenarios based on Microsoft supplied estimates and benchmarks that will factor in revenue, operational costs, margins and cash flow.

One of the biggest goals Watson outlined for Microsoft channel is connecting customers with partners.
“We need to attract more customers,” she said. “In the last 12 months we’ve got 2.4 million visitors to the solution finder (portal) and 6.5 million searches for partners, and 250,000 leads came from this.”

Watson told the more than 7,000 worldwide partners attending, of which 140 are from Canada, that she wants to double the amount of leads to 500,000 in this next 12 month period.

To that end, Microsoft has introduced PinPoint, a unified online business portal for SMB customers and partners. Customers searching PinPoint can find technology solutions from Microsoft partners, along with a way to interact with them.
For Brian Bourne, the president of Toronto-based CMS Consulting, the challenge of being a Microsoft partner is having customers find you.

“There is too much partner dilution (in the Microsoft space). There are so many partners. Anyone with $2,500 can become a partner and with that you get more than $2,500 in software. So what Microsoft is doing with the partner program is trying to sort the partners out (that) are committed and deliver quality (from) those who just signed up,” he said.

The company also announced Digital Forum, a Web site where partners can showcase their innovation to customers and other partners through online videos, along with software plus services-level training in 10 languages, launching this August.
“We’re also providing an assessment tool for knowing what stage a customer is at…better licensing to help with quoting…support for fast SLA so that partners can be ready in front of the customer,” Watson added.

Eric Rutten, president of WolfBridgeTSS of Mississauga, Ont., describes the new program changes as fine tuning.

“I think it will help. For example, BI (business intelligence) is a new competency and it will allow a partner to differentiate. Right now I’m a BI partner and the competency title is data management, but what does that really mean? Being specific you take that out and it will help clarify it for partners and those who are looking for these specific competencies,” Rutten said.
He added that providing more tools is a good indication of the company becoming more accessible to partners. “They give you want you need and want, and through the portal it’s a lot faster than before,” Rutten said.

Bourne said that the new additions to the partner program will help customers get a better view on who is a more committed channel partner and enable them to connect faster to solution providers.

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Paolo Del Nibletto
Paolo Del Nibletto
Former editor of Computer Dealer News, covering Canada's IT channel community.

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