How will Microsoft’s Software plus Service strategy affect you?

There is a raging debate among many of my colleagues through direct conversation, blog posts and user group forum threads about Microsoft’s Software plus Service (S+S) and Business Productivity Online Suite (BPOS) announcements recently. Microsoft has stated that some of these hosted offerings will be available for its partners to market to prospects and end-customers in a traditional manner, and some will be marketed by Microsoft directly to end-customers.

Although the mechanics of how all of this will occur have not been fully baked, some of the facts include that Microsoft will bill the end-customers directly, thus they will need to be identified during a registration process for these services. Microsoft will commission partners a small percentage of usage yearly. These are a few of the factors that have some partners up in arms:

  1. Microsoft will sell directly to end-customers
  2. Microsoft will bill end-customers
  3. End-customers will be identified even when sold by partners
  4. Commissions margins are considered too low at an ultimate 6% of billing after the 1st year

In full understanding of these factors, I recently posted this response to one of the group threads discussing this topic:

Service providers will need to modify their strategies to sell in this new world. The way I see it, there are 4 basic types of service providers that S+S/BPOS will affect:

  1. Smaller service providers who have either not built their business practices to the point where S+S will affect them
  2. Service providers who have not developed the business acumen and client relationships to stave off Microsoft or any other direct vendor from penetrating their customer base
  3. Service providers who have built the business acumen and deep client relationships to guide their clients through technology decisions
  4. Hosting providers


                 For group 1 – no harm, no foul, as S+S will have little effect.

For group 2 – possible threat, so they will need to decide how to get in front of it. Their 2 choices are to embrace the offering and sell it as-is to their client base where it makes sense, or partner with a hosting provider who will provide the same services, but private-labeled, and allow for higher revenues to be generated.

For group 3 – no harm, no foul, but they can still sell private-labeled hosting services through a hosting provider to earn higher revenues and differentiate their offerings from competitors.

For group 4 – wow – this group has some serious competition, and will need to invest in marketing more heavily than in the past to deliver a compelling message to their prospects illustrating why they should buy from them instead of Microsoft.

Good, bad, right or wrong Microsoft is taking steps to respond to Google’s competitive threat. If we were Microsoft investors instead of partners, we would demand that Microsoft do something. Unfortunately, their response with S+S and BPOS will disenfranchise certain groups of partners who fail to react, while others will adapt to succeed.

I once heard that the reason railroads faltered in the face of the advent of air travel is that the companies that owned the railroads thought they were in the railroad business, and only too late did they realize that in fact they were in the transportation business.

Are we in the railroad business (selling software licensing)?

Or are we in the transportation business (building business acumen to identify our client’s challenges, pain and goals and advising them of ways to address them through technology as a true business partner and Trusted Advisor)?

Time to decide…

As always, I’d like to hear what you have to say…

Erick Simpson
MSP University
www.mspu.us

Posted in: Events

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3 Comments

  1. Stuart Crawford July 19, 2008

    Erick
    It is time to decide, are we in the consulting business or the box pushing business. We knew that margins would shrink in the hardware business, lower than what they have been. This has happened for a while. Now, margins are gone in the software business.
    However, there is a huge opportunity to play in the business process and people management components of consulting work. The network and data management world is a commodity now. It is time to grasp the business side.
    Technical people will fizzle out in this world over time. Harry Brelsford said it right on my Small Business IT Radio show a while back, this year we have a by. Next year, it is time to pull up our socks and stop playing in the IT tech world and be fully engaged in the business acumen side of the technology business.
    So some kind words – Wake Up SBSers, the time is now to engage. Said with the outmost respect.
    Cheers
    Stuart Crawford
    IT Matters Inc.
    Calgary, AB
    http://www.itmatters.ca
    http://www.stuartcrawford.com

  2. David Schrag July 19, 2008

    I say … you’re right!

  3. Rich Lusk July 21, 2008

    I haven’t been into selling software or licenses heavily. I once had a trusted, successful Tech. Manager that said service is what sells, good personal service.
    What services are MSPs going to sell? There are several ways to go already.
    Those focused strictly on software selling, hardware selling, or the old break-fix method will have a rough time in the near future.