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

Posted in: Events

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Live from the Microsoft Worldwide Partner Conference part 2

Well here we are at the WPC for the 3rd day, and after a warm-up from Allison Watson, who highlighted 5 partners with testimonials on how they used Microsoft technology to bring interesting solutions to their well-known clients, Steve Ballmer stormed the senses in typical style, opening with a scream as he stalked the perimeter of the stage at the Toyota Center like a caged tiger (a pretty good-sized one).

Of course, this is what the crowd and attendees have been waiting for, as Steve’s energy and enthusiasm rolled off the stage and up into the highest rows of seats. He really doesn’t need a microphone and amplifier…

After some preliminary thanks and the requisite report of how well Microsoft products did last fiscal year, Steve’s presentation focused squarely on Software Plus Services. What I found interesting but not surprising was Steve’s announcement of Microsoft’s initiative to build a completely web-based development platform, opening the door for more Microsoft applications to be Software Plus Services friendly, as well as allowing the ability for developers to develop on this web platform.

Steve went on to say that Microsoft is focusing on 4 primary areas:

  • PC
  • Enterprise
  • Consumer Internet
  • Consumer Devices

Again, not surprising, but interesting when contrasted with some of Allison Watson’s "A-List" presentation yesterday, where she highlighted some of the Skunkworks-type development that goes on behind the doors of the mighty Microsoft, such as Microsoft Robotics (which demonstrated a small robot like many we’ve seen – think ASIMO, just much much smaller) which begs the question "who do partners sell that to?", and Microsoft’s cool Astronomy program, which is like a "Virtual Earth" for the Universe, leveraging the capabilities of the Hubble and other telescopes, but again begging questions of relevance to partners…

Steve closed the last half hour or so of his keynote by answering pre-submitted questions regarding key areas that highlighted his presentation, always seeming to have just the right spin on topics such as competition with partners through Software Plus Service, Cloud Computing and others.

Entertaining, Steve’s performance seemed to me weighted towards properly positioning Microsoft’s message to Partners worried about their future, as the organization makes the necessary move to S+S in order to remain relevant and competitive against contenders like Google.

In fact, I had several conversations with some key Microsoft folks here this week regarding the sensitivity that their S+S messaging must embody, and the 3 types of partners I thought would need to be addressed in very different ways:

  • Partners fearful of Microsoft owning their client relationships as a result of purchasing S+S directly from Microsoft
  • Partners mature enough in their businesses who realize they have built a strong enough business partnership with their clients that their relationships would not be in jeopardy (whether they sold Microsoft’s S+S directly from Microsoft, or from a Microsoft Hosting Partner, allowing them to private-label these services and bill for them directly)
  • Hosting Partners

This is such a concern with some partners I’ve worked with that I’d like to hear your opinions, so please submit your comments.

Erick Simpson
MSP University

Posted in: Events

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