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Born-again Microsoft Preaches SaaS Gospel to Partners
But is its Evangelism Going Down Well?

by Maroushka Kanywani, Editor, Dashboard InsightThursday, July 17, 2008

Microsoft has fully embraced software delivered as a service and won't let others take the edge in Cloud computing, attendees of last week's Microsoft Worldwide Partner Conference heard, with plans already afoot to launch a "platform for the internet Cloud." So if Microsoft is now a 'software plus services' zealot, is its evangelism going down well?

Written by Stuart Lauchlan, News and Analysis Editor, MyCustomer.com

Maybe it's just a 'born again' fever kicking in, but Microsoft is now a fervent believer in software delivered as a service. Now that's not entirely the same as software as a service (SaaS), but it's a major change of heart for the firm as outlined by CEO Steve Ballmer, who previously dismissed the notion of SaaS replacing client-server as “naive”.

But last week at the firm's Worldwide Partner Conference in Houston, Ballmer told Microsoft partners not to fear a SaaSy future, even though many of them won't make the transition to the new world order. But he insisted that Microsoft can't just sit back and watch others – unspecified, but presumably those with a California zip-code... - come in and take the edge in Cloud computing. As such, business models and software architectures need to change to accommodate scale and availability and a subscriptions-based revenue model.

Channel partners have been sceptical of Microsoft's SaaS intent, worried that the company's online portfolio of hosted software will hurt their business opportunities and give Microsoft more direct ownership of customer relationships. But it's a world, said Ballmer, that partners shouldn't see as "scary or problematic", although he admitted that businesses providing Cloud-based services from companies such as Microsoft would grow faster than those providing hosted versions of Microsoft's software.

"Even as the business models change, for us, the notion of partnering with all of you remains fundamental," Ballmer promised. "We build from the present. As we build on this world of software plus services, we'll build it together.

"This isn't going to happen overnight in the enterprise world. But what you need to be able to do is know that the wording, the training, the investments you are making today will seamlessly move to the new world," he said. "I'm not going to tell you the world of the future looks exactly like the world of today. We all know that's not true. There will be businesses that you're in today that won't exist 10 years from now because the technology will have advanced so far.”

A Platform for the Cloud

According to Ballmer, Microsoft will launch a "platform for the internet Cloud" that'll let partners write, deploy and manage programme. “We're not getting rid of servers. We're extending the basic programming model and management model that we know today from Windows and Windows Server to the Cloud,” he said. “If you know Exchange, you know Exchange, and those skills and technologies, they will translate as we move from the server to the Cloud. Building SharePoint apps today? Great, we're going to take you with us into the world of software plus services. Same thing with Dynamics.

"I'm not going to tell you the world of the future looks exactly like the world of today. We all know that's not true. There will be businesses that you're in today that won't exist 10 years from now because the technology will have advanced so far."

Steve Ballmer, CEO, Microsoft

“We have great hosting partners. But the best you can do is the best you can do with our existing server products hosted and managed well. We're basically reinventing some of the server software particularly as it relates to scalability, geo-caching and replication, management, cost of operation, and all of the improvements we'll make in order to do our own cloud services, which are necessary. They're innovation that we and we alone can do. We will also repackage back over time into our server offering. There will be customers who want to work on our scale platform in the Cloud. There are going to be customers, though, who want hosted, dedicated solutions from partners. We will support both."

Ballmer insisted that partners won't come up empty-handed in Microsoft's hosting plan. Stephen Elop, president of the Microsoft Business Division, outlined plans to pay solution providers that sell its hosted services 12% of the monthly subscription fees for the first year of a customer engagement and 6% in subsequent years. "This really is a transformation," he said. "This is hard. Everyone of us has to embrace the fact that a lot has changed and will continue to change. As a partner of Microsoft, your business must change as well. We need you to be successful with online services in order for us to be successful."

In the US, Microsoft is beefing up the functionality of its CRM products with Pinpoint, an online directory of partner tools and applications which will be fully functional in August, according to Brad Wilson, general manager of Microsoft CRM. "For our partners, it's a no-brainer to engage and be listed," Wilson said. "We think it's a great way for our partners to get exposure and a connection to our customers and prospects."

Customers can access Pinpoint online or directly through CRM Online or Dynamics CRM via the new resource centre function, which provides tips and best practices for getting the most out of their CRM implementation. Microsoft develops its own add-ons, which will be offered elsewhere. "We want our broad partner base to embrace CRM online as a way to handle their customer management needs," Wilson said – although non-US customers and partners are still out in the cold as far as CRM Live is concerned.

Software Plus Service Zealot

Allison Watson, vice president of the Worldwide Partner Group at Microsoft, described Pinpoint as a unified online business marketplace for SME customers and partners. “Our goal is to provide thought leadership to our partner community on the business model evolution required by the software-plus-services landscape,” she said.

The firm also plans to release solution accelerators between its major CRM point releases. The first eight accelerators were announced at the conference, including one for sales methodology integration, e-service integration, an alerts and notifications accelerator and an event management template for companies that run public events. The accelerators will be free and available via download from Microsoft or its partners.

"After a year spent building and tuning the new vehicle in its software + services strategy, Microsoft has handed the keys to its partners and told them it's theirs to drive - and to customise."

Warren Wilson, Ovum

So if Microsoft is now a 'software plus services' zealot, is its evangelism going down well? “After a year spent building and tuning the new vehicle in its software + services strategy, Microsoft has handed the keys to its partners and told them it's theirs to drive - and to customise,” noted Warren Wilson of analyst house Ovum. “Microsoft says it is committed to helping partners succeed; after all, it depends on them for some 96% of its revenues. To that end, it describes a number of ways in which partners can leverage the new model.

“Key to partners' success will be their ability to provide some additional value on top of the plain vanilla hosted solution - perhaps by helping customers migrate from other platforms or, often, by customising the subscription services for the particular industries they serve. Microsoft has spent the last six months or so training the 1,400 account managers that serve its 30,000 top partners, and creating online resources that help partners figure out what kinds of additional services to offer.

“Microsoft is clearly encroaching on some partners that have themselves been providing plain-vanilla hosted solutions based on Microsoft's products. But the vendor has been signaling its intentions for some time, so this week's announcements should take no one by surprise. Nor is the need for partners to provide higher-value solutions unexpected. After all, plain vanilla hosting is destined to become a low margin, commodity business, if it isn't one already. To a large extent, Microsoft is simply accelerating a transition that partners would face anyway - but it's also offering them tools they would otherwise have to create by themselves.”

Source: MyCustomer.com

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