Microsoft and Microsoft Partners – Change for Whose Benefit?
July 9, 2008
Much to the chagrin of many Microsoft Partners, yesterday in Houston Microsoft commenced its annual Worldwide Partner Conference by announcing the addition of two cloud-computing services: Exchange Online Deskless Worker and SharePoint Online Deskless Worker.
As Microsoft develops web-based enterprise applications for its data centers and the ‘cloud’, the company cannibalizes market share from its partners who also provide hosting services with the same applications. In light of Microsoft’s new offerings, Microsoft reps used the partner convention to assure its partners that Microsoft doesn’t intend to drive their partners out of business.
According to Stephen Elop, Microsoft’s new president of the business division at Microsoft, “Our vision is that everything you can do with our onsite servers, you will be able to do with our on line services … For partners, it’s about the differentiated value they can deliver on top of our services, as well as providing them with an ongoing revenue stream.”
Although Microsoft originally contended those services would only be available to large businesses with 5,000 or more users, Microsoft changed its mind last winter and now plans to market their portfolio of web-based services to all businesses. Just like my former spousal unit, Microsoft can ALSO change its mind, at any time, for any reason – especially if the change benefits Microsoft.
Microsoft’s new relationship with its ‘partners’ transforms partners and MCSEs into Microsoft sales and service personnel. Microsoft alleges its goal is to create a market where Microsoft and its partners can co-exist and earn revenue. Called ‘revenue sharing’, Microsoft believes their new partner relationship leaves room for partners to provide profitable consulting and administration services in support of Microsoft hosted services. Partners disagree on the potential profitability from this change in the partner program.
Microsoft’s commission to its partners for selling their hosted services is 18% the first year, with a 6% renewal as long as the partner and his client maintain a positive business relationship. Microsoft prices its services starting at $3 / user / month. At $36/year, a partner’s first-year commission is $6.48 / user. Some partners believe their profitability is taking a hit.
Microsoft partners target small businesses and some partners fail to recognize the profit potential from Microsoft ‘revenue sharing’. Many partners contend the new hosted services from Microsoft will cannibalize existing partner product/service offerings. It will be interesting to note if this new business model from Microsoft, which replaces onsite client-server business networks with a client-cloud model, will prove win-win with its partner network. Stay tuned as this issue is certain to remain contentious with Microsoft partners. Who do you believe will benefit from the new hosted services model and revenue sharing proposed by Microsoft?
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