Change and Microsoft Partners

August 1, 2008

Yesterday I enjoyed lunch with the eminent and scholarly William Barnett, PhD, a professor of economics at Loyola University’s School of Business. Our lunch discussion centered on change: changes facing Microsoft, changes in Microsoft’s relationship with its partners, and changes in the partner’s business models.

The software market is undergoing substantial change. Microsoft’s software ownership model is competing with the free, hosted app model of Google, IBM, and others. In response, Microsoft is offering software for rent, hosted apps in the cloud, to be sold by their partner network for a commission. The cost to rent the hosted apps is small when compared to alternatives in the market place. In addition, the commission paid to partners is also quite small when compared to profitability of other partner solutions (i.e. in-house Exchange servers and partner hosted Exchange services).

Dr. Barnett noted Microsoft’s hosted app software model requires middlemen: partners are Microsoft’s distribution network. The Google hosted app model is a free offering that does not require a distribution network. Dr. Barnett acknowledged Google’s use of technology to replace the need or expense associated with a human intermediary in their distribution network. In order for Microsoft to efficiently compete with Google in the software rental or hosted app segment, the expense associated with partners must be eliminated. Some may contend long-term revenue growth potential in the software rental/hosted apps segment of the market is not great for partners.

Dr. Barnett mentioned Microsoft’s consulting and 24×7 telephone tech support service, at very competitive rates, with well trained engineers – and noted the direct competition with partners. As this service offering from Microsoft continues to evolve, what do you think of the revenue growth potential from billable hours in the consulting and tech support segment of the market?

Dr. Barnett inquired about how the hosted app offering from Microsoft will affect Onsite’s revenue. Onsite earned significant revenue in the past ten-years from hardware sales, Exchange server software sales, and support and service of in house Exchange servers. If Microsoft’s Exchange hosted app service is as good as marketing suggests, in-house Exchange server sales and support will disappear.

How will Microsoft’s strategies for revenue growth in their future affect the revenue growth in your future? Microsoft contends partners will retain the configuration and customization niche. How do you feel about the potential revenue stream from this niche especially with Microsoft as a competitor offering consulting services? Have you identified other areas for growth in your industry? It will be interesting to note your replies. Stay tuned as change forces change and the consumer seems to benefit.

If you’re searching for New Orleans computer service or repair of your Microsoft based system or network, then call the Microsoft specialists at 504-469-6991. Onsite Computer Services, Inc. in New Orleans

You may also be interested in Onsite Computer’s Blog.

This New Orleans On-Site Computer Service post was provided by Eli Lucas. Eli can be reached at eli@onsitenola.com. Onsite Computer serves the Microsoft computing needs of small businesses throughout the Greater New Orleans area including Uptown, Lakeview, Broadmoor, Mid-City, Metairie, Jefferson, Kenner, Westbank, French Quarter, and the Warehouse District. Please visit our website for New Orleans Computer Service.

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