Posted by: drmiw | November 17, 2008

What does Software + Services mean for Microsoft Partners?

For some five years now Extrasys and other Microsoft Partners have been reselling Microsoft software products to businesses as a hosted service per user per month. Now Microsoft have started selling online services themselves including Email, SharePoint and Dynamics CRM so what does their Software + Services offering mean for Partners like us? Well, Microsoft have recently been touring the big cities of the world giving presentations to local Partners Networks and addressing this burning issue; I attended one such event on October 1st in 2008 and here is my report on what was said by, among others, Microsoft CEO Steve Balmer. Be warned, sensitive readers, there was a lot of Google bashing!

Microsoft’s evolving Product Roadmap

Steve Clayton, Software + Services Lead made the following points:

  • We are in the “Services Era” but it is a “fallacy” that all software will eventually be delivered through a web browser, no matter what Google says, because users are not always online, and Google Gears shows that even they understand this
  • Software + Services rather than ‘Software as a Service’ gives businesses the ‘Power of Choice’, that is, they can have their software hosted and/or on premise on different devices with varying functionality; and this is not just Microsoft’s position it is an industry trend shown by Salesforce.com’s on-premise offerings
  • Microsoft are serious about S+S and are adding 10,000 servers, the equivalent of Facebook’s entire server farm, per month to their data centres

Steve Clayton made some good points here but I would say that the web browser will be the most important delivery platform for a while yet, and with services like Extrasys’s that’s all you need to access a fully functional Microsoft Windows system. But we interact with the Internet more and more with devices that are not PCs, and we have become used to applications that are independent of operating system so what is the future for Microsoft?

Developing Software + Services Solutions

Gurpreet Singh, Director of Emerging Technology, imagines a combination of cloud services plus connected devices and federated identity as being the future for many Microsoft users, jumping from device to device and accessing their data and applications in different ways. He talked about the evolution of software from procedural to object orientated design, but still tightly coupled, which has led us now to service orientated architectures, loosely coupled and distributed redundantly. As for Google he says that they need to understand what enterprises want, and Microsoft with their “experience and heritage” have a distinct advantage; but I would say that with cost becoming the main driver for businesses in a global recesssion, Google may yet gain the upper hand.

As examples of the new wave of rich devices hitting the market, Microsoft Surface, the table-top, touch-screen platform was demonstrated at the event showing, with a flick of the presenter’s wrist, 3-D graphs of energy utilisation in an American city; and a new, fridge-top messaging device called Wayve(?) got its first public airing, but I can’t find a web page for it so maybe that bit was a dream (see later).

With the demonstrations out of the way, Gurpreet fielded a few questions from the floor, one of which is of particular interest to me and which he initially seemed to avoid answering. Why won’t Microsoft allow Office to be streamed to end users? Technically we can do this now and we can even afford caching of the applications on users’ devices in a domain-independent way, which is great for our value proposition. Our users could then use the products they pay for on their online Hosted Desktop even when they’re offline for a very small extra charge, which would have removed one common objection from potential customers and helped our sales team no end. Anyway, according to Gurpreet, the “licensing issue is being worked on now” so hopefully Microsoft will see sense soon and help their Hosting Partners win more business.

The Evolving UK Software Market

In his presentation, David Mitchell, an IT Industry Analyst from Ovum said that “pure-play SaaS” is tantermount to “architectural bullying” because CIOs want control of their systems; so software vendors should ensure that SaaS-in-a-box should always be an option. He said that the SaaS market is growing but slowing and he listed four ways for a SaaS provider to succeed, which I’ll address in a future post. Finally, he would advise any software provider to consider virtualising an application before trying to turn it into a web application, and I would certainly agree with him there.

Reselling Software + Services Solutions

Then we came to Steve Balmer’s warm-up act, Maggie Chan Jones, who did her best to get the audience excited about potential opportunities for Microsoft Partners. The main product is the Business Productivity Online Suite , which will be available in Europe in Spring 2009 and includes Exchange, SharePoint, OCS and Live Meeting. She said that partners can benefit from enhanced referral rates in the first year and can get higher margins from customising the product rather than hosting it for customers.

Microsoft know that partners bring them a lot of business, and there are many thousands of IT professionals in the UK alone whose businesses, careers and skillsets are based solely on Microsoft products and will therefore carry on promoting them. Now that they can sell online services direct to customers, however, Microsoft won’t have to rely quite so much on their partners, and as the credit crunch bites and S+S and rival SaaS products become more popular I wonder which Microsoft partners will survive this recession we’re in?

Driving the future of Business

With the preliminaries out of the way it was on to the main event. It was the first time I’ve seen or heard Steve Balmer live, and I certainly did hear him! The man is big and he is LOUD. So loud he woke up an even bigger man sitting next to me who was gently snoring and slowly but surely falling in my direction. The preceding presentations had kept me awake at least, but now it was time for the main man to strut his stuff and everyone was listening.

Balmer makes no apologies and no concessions. Microsoft has to change to keep up with Google and if their Partners don’t embrace that change and continue to make money then that’s their problem. Now whenever I encounter the word ‘bullish’ I think of Steve Balmer. I was so impressed by his presence and his words that I told my colleagues back in the office that I was going to buy Microsoft shares – looking at the share prices today I’m rather glad I didn’t, but I’ll keep an eye on them.

So what did he actually say? Firstly Balmer talked up Microsoft successes, saying that 180 million Vista licenses had been sold, along with 100 million SharePoint licenses and 750 thousand Dynamics CRM licenses. He mocked Google by commenting on their Chrome browser, which is essentially an operating system that runs on another operating system – Windows! He claimed that Microsoft web servers are as reliable as Apache servers on Linux, that their Virtual Center Machine Manager is cheaper than VMware, and that they are looking to take a bigger share of the database market from Oracle.

He referred to Windows Azure, calling it Windows Cloud saying a big announcement on the Azure/Cloud Services Platform was forthcoming, which it was, and admitting that they would effectively be competing with their Hosting partners in certain areas, and indeed they are. Just like Extrasys they will be providing software as an online service on a subscription basis with online billing, although their hosted databases and SharePoint instances won’t be extensible initially. On Hosted Exchange in particular, Balmer said that having this ‘on the Cloud’ simplifies matters so “Partners will just have to live with it”.

My feelings about the future

I agree with Steve Balmer that companies like Extrasys should embrace Software + Services, let Microsoft provide commodity products online, resell these where possible and try to add value elsewhere. And that is indeed the path on which I intend to lead Extrasys.

I think Extrasys is in a good position through increased market awareness of Hosted Services in general, through our current marketing and sales drive, and through our flexibility and adaptability as a team. We are, in some ways, in a similar position to Microsoft in that we have an active partners programme which is driving business to us, while at the same time we are also getting some great direct sale opportunities. In our case our direct sales opportunities don’t fit neatly into our standard product catalogue so there’s no conflict there, but like Microsoft we will work the channels and do all we can to keep our partners and our customers happy.

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