Microsoft can do it without partners

Microsoft’s biggest strength has always its partner network and it seemed, at least for a couple of decades, that a strong channel was needed to get your product into the market. Few remember the days where buyers only saw products in computer magazines, computer trade shows and the salespeople walking through the door — the first two no longer exist and the last one may be on its last legs.

The overriding reaction from Microsoft’s Surface announcement was the snubbing of their traditional OEM partners and building a device on their own. As a consumer I think it’s a great idea — the Dell that I use for work is the sorriest excuse for a premium laptop and the more Microsoft can own the hardware and drivers that support their OS, the better. Surface, and Microsofts ownership of the design, manufacturing, distribution, sales and support of the device is a response to the pressure that they are under from the iPad — and having OEM partners messing around with their own hardware, with Android shoehorned in, obviously doesn’t work for them.

There is more to this story than consumer tablet devices. What about the rest of their business? What about the channel for enterprise software? In terms of traditional enterprise accounts I don’t expect much movement yet — there is a well established channel and an organisational culture within Microsoft to push product through that channel. I don’t expect that enterprises are going to be buying Windows Server for the datacentre from a local Microsoft store any time soon. This is probably because the channel supplier is already camped out in the data centre and rolls everything up in services and support contracts that are attractive to the enterprise (or at least appear to be).

What is going to change the Microsoft to partner to customer channel is the cloud — and it is already happening. Focussing on SaaS for a moment, consider the ‘buy direct’ model of Office365. Customers can go direct to Microsoft and get thousands of seats without going through a partner. The most engagement that they will have with partners is for migration or configuration of AD. Increasingly we are seeing Microsoft cash cow products (Exchange and Office) being sold direct and this trend will only continue. Should anything else be expected of Microsoft? With Google going direct and promising customers all sorts of magic and unicorns, why would Microsoft do anything less? Should they rely on the partner channel that either cowers in the corner with cloud phobia or is still out having an expensive lunch funded by multi year MOLP agreements and software assurance plans? The answer, of course, is no. Microsoft should not hang around while partners are milling about and Google is eating their lunch. Just like Surface, where Microsoft has to take the fight to Apple, Microsoft has to go direct because relying on (OEM) partners hasn’t been working too well.

Not only can customers buy Office365 direct, but they can also buy Windows Azure direct. With the new IaaS oriented VMs, it makes it easier to buy direct than go through the channel for on-prem Windows Servers. Microsoft has tried for years to get partners on board with Windows Azure but it has largely failed. That may be because partners don’t understand Windows Azure, but also because Microsoft is making the money (somehow) on the sales. Without the sale of the hardware, OS, networking, installation, configuration and support of a traditional server, there seems to be very little meat left on the bone for the channel — even if a few pennies are thrown their way by skimming a percentage of the monthly Windows Azure bill. To blame the channel and say that it has been lethargic is not entirely fair — Windows Azure effectively blows their business models out of the water, so it is unsurprising that they failed to embrace it with open arms. As with the SaaS offerings, what is Microsoft to do? Amazon Web Services goes direct and customers go direct to Amazon, without waiting for their incumbent IT suppliers to recommend AWS. In the face of that competition, Microsoft has little choice than to go direct and act like a huge multinational with huge investments in infrastructure, as Amazon does, rather than leaving it up to local partner minnows.

If the Microsoft channel continues to collapse (and I believe it will), when does Microsoft stop? Do they offer more and more professional services on top of their SaaS, PaaS and IaaS? I believe that they have little choice. If a customer buys Office365 direct from Microsoft, who would they choose to do the installation and support? The supplier of the service, or a partner? I believe most customers would choose to get the professional services from Microsoft — after all, they would reason, the Microsoft professional services have more direct access to the people looking after the physical infrastructure than partners would (and they would be right). Should Microsoft snub the channel and offer Windows Azure based software development services? Yes, if their existing channel is fixated on building apps on-prem (whether through ignorance or protecting their market).

Microsoft partners that continue to ignore cloud based offerings are going to fall by the wayside — both because Microsoft will ignore/undercut them by offering direct cloud services, or because their own customers will choose to go direct themselves (even to Google or Amazon). Partners need to work differently and re-invent themselves — find a way to add value and make money off the cloud. Microsoft in turn needs to protect those partners that are cloud-oriented (by, for example, allowing partners direct access to internal teams), after all, they need lots of partners in order to scale. There is no way that Microsoft can offer all of the professional services themselves — yet.

While many criticise the languishing 90s era Microsoft it appears that the ship is beginning to turn. Building a closed ecosystem consumer computing platform seems to be the only way to satisfy the needs of the consumer market (and compete with the iPad). Building out cloud services and massive computing infrastructure seems to be the way for satisfying the needs of the emerging business software market (and competing with Google and Amazon). Nobody cares as much about Microsofts survival than Microsoft does themselves, and they seem to be realizing that. Perhaps Microsoft is shedding the 90s culture and moving with the times. It is a big bet for Microsoft, but Microsoft seems poised to assert their place in the new markets and I wouldn’t bet against their ability to deliver.

Simon Munro

@simonmunro

About these ads

  1. Leave a comment

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Follow

Get every new post delivered to your Inbox.

%d bloggers like this: