Microsoft Partners Fear Cloudy Days Ahead

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Microsoft CEO Steve Ballmer acknowledged channel partner concerns about the move of the technology industry to the cloud during his keynote address at the Worldwide Partner Conference this week.

"The cloud does change and make us reinvent our business model, yours and ours," Ballmer told partners. "It's a change that is inevitable. It's a change that thankfully is not happening overnight, and it's a change that thankfully we have well embraced together."

And the partner concerns are very real. There's concern that as Microsoft moves to the cloud it will compete with partners.

And as Channel Insider columnist and IT solution provider Dave Sobel wrote earlier this year, there is trepidation moving to the cloud. A customer approached him talking about wanting to reduce IT spend to a third of current spend as a peer company had done.

Sobel wrote: "The challenge is that we're displacing ourselves. This longtime customer has had us maintain their existing environment. We've been their IT department and delivered solutions on top of their existing infrastructure. By changing this environment, we displace our existing managed service with another one.

"And most challenging, the new work is of both lower revenue and lower margin."

That's a concern of so many IT solution providers everywhere. When they hear that Google partners sell a Google Apps seat to customers at $50 per seat and partners pay $40 for that, they wonder how they can make enough money for that to be a viable business.

Ballmer acknowledged the issue in his keynote.

"I'll have a number of breakout sessions with partners where I'm sure I'll hear various things about how we are competing with you when you don't want us to and how we can improve channel conflict. I'm sure we will hear about margins and blah blah blah blah blah. But we will factor those inputs in. We will continue to tweak and tune. We will continue to support you and drive this move together."

And in acknowledging the trepidation, Microsoft shed some light on just how it would help partners make the transition. The following are some of the initiatives Microsoft announced at the WPC

  • Partner Profitability Modeler, an online tool for modeling three year revenue, profit/loss, and investment costs on new cloud computing opportunities.

  • Cloud Essentials Pack, a one-year subscription for training on Microsoft cloud solutions, technical and sales support, and licenses for internal use of cloud applications.

  • Web-based management tools that let partners order and manage cloud products for customers. This also includes a sales dashboard.

  • Up to 250 internal-use licenses for BPOS and CRM Online, will similar offerings and for Windows Azure and Intune coming later.

Perhaps these offerings will warm up partners who have been cold to Microsoft's cloud efforts. Dave Sobel later wrote that he now understands where Microsoft's BPOS offering fits within his own cloud business model, after a visit to Redmond.

Will other partners be similarly persuaded by Microsoft's words at WPC this week? What do you think?

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This article was originally published on 2010-07-16