Microsoft’s partners are becoming more sophisticated at providing services that complement, and frequently compete with, the company’s cloud services.
The cloud represents only a little more than 10% of Microsoft’s revenue. While Microsoft claims there are 70 million active users of Microsoft Office 365, that still only represents 6% of the 1.2 billion Microsoft Office installed base.
In the third quarter of Microsoft’s fiscal year, the consumer segment of Microsoft cloud business saw 79% year-over-year growth, vs. 57% growth in the commercial sector. Microsoft Premium Protection services grew 35%.
95% of partners expect their customers to move some portion of their email and Office apps into the cloud. Additionally, 92% said they expect customers to make use of online meetings. Adoption of file sharing (93%) and Microsoft Skype for Business (91%) is also high. But only 51% say they expect customers to increase the use of Microsoft Office by more than 30% or more in the next 12 months.
82% of partners report that customers are already using Microsoft SharePoint as part of a hybrid cloud deployment. More than 60% of existing Microsoft SharePoint licenses are still running on-premise. Additionally, 40% of partners say their customers make no use of Office Groups, SharePoint News Groups or Microsoft Yammer.
A full 70% of partners cited new revenue streams, followed by 60% specifically citing services running on top of Microsoft Office 365.
The survey also finds that just over one-quarter of the respondents indicate that cloud migrations would account for more than half their business in 2017. A third of partners say their customers view setting up Microsoft Office 365 as being time- and labor-intensive.
Just over half (55%) plan to add cloud management services to their portfolio in 2016. Partners expect these services to account for 15% of their revenue in 2017.
While 52% see Microsoft Office 365 driving the need for hybrid cloud services, 49% plan to add these services to their portfolios in 2016.
Two-fifths (41%) see mobile computing as an opportunity, and 39% say they will add mobile services to their portfolios in 2016. Two-thirds of partners said 20% of their customer bases use mobile-device management.
56% say they plan to add compliance services, while 53% say they will focus on information records and governance. Nearly two-thirds (63%) noted that their customers have issues with the classification, storage and retrieval of emails.
A full 69% of partners cite security as the primary challenge to Microsoft Office 365 adoption, followed by cost, at 56%.
Partners say better access to the latest version of Microsoft apps (69%) and faster refreshes of applications (30%) are cited as the top two benefits by customers.
More than four in 10 (41%) of partners cited upgrading their skills as their major cloud challenge.
A full 72% of partners say consulting offers them the greatest cloud revenue opportunity. Specifically, 24% cite improving the end-user experience as a major opportunity, and 31% are adding this type of service to their portfolio in 2016. A full 73% are relying on self-training to acquire these skills. Another 32% are trying to hire IT pros that are already trained.
Just under a quarter (24%) see vertical solutions as a major opportunity, and 26% will be adding these types of solutions to their portfolio in 2016.
26% view Microsoft’s professional services organization as a competitor. Two-thirds of partners also note they will offer cloud services that compete with Microsoft in some areas, most notably file sync and storage (52%), content management and collaboration (48%), CRM (45%), customer service (45%), and backup, recovery and archiving (38%).