While channel partners have historically made a lot of money reselling software and hardware on-premise, the shift to the cloud is putting much more emphasis on services. Because the revenue that cloud service generates mostly shows up in small increments over the life of the service contract, solution providers need to wrap as many services as possible around a cloud application—not only to stay profitable but also to keep the lights on.
For the most part, Microsoft partners are viewing Office 365 along with other Microsoft applications as a means to a more profitable end, according to a recent survey of 191 Microsoft partners conducted by Harmon.ie, a provider of workflow and collaboration software and services. As opposed to the Microsoft applications themselves, most of the Microsoft partners surveyed clearly see consulting, managing migrations and providing cloud management services as their biggest revenue opportunities.
In fact, 60 percent of Microsoft partners report they are looking to expand those revenue streams by moving beyond the Microsoft portfolio, and 38 percent view Microsoft as a potential competitor when it comes to delivering those services.
Clearly, the Microsoft channel ecosystem is maturing rapidly in the age of the cloud. Less clear is how dependent those partners will be on Microsoft in a cloud era where the diversity of applications being made available in the cloud continues to expand with each passing day.
The good news is that a full 97 percent of Microsoft partners expect their clients’ use of Microsoft Office 365 to increase in next 12 months and more than half expect to see 30 percent to more than 50 percent adoption within their customer base.
Specifically, Microsoft partners are looking to consulting services (72 percent), hybrid integration (47 percent) and cloud management (41 percent) as their biggest opportunities. More than half (57 percent) expect to see new revenue streams such as providing services on top of Microsoft Office 365 (48 percent) emerge. But those same partners also note that cloud management (58 percent) and hybrid integration services (48 percent) are the toughest to deliver. From a business perspective, the partners cited the need to increase their cloud skills (41 percent) and insufficient revenue streams (40 percent) as their top two business challenges.
Partners are concerned about competition. In fact, 38 percent of them view Microsoft as a potential services competitor, which may help account for why 60 percent of them have expanded their cloud application portfolio beyond the Microsoft cloud portfolio.
Naturally, few customers are making the transition to the cloud overnight. Microsoft partners report, for example, that they expect 72 percent of their customers will continue to use Microsoft SharePoint on-premise or in a hybrid mode, according to the study. Microsoft will not deliver a Microsoft SharePoint cloud service until 2016. In fact, well over half (62 percent) cited customer security concerns as the biggest obstacle to adoption. Migration of custom applications (39 percent) and data migration (36 percent) are the next two biggest concerns.
Put it all together, and it’s clear that Microsoft channel partners are evolving in a way that not only suits their best business interests—but also in ways that Microsoft may not necessarily expect.
Michael Vizard has been covering IT issues in the enterprise for more than 25 years as an editor and columnist for publications such as InfoWorld, eWEEK, Baseline, CRN, ComputerWorld and Digital Review.