Microsoft Office 365 Turns Corner With Channel, Cloud Partners
Microsoft (NASDAQ: MSFT) is finally turning the corner with Office 365, training and engaging channel partners that want to generate consulting and recurring revenues from the cloud. Roughly 18 months after Office 365 officially launched, the discussion has increasingly shifted from partner concerns to partner opportunities. Here’s the proof.
During a Microsoft-led session at a Tech Data (NASDAQ: TECD) conference last week near Tampa, Fla., nearly 100 VARs and MSPs peppered Microsoft’s Steve Deming (pictured) with questions. Most of the session focused on Microsoft’s forthcoming Office 365 upgrades, new SKUs for resellers and customers, and the long-awaited Office 365 Open program — which will let partners manage end-customer cloud billing and pricing.
Throughout the session, partners focused on profit opportunities. Concerns about Microsoft’s overall cloud strategy were rarely mentioned — if at all. That’s critically important as Microsoft battles Google Apps (NASDAQ: GOOG) partners like Cloud Sherpas for the hearts and minds of partners and corporate IT managers.
What a difference 18 months makes. When Microsoft launched Office 365, the successor to BPOS (Business Productivity Online Suite), in July 2011:
- The software giant declined channel partners the opportunity to manage end-customer billing and pricing.
- Many of the initial Office 365 deals seem to be direct sales to customers — with little or any partner engagement.
- Microsoft historically has sold more than 90 percent of its software through partners. But the company hasn’t said what percentage of its cloud revenues involve partners.
Signs of Progress
Thanks to Microsoft channel programs like Cloud Accelerate and Cloud Essentials, the software company gradually trained partners for cloud opportunities, creating first-mover advantage for scores of Microsoft VARs.
Early winners include AgileIT (which has 25,000 cloud seats under management) and Champion Solutions Group (which has more than 250,000 cloud seats under management). Chris Pyle, president and CEO of Champion, is working on some new surprises that could further “wow” the Office 365 channel ecosystem (stay tuned).
Meanwhile, Microsoft itself seems to be discovering the value of cloud partners. The proof: When Microsoft sells Office 365 direct, customers are 50 percent less likely to have a successful long-term, sticky engagement with the software giant’s cloud offerings. But when partners are involved, the deployments are far more sticky, according to Microsoft’s Deming.
Armed with that stat, The VAR Guy believes, Microsoft’s channel team is winning over partners as well as any lingering cloud channel skeptics within the halls of Microsoft. Plus, Microsoft’s mid-2012 decision to kill Windows Small Business Server (which some partners still lament) should prompt even more Office 365 momentum.
Still, Microsoft seems to be taking two steps forward and one step back. A prime example: When the next round of Office 365 enhancements arrive within the next few weeks or months, Microsoft will offer at least eight different SKUs for the cloud suite. During the Tech Data conference, Deming conceded that all the new SKUs could take some getting used to for partners.
Also, some partners realized that the Office 365 Open program could introduce new challenges even as it solves the end-customer billing concerns. For instance, some Office 365 Open partners could decide to sell the core cloud suite at break-even prices or even a loss, while trying to turn a profit on value-added wrap-around or migration services.
All that said, the tone among Office 365 partners seems to be dramatically improved compared to a year ago.