Microsoft Bundles Could Upend Traditional Product Classifications. Should Competitors Be Worried?

Is history repeating itself? It sure sounds like it.

This week, Microsoft (NASDAQ: MSFT) is bundling some of its less successful offerings with its best sellers. If you recall, past efforts to do this have transformed the software industry—and wound up getting Microsoft slapped by the U.S. Federal Government.

Is history repeating itself? It may be. Let’s take a look at the latest news.

In Washington this week, Microsoft is hosting its annual partner conference, Inspire. There, thousands of partners, analysts, researchers, vendors and members of the press are huddled to hear the latest form the company. This includes our own Nicole Henderson, who will report from the event all week.

On Monday, Microsoft made several announcements. Satya Nadella opened the event with the unveiling of Microsoft 365, which combines Office 365, Windows 10 and Enterprise Mobility + Security together for as little as $20 per month per user.

Microsoft 365 will come in two versions, one named “Enterprise” and the other “Business.” The former is for large organizations while the latter is tuned to those that top out around 300 users.

Here’s Microsoft’s official positioning:

• Microsoft 365 Enterprise is built on the foundation of the highly successful Secure Productive Enterprise, which grew seats by triple digits in the last year. Going forward, Microsoft 365 Enterprise replaces Secure Productive Enterprise to double-down on the new customer promise of empowering employees to be creative and work together, securely.
• Microsoft 365 Business is designed for small- to medium-sized businesses with up to 300 users and integrates Office 365 Business Premium with tailored security and management features from Windows 10 and Enterprise Mobility + Security. It offers services to empower employees, safeguard the business and simplify IT management.

According to Kirk Koenigsbauer, corporate vice president for the Office team at Microsoft, the announcement “represents a fundamental shift in how we will design, build and go to market to address our customers’ needs for a modern workplace.”

No question Microsoft 365 is a major advance. But a fundamental shift? In some ways yes, but not in others. Take technology.

Microsoft clearly sees that the lines between an OS and an application or service or utility are blurring. But where it gets even more interesting is in the cloud, where experts argue long into the night about the differences between Infrastructure-as-a-Service (IaaS) and Platform-as-a-Service (PaaS). Throw some complex Software-as-a-Service (SaaS) offerings into the mix and you can see why the need for “a fundamental shift in design, build and market” is needed.

This is big news indeed; it could usher in a new era of automation and development. Still unresolved? How will a company charge for value added innovations like the three new apps Microsoft unveiled today? They include:

• Microsoft Connections—A simple-to-use email marketing service.
• Microsoft Listings—An easy way to publish your business information on top sites.
• Microsoft Invoicing—A new way to create professional invoices and get paid fast.

Will companies charge separately for add-ons like these or merely throw them into the mix to lock-in customers and limit defections?

Now let’s consider marketing.

Bundles? Microsoft has used these quite effectively before. Recall there was a time when customers made separate purchase decisions for word processing applications, spreadsheets and presentation graphics packages. After Microsoft put all three into a single bundle and called it “Office,” WordPerfect and Lotus never recovered. Similarly, when Microsoft argued that an Internet browser should be built right in to an operating system, scores of protests followed. “Anti-competitive behavior” rivals cried. Eventually the Feds agreed.

But in hindsight, wasn’t Microsoft right? And if it is right again, then shouldn’t stand-alone security, artificial intelligence and mobility management companies be worried? I would.

Make no mistake. Today’s announcements are a big deal—possibly historic. And to make sure they stick, Microsoft has already begun laying the groundwork internally to support its new agenda.

It’s taken other steps as well. This includes the unveiling of “One Commercial Partner,” a new Microsoft program that realigns internal company resources. “We’re bringing together partner-focused teams from across the company into one organization,” writes Ron Huddleston, corporate vice president of One Commercial Partner at Microsoft, in a blog published Monday.

According to it, all of Microsoft’s partner-facing employees will work with partners in one of three different ways. They are, according to Microsoft:

1. Build-with – Whether you need to build a practice, build IP, or build your capabilities, our team of partner development professionals are there to support you. They have business model expertise and are supported by technical and specialist resources. Their mission is to get the right resource to you at the right time to support your success and growth.
2. Go-To-Market – Our team of partner marketing experts will help you bring your solutions to market through offers. They will orchestrate with the teams that build with you on the market opportunity and the teams that sell with you on customer needs.
3. Sell-with – We are adding a new role to our partner business. Channel Managers have responsibility for connecting the right partner solutions to the right customer at the right time. Armed with best practices, marketplaces, and solution maps, they will work hand in hand with Microsoft sales teams and customers of all sizes and across industries.”

Big news, indeed.