Where did the term Cloud come from? I used to have a good theory. Something about network diagrams and lots of cloud shaped whiteboard drawings. But now I'm convinced that the over-used term came from Microsoft.
After a week in the Seattle area without seeing any sun - it only makes sense that it was the Redmond giant. Makes sense, right?
Joking aside, Microsoft deserves credit for its strategy and commitment around hosting partners.
This commitment was shown at an event held in Bellevue, WA, March 27-29 for 400+ attendees from hosters, telcos, and other managed services providers. I don't know of another large software vendor putting on an event for this specific type of business partner in the past. This was my first trip to Microsoft's Hosting Summit, the 8th event they have held. This event was so popular with partners that registration had to be shut down early.
The event was comprised of strategy updates, informational sessions on trends and Microsoft plans, business strategy workshops, a small partner showcase / expo area, and more. The following highlights some of Microsoft's key partner strategies in hosting as well as some of the industry-wide challenges and opportunities that face the hosting community.
Hosting and Partner Strategy
Microsoft is clearly committed to Cloud and hosted applications and the partners who build, host and provide services around them. Hosting related revenue in the SMB division has roughly tripled over the last three years. And there are now over 5000 Exchange hosted partners.
Ross Brown, VP from the Worldwide Partner Group, admitted that the hosting business has been a bit to the side in the past, but that he wants to bring it front and center. He said they were continually working on improving the partner experience and said they were working to increase the incentives to hosting partners and really anyone using the SPLA (Service Provider Licensing Agreement), which is the key vehicle that allows partners to sell Microsoft products in a hosted model.
Striving to Offer Choice
One of the best things about Cloud and hosted applications is that they provide the customer with choice. They are options on top of traditional on-premise software. For email for example, there are three options: Office 365 (Msft hosted, multi-tenant, large scale), Hosted Exchange (Partner hosted, single tenant), and On-Premise. A customer can pick the model that works best for them, or even a combination as some HQ / branch structures will do.
However, choice is easier said than done. It has proven to be very difficult in our industry to come up with offers that seem equal and comparable to customers. And perhaps harder still, is compensating salespeople so that they are not biased to pushing one offering over another.
So how does Microsoft approach these conundrums? I don't think they've solved it but they offer two material solutions. First, at least one Microsoft spokesperson told me that direct and partner salespeople should lead with Office 365: It's a powerful solution that solves many customers' needs. The idea is that if there is more customisation required, then either a customised hosted or on-premise solution is best.
Secondly, Microsoft has introduced a concept called License Mobility, which allows customers to transfer their agreement from one type of offering to another. Typically this could be a customer with an Enterprise Agreement transferring their on-premise licenses to subscription based Cloud application seats. In theory this allows customers to make easier decisions, knowing that they are not locked into a specific offering for a long time.
Products Built With Hosting Partners In Mind
What I found both uplifting is that Microsoft said that its System Center 2012 and SQL Server 2012 were built with hosters and service providers in mind from the ground up. This included making products capable of handling multi-tenancy and with higher availability. I couldn't actually tell you if other companies are good at this or not. I suspect they are not if one of the most channel oriented companies in the world is just getting the hang of it right now. But yes - it was uplifting for the partners in the audience to hear this and know that their lives could potentially be simpler because of channel-friendly products, not just a channel-friendly route to market.
Differentiating Is A Goal - But it's Tough.
I think one of the biggest struggles right now is for hosting companies and service providers to figure out how to differentiate themselves in the market. It doesn't make a lot of sense for hosters that offer a hosted vanilla version of Exchange to compete in the market against Office 365. Microsoft agreed at the summit that its partners needed to focus on their points of differentiation.
So how might a partner differentiate? Here are a few ideas between what was mentioned at the event and this analyst's opinion:
- Add-on product offerings or add-on services can help to move away from vanilla. The most popular add-on products according to Microsoft are Web conferencing through Lync. Consider the situation where a government requires businesses to archive their records for longer than what other hosters will do.
- Industry oriented services can be valuable. Service providers can cater to a specific industry such as legal or professional services. Many hosting providers are creating their own intellectual property and can charge more because of it.
- Add-on professional services or system integration work is fairly common among partners, but it necessitates a very different skill-set than hosting or managed services.
- In certain geographies, partners can provide similar services to what Microsoft does, but by doing it in countries where Microsoft doesn't have a data center, they can gain additional customers because of government rules that dictate data must remain in the country
Posted by Darren Bibby