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| Software Plus Services Becomes Urgent |
| Jul. 23, 2007 |
Establishing a services business has been a public priority for Microsoft since 2005, but its efforts to do so have been largely experimental. The shift to services has taken on more urgency, however: company executives told attendees at Microsoft's 2007 annual partner conference (held in Denver, CO) that the company's top long-term priority is to move to computing models that rely heavily on online services—and if Microsoft doesn't move quickly, it "will become obsolete." However, other than promising partners commissions for referrals to its services, the company offered little in the way of business models for services partners. Fundamental Transformation Affects All In Microsoft's "software plus services" vision, customers will employ both locally installed software and hardware resources as well as Internet-based resources, but Ballmer acknowledged that much about the vision is uncertain. Nevertheless, he predicted that the company would be delivering some key parts of the vision within two years. (For a diagram of the components that Ballmer indicated would be built, see the illustration "The Software Plus Services Architecture".") Discussing this architecture in detail is in itself a significant shift for a company that has watched jealously as its traditional software business has begun to slow, while brash competitors such as Google or Salesforce.com captured attention and momentum with Web-based models for software delivery. While Microsoft continues to believe that the local client will remain important, it also sees that sophisticated applications can be delivered over the Internet by online services and user interface technologies such as AJAX, Adobe's Flash, and Microsoft's Silverlight. "The fundamental transformation to software plus service that's happening in the model of computation and user interface is upon us, and it will affect us all," said Ballmer. Upcoming Partner Opportunities Although few new services will be available before 2008, the company outlined ways in which partners could be involved in them, and beefed up many of its existing services and programs. (For more information on how partners might fit into the company's software plus services strategy, see the sidebar "How Partners Fit into Software Plus Services".) CRM Live Commissions The centerpiece of the show was Dynamics CRM Live, an online customer relationship management (CRM) service that can be hosted by both Microsoft and partners. The service will be based on the next version of Microsoft's Dynamics CRM software, expected by the end of the year. The service will have price points of US$44 per user per month for the Professional Edition and US$59 per user per month for the Enterprise Edition (which can synchronize data between online and offline data sets). However, during an early-access period leading up to the launch, subscriptions will be free. The most notable part of this program is that partners will be rewarded for referring customers to the service, receiving 10% of the subscription fees for as long as the customer uses the service. The company also promised better development tools for customizing Office Live, which launched in late 2006, and an affiliate program that will let partners get a share of subscription fees and advertising spending by customers that they refer to Office Live. Marketplaces CRM Live and Office Live will give partners some opportunities to create new applications to sell to customers. Online marketplaces for developers will let customers see customizations that third parties have developed for the services, and then download and use them. Microsoft demonstrated how a customer could download XML templates to convert a vanilla CRM implementation into a more specialized events management application. Improving Existing Programs Although new models for software and services were the highlight of the conference, the company is not neglecting its traditional products. It announced many new initiatives to make it easier for partners to learn about its technologies and reach new markets. New financing options. Microsoft Financing, which partners can access on behalf of customers to finance software, hardware, and services, will expand a program that lets customers pay small amounts for six months and the remainder of their loans over 30 to 36 months. The original program fixed the initial payments at US$50 monthly (or an equivalent in local currencies) for six months; the new SmartPay program extends the lower-payment period to a year and allows customers to pay anywhere from US$50 to US$1,500 a month during that time. Security partner opportunities. The Security Software Advisor (SSA) program, introduced in 2006, will be expanded so that more partners are eligible to earn 30% commissions (35% for partners with the Security Solutions Competency) for referring customers to subscription security services. New competencies. Competencies identify particular partner skills and the company will bring the total number of competencies (most of which have sub-specializations) to 13 with the addition of competencies for hosting solutions and for business intelligence. In addition, a new unified communications specialization has been added to the Information Worker competency, and new specializations will be added to the Security Solutions competency. ISVs who develop applications for the Dynamics platform will get a Certified for Microsoft Dynamics program that recognizes high-quality partner applications. More partner training. Turner said the company will reduce examination prices (examinations are required for most competencies) and make training vouchers more available to partners. Some product groups have developed their own training offers. The Dynamics group plans to train up to 4,000 of its own technical sales people to help Dynamics partners with their sales efforts, and will help partners recruit and hire up to 1,000 Dynamics specialists of their own. Similarly, the Information Worker group plans a Partner Skills Accelerator, which will offer free training and discounted certification exams. Office Business Applications (OBAs). A new OnRamp program will deliver technical resources, marketing assistance, and sales leads for partners building OBAs, customizations and applications that employ Office applications such as Outlook or Excel as the interface for working with data in back-end systems. One of the best known OBAs is the Microsoft-SAP Duet product, which lets Office users access data in SAP systems. Microsoft wants to position Office applications as the front end for many more such systems. SharePoint deployment. A new SharePoint Deployment Planning Services (SDPS) program is patterned after the existing Desktop Deployment Planning Services. It will enable customers with Software Assurance upgrade and maintenance rights to engage a partner (subsidized by Microsoft) in planning SharePoint projects. Easier license quotes. LicenseWise is an update to the Microsoft Product Licensing Adviser and will make it easier for partners to prepare and review quotes for customers. Product Announcements Microsoft made only a few product announcements at the partner conference, including the following:
Subsidiary, Consulting Changes Some of the announcements at the conference outlined how Microsoft will change its internal procedures or priorities in ways that will affect partners. Notable examples include greater flexibility for the company's subsidiaries and a new role for Microsoft Consulting Services (MCS). Local focus. Turner said Microsoft's subsidiaries around the world will have more flexibility in allocating their resources in the coming fiscal year; subsidiaries will be able to put more resources behind important local initiatives and will be less beholden to central marketing priorities. MCS changes. MCS has always been a controversial subject for partners, since many make most of their Microsoft-related revenue from consulting, and consulting partners occasionally complain that Microsoft is competing against them for engagements. In an effort to assuage those fears and turn MCS into a resource for partners, the company will take 100 of its senior architects and rotate them through field sales teams for several months at a time. These consultants will not be compensated on a traditional billable-hours basis, but instead will have incentives based on the number of customer wins. Maria Martinez, whose Worldwide Services unit includes MCS, also said that for the first time partner satisfaction has become part of the performance scorecard for MCS. In addition, the company will try to clarify how partners are chosen for enterprise engagements and will develop more effective processes to transfer the knowledge that MCS consultants gain from field engagements to partner consultants. Signs of Organizational Change Conference keynote address lineups are a popular indicator of organizational changes at Microsoft, and at the latest conference, the lineup gave clues to possible changes in the partner organization. Allison Watson, who leads the Microsoft Partner Program, has made major announcements in previous partner conferences, but in Denver she played a more ceremonial role, opening the daily keynote sessions with brief remarks. While Ballmer articulated the company's vision for services, company president Kevin Turner had two substantial keynote presentations during which many of the most significant announcements were made. Watson has planned some time away from work following the partner conference, but her diminished role and Turner's higher profile could signal that Turner, who has flattened the company's reporting structure and now has more than 20 direct reports, may want to deal more directly with partners. One notable omission from the keynote address lineup was Ray Ozzie, Microsoft's senior software architect, who is the main technical leader of Microsoft's software plus services vision. A Subdued Mood Overall, the mood at the conference seemed subdued. While Ballmer's keynote address indicated that Microsoft will respond aggressively to shifts in the industry, such changes will have a profound impact on partners. Partners who currently host Microsoft server applications, such as Dynamics CRM, Exchange, and SharePoint, could find Microsoft competing for the same customers. In addition, important details were missing in the description of future business models. It is not clear to many partners what services Microsoft is serious about, how partners will be compensated (if at all), what new skills Microsoft might demand of them (such as marketing and advertising skills to drive customers to the company's hosted services), and how long their existing relationships as advisers and service providers to customers will stand up in an environment where on-premises software may have a much smaller role. Ozzie's absence could signal that the team developing the technologies required to implement the software plus services model has not yet figured out how to plug partners into it. Resources The main partner and conference sites are https://partner.microsoft.com and www.microsoft.com/partner/events/wwpartnerconference. A virtual events site, with keynote videos and other information, is at partner.microsoft.com/digitalwpc. Programs for ISVs are at www.microsoft.com/isv. The Office Live Marketplace is at www.officelive.com/marketplace. OBAs and the OBA OnRamp program are described at www.obacentral.com. |
