Why partners are sunny about Microsoft's SaaS evolution

Computerworld - When Microsoft Corp. CEO Steve Ballmer warned last week that the "fundamental transformation to Software+Service ... is upon us, and it will affect us all," he probably had Microsoft loyalists such as John Joseph squarely in mind.

Joseph is president of J4 Systems, a small but thriving value-added reseller (VAR) in Rocklin, Calif.

A Microsoft Gold Partner, J4's bread and butter is installing and maintaining Microsoft software on premises for a wide variety of small businesses in the Sacramento area.

That's the sort of business model that Microsoft executives repeatedly said at last week's Worldwide Partner Conference in Denver was at risk of becoming obsolete, as Microsoft starts launching Web-hosted versions of its software, starting with its Dynamics Live CRM service early next year.

"The industry will change," said Allison Watson, corporate vice president of Microsoft's worldwide partner group, in an interview last week.

The lead champion within Microsoft for the interests of its 400,000 partners worldwide, Watson nevertheless urged vulnerable partners to either jump on the Software+Services bandwagon or develop deep strategic or vertical industry expertise to offset the drying up of lucrative integration work as customers move to Web services that are easy to set up.

"It's one of the hardest things any company can do, but it's what keeps them alive over time," she said.

Not getting the SMBs, but oh well

Yet Joseph has no plans to overhaul J4's business. While he likes Dynamics Live's low initial setup cost and expects to start offering it when it is released, he said he doesn't expect much demand except from extremely small companies. And Joseph was adamant about resisting Microsoft's call to specialize.

"Ninety-five percent of our clients are within a half an hour of driving," Joseph said. "It just doesn't work in [a small-to-midsize business] market to go vertical. If you do, you run out of clients fast."

Nevertheless, Joseph is sanguine. On-premises software isn't going away anytime soon, he said. And even if it does, Microsoft is doing enough to ensure that foot soldiers like himself in Redmond's army of partners will remain well fed.

"I think there is enough in it [Software+Services] for us," he said. As for on-premises software, Joseph said, "we've always known that everything has to be led by a conversation about solving business pain points. And that's not going away."

Hear, hear, says Microsoft. While Ballmer called Microsoft's embrace (see Microsoft's white paper) of hosted services "priority No. 1," he also made it clear that software still had a long future ahead.

"This is a long-term migration," he said. "It's kind of like we've been saying at Microsoft for at least 27 years that the mainframe is going away. Well, it's still going away."