Microsoft to take its 'mobile first, cloud first' mantra to partners

At WPC, the company will unveil new cloud programs and incentives for channel buddies like resellers, ISVs and system integrators

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"A lot of these guys don't like the new model," said IDC's analyst Darren Bibby.

For starters, the nature of the deals is different. The on premises deals usually involve a one-time payment, while cloud services are sold via subscriptions, which generate a recurring revenue stream. The size of the deals tends to be smaller.

"Cloud causes partners the most issues," Bibby said. "At WPC, partners will want to discuss what their place is and what opportunities exist for them."

At the same time, Microsoft has started to attract a new type of partner which hasn't done business with the company before -- the "born in the cloud" partners that never focused on selling on premises software. They face no transition pains in adopting Office 365, Azure and other Microsoft cloud services. In fact, for them, Microsoft can't go fast enough in the direction of cloud and mobile.

Then there are partners that feel equally at home with cloud and on premises products, and are able to cater to customers that want hybrid implementations.

"The channel overall is in this transformational phase," said Gartner analyst Tiffani Bova.

To sell cloud computing services, partners may need also to revamp their staff's skill sets, boosting software development capabilities, learning how to deal with Microsoft cloud APIs (application programming interfaces) and adding expertise on mobility, she said.

Likewise, salespeople will have to be trained on selling cloud services, and those who resist learning the new model may have to be let go, Bova said. Partners may need to engage in a similar pruning process of their historical customer roster, based on whether they're open to moving to the cloud or not.

Partners may also struggle with their business identity. Bova cites the hypothetical example of an on-premises software reseller that generates US$10 million in annual revenue and pockets $1 million in profit. In a cloud world, this same partner may see revenue shrink to $6 million but margins may grow so that profit doubles to $2 million.

"Culturally, the lower revenue has significance for them," she said. They need to shift their mindset and measure the success and size of the company by the higher profit, not the amount of revenue.

In addition to hearing about Office 365, Azure, Dynamics CRM Online and other cloud products, partners are likely interested in hearing about the Surface device, whose latest edition, the Surface Pro 3, is positioned by Microsoft as a tablet that can replace laptops.

Microsoft has been criticized for not making the Surface broadly available to its channel partners, opting instead to deal with a relatively small set of distributors and resellers.

Asked for comment, a company spokeswoman said via email that the company is "enthusiastic about the partner opportunity around Surface and we expect it to continue to grow with the introduction of Surface Pro 3."

In addition to the distributors and resellers it's involved with, Microsoft also has the developer-focused Apps for Surface program and the Designed for Surface program for accessory makers, she said.

WPC attendees will get to hear from Nadella live

WPC attendees will also get a chance to hear directly from Nadella, who is scheduled to speak on Wednesday, an opportunity for them to better understand his vision and plans for partners.

Under Nadella the company is more open to porting its software, like its Office crown jewel, to non-Windows platforms, like Apple's iOS and Android. He also will usher in significant changes in the coming months.

In a manifesto-type letter to employees last week, he stressed the need for Microsoft's culture to become more conducive to innovation and more responsive to customer needs and market opportunity.

He outlined changes for the engineering team, and retired the "devices and services" tagline his predecessor Steve Ballmer had used to signal the company's new focus, replacing it with his own: "productivity and platform."

Microsoft will "reinvent productivity" for individuals and businesses worldwide, he wrote, explaining that "productivity for us goes well beyond documents, spreadsheets and slides" and means helping people "who are swimming in a growing sea of devices, apps, data and social networks."

Some industry analysts and commentators, reading between the lines, believe that the letter strongly implies that a sharp reduction in the company's headcount is coming, although that is not explicitly stated in the text.

Content and Code's Wallis is looking forward to participating in a roundtable discussion with Nadella at WPC and getting to hear what he has to say about a range of subjects during his keynote.

He's been positively impressed by the new CEO so far, and sees similarities between Nadella and Bill Gates, especially their emphasis on the importance of innovation.

"I'm interested to see how Satya Nadella's changes impact Microsoft," he said.

Juan Carlos Perez covers enterprise communication/collaboration suites, operating systems, browsers and general technology breaking news for The IDG News Service. Follow Juan on Twitter at @JuanCPerezIDG.

Copyright © 2014 IDG Communications, Inc.

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