Microsoft is “leading with online” – should you?

This year, at Microsoft’s World-Wide Partner Conference in Washington (WPC), used any moment to tell its partners that they now are leading with online. But what does this mean? And why the sudden change towards online? Should you adopt the same strategy – and why should you?

First of all – Microsoft have done some big mistakes before. Focus on their Internet Explorer product, made them loose half a century to play catch-up with Netscape. Windows Phone is another great example on a loosing strategy for Microsoft. Half a decade lost here too. So is Microsoft misleading the ecosystem? I doubt not – I believe Microsoft already lost 2-3 years of great momentum – they just got better to spot their strategy mistakes. Reality is that Microsoft’s Hosting partners have been preaching the Software + Services business model for nearly 12 years now. Since Microsoft Exchange 2000 – and a bit before – Software + Services has been a part of Microsoft, but now – truly now – customers are in fact telling Microsoft they don’t want to:

  • Update any application anymore. Dealing with updates and redeployments are often 40-60% of time spend in the internal IT departments, and over 40% of the external consultant fees.
  • Stay up to date, with latest features and functions.
  • Pay for what they consume, and use. Customers want to have an easy opt-in options, and a structured and predicted opt-out.
  • Outsourced management of their infrastructure and applications, moving focus for the internal IT department to become internal business advisors in IT usage.

Do you really believe that Microsoft will lead with online in any case?
Truly – no! Microsoft is a marketing company, and change their subject to see fit  in any business case. Only Microsoft Dynamics CRM of the Microsoft Dynamics products is a true S+S product and the whole Dynamics sector have not yet been transformed to S+S strategy, just laid out. This is a great problem for Microsoft – and will start a fight from competing products.

Reality is that “Lead with Online” is a marketing phrase, to let Microsoft control when and how to leverage the subscription model vs. the perpetual up-front model. Remember Microsoft is still a public listed company with shareholders expecting greater rewards and turnover.

If they don’t – why should you?
Reality is that they are using the online phrase as you should. Have you started with an online statement for your company? The sooner you start educating your customers and giving them an option, the sooner they stop looking for a competitor with an online statement. You should opt-in to the “Lead with Online” based on three terms:

  • Competition. If you don’t do it – trust me, someone else is already starting to. If you are an ISV, start making an Online version – if you are an VAR, redefine your Online value and so on.
  • Opportunity. Parts of you lost leads could be subject to trust. Online built a greater trust between you and your client – to start selling to your closed and dead leads!
  • Restructure/Recapitalization. Most important of all, leading with online is not only sales & marketing. Let me explain.

Restructure to Online
Leading with online, is also an indicating that you need to transform your business to fit the online model. Software + Services is not a marketing/product matrix, it truly is a business model. You have to restructure your organization to support 24×7, re-train your sales and marketing people, change compensation models within and probably also need a visit to the bank.

With a subscription based business model you no longer get the top-line revenue you did before. If you are listed on the stock, you better start telling your shareholder that they have to expect lower top-line – but predictable revenue. But in fact, the longer you wait to change, the harder. IDC lately predicted a loss of nearly 40% in topline revenue when transforming to online  – so “Leading with Online” is a great tool you should adopt, to control your transformation towards online services.

Going online does not change anything though – you still need to focus. I believe you should follow Microsoft to lead with online, and start changing your business. In 5, 10 15 years we will only have subscription based revenue in the IT business. You have a great option to control in advance, not as a threat.

Start onlining now 🙂

2 thoughts on “Microsoft is “leading with online” – should you?

  1. It’s kind of scary holding on to a gorilla’s hand while it stumbles and crashes its way through the jungle. That’s exactly what it’s like being a Microsoft partner as the “gorilla” tries to formulate it’s online strategy.

    If you’re a Microsoft hosting partner, you’ve already been crushed underfoot by the gorilla you’ve been friends with for the last few years, and if you’re a traditional reseller you are hoping that you don’t get slammed into a tree.

    I don’t think Microsoft has got the cloud strategy wrong. They are a little late to the party, but not as late as Oracle or SAP who still in internet denial. Google’s made some pretty rotten mistakes too (Google Aps anyone?), and the person in charge of naming things at is copying Microsoft’s horrible naming and renaming habits. Amazon’s cloud services looked bleeding edge compared to hosted servers, until Azure came along and kicked its ass.

    There’s still plenty of room for Microsoft to make more mistakes online — taking three years to launch CRM Online outside North America, and burying Mesh into Live Sync — but it’s fun to watch. Hold on tight.

  2. Neil – a perfect analogy and thank you for the comment, I value the view and feedback.

    I agree with you that it is hard for partners to cope with the changes going on right now. Many of the partners are been confronted on the capital investments they made and still hold with several years to become cost-profit-positive. Although I believe there is a business opportunity for non-hosters/non-serviceprovider that is clear and viable – it is a strong battle to change compensation, people focus etc.

    The question no one deals with is actually >>if Microsoft<< knows what they are doing? We all pursue the fact that Microsoft does this on purpose and by a master plan, when in fact I strongly believe they test the market – and therefore the partners – to find a business model that suits all. I never participated in so many partner advisory councils and feedback meetings as these days.
    My hope is that partners of Microsoft understand how much their voice value for Microsoft, and use this opportunity to clear the strategy and keep up with competition from other vendors.

    Let see if we can help Microsoft correct the mistakes online – and make room for everyone in the same stroke!

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