Microsoft is starting to learn – Recap from TechEd 2010

Microsoft is facilitating the TechEd 2010 in New Orleans, and among many new and broad insight, I seems like Microsoft finally started to push back on their strategy for hosters. For a long time, hosting partners and Microsoft has collided as Microsoft launched BPOS and later Azure. Whether or not the parts see themselves as competitors or not, many hosting partners are facing a hard time on cost-pressure commodity services, and failing to recap their business strategy to go up the stack. Seeing Azure and BPOS as a competitive solution are fare from the truth, and I would like to use Bob Muglia’s statements from TechEd 2010:

“Microsoft sees hosting partners becoming more important as the cloud becomes more predominant. The partner piece of this is incredibly important.”
Muglia said – CRN


“If a business wants to go outside the firewall in a cloud environment, Muglia notes, the main difference between using Microsoft and one of its hosting partners is that a partner’s cloud can be customized better to your environment.”

Also Bob Muglia touched upon the statement of building Windows Azure together with hosting offerings, maybe bundling BPOS for other services. This has been the voice of Microsoft for many months, but I yet still see a lot of hosters, neglecting to recap their business strategy and start building dynamic data centers to support higher margin services and outsourcing opportunities.

  • SMB customers WISH to outsource their IT these day.
  • SMB customers WISH to rent commodities at a very low price
  • SMB customers NEED fanatically good support
  • SMB customers SEE service providers as their future IT support

Even Enterprise customers wish to asses their opportunities:

Face your fears and change your business model. Turn into a service provider to facilitate services and sell more premium support packages on top of BPOS. It does not sell itself, and the term, just of using a credit card does not compete with a hosters telesales organization!!! Turn into a hoster to transform business from internal IT management to outsource IT management with a combination of dynamic data centers and commodity services. As Bob Muglia shows, Windows AppFabric may be the piece to tie it all together, so partner up with SI’s or software vendors to make the solutions stick. Microsoft ForeFront 2010 offers extensive identity integration capabilities, giving an established hoster or service provider, many many new channels of revenue.


Why Microsoft shouldn’t be a Cloud Computing Company

Just finished reading Paul Quickendens blog entry at CloudAve – make no mistake, I do agree with many of Paul’s points and arguments, but I have to ask myself: Why wouldn’t Microsoft go to Cloud Computing and is this so wrong?

At first – let’s go back and address some of Paul’s points. As started in the Innovator’s Solution and  Dilemma; companies cannot disrupt themselves within. But looking at Google, Netsuite, Salesforce – for a long period Microsoft’s old traditional business model have been disrupted. We faced nearly a whole generation, where Microsoft grew their market share, and stood as sole provider of killer applications. Basically we have to respect that Microsoft is a public company – focus is to build shareholder value and capital. And normally; we are human beings – and therefore reluctant to change… in five years time we have adopted the status quo.

So is Paul wrong? Definetly not! When a senior Microsoft official use a term like “they are going to Creatively Disrupt themselves”; you better think hard whats going on. Clearly some fragments of the Corporate structure is challenging the Partner model. It is not totally odd as Bill Gates left the company year ago, and the newcomer Kevin Turner is rumoured to be a hard nut against suppliers, partners and vendors in Wal-Mart. Ron Markezich with his remark made it clear, that some parts of the Microsoft partner sphere is going to perish.

For Microsoft the marketing phrase is; Azure and BPOs is for the partners. And with partners Microsoft address the independent software vendors (ISVs) and Systems Integrators (SIs). Basically Microsoft cannot deliver value with either Azure or BPOs without these Partners. As coming up from the hosting channel in Europe the last 9 years, I can only see what Paul’s is addressing as the partners whom invested heavily in driving the partner hosted business models, have to give room. But we, as providers of services can still capitalize on the marketing terms – although we are much closer to fail, than succeed.

So – conclusions. If Microsoft does not invest in this, another channel will arise and Microsoft will be disrupted. If Microsoft does invest in this, they will attack parts of their own partner channel but hit the opportunity. VMWare is going to serve the market, Google is there and is pushing hard. Have we seen the winner? No. We have seen the beginning to the end of this era – but you as a vendor, partner or customer have to build upon new choices. I strongly agree with Paul’s view – Microsoft would have won more hard and feelings by helping existing partners compete against their competitors. Reality is that Cloud Computing is a $42 billion market opportunity – today around $9 billion. Microsoft will compete against their own channel of those $9 billion (call it compromise their existing revenue), but also bridge the gap towards the $42 billion. You have the same opportunity – although investment sums are probably somewhat different, and unfortunately Microsoft is cause many partners to hold back investments that would be beneficial to all parts.

Paul – thank you for spinning the entry, and some thoughts.

BPOS Reseller Model Recap

Several months ago I did mention that there is no Business Model to resell BPOS unless you are a systems integrator and earn your money on time & material. Read –

Based on todays announcement from Microsoft (Read I really need to recap my thoughts and learnings from my blog post. Not only does the price cut impact the whole Microsoft Hosting Industry, but a possible earning-model, has just become more hard to cover. Reality is that it’s defiantly not reselling model now for Microsoft Business Productivity Online, and I urge hosters to review their business model, disrupt the model and take a more vertical approach towards differentiating their services in a hosting world. I still believe there are huge markets to capture on Microsoft technology; running a plain vanilla SaaS hosting business has just become harder.

To cover a salary for a medium sales rep. on phone, you now have to cover:

Microsoft Exchange Online, priced at $5 per seat, per month – needs 4.500 SKUs sold per year.

Microsoft Online Suite, priced at $10 per seat, per month – needs 2.700 SKUs sold per year.

It is a tough game…