3 out of 5 – not bad at all!

Yup – this is the conclusion and finalization of a series of articles on the path Microsoft took to attach its own hosting channel. Let me just summarise:

Many years ago, in countries not far away from here, Microsoft helped and pushed a segment of its technical partners into what was to be known as “hosting partners”. Business models evolved and as ASP’s become SaaS providers, the hosting providers became service providers (although not many offers a service…). Business grew, new ventures was funded and the market for the hosting providers was not about competition, but harvesting the green fields of customers in need for outsourced services and “IT on tap”, untill…

1 of 5 – Microsoft to deliver Online Services
“Dear partners, to help grow the opportunities and market of hosted services, Microsoft is launching a commoditized solution for Online Exchange, Sharepoint, CRM and Unified Communications”. Microsoft’s field rushed towards their partner channel to calm them down as the message was: “There is plenty of room for us all, and we will help you combine Online Services with ISV based service”. Great! Online Services is just a part of the solution, we can still grow margins on secondary offerings.

2 of 5 – Microsoft to launch Azure!
“Dear partners, Microsoft is launching Azure to help of the next generation of ISV’s built Facebook-a-like applications; we wish to target ISV’s”. Well, didn’t you just tell us to target ISV as this was our opportunity to compete against BPOS? The message was changed. But rest a sure – a solution was to the channel conflict was launched. “Partners! Built dynamic data centers as this will help run business applications and legacy applications, that doesn’t fit with Azure. Virtualization is at its peak – this is a great opportunity and ERP applications form Microsoft will never live in the cloud”.

3 of 4 – Azure VM Role
“Partners, we have listen to customer demand, and customers want’s VM type environments to bridge the gap between now and the future of ho sting platforms.”. This time partners didn’t ask for a solution. Three strikes and you usually are out! But wait a minute! Corporate managers just recently announced that Dynamics ERP products is not to fit with the Azure and Cloud based business model. So maybe, we have a opportunity to drive these products in our costly datacenters? A new business opportunity…

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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 Force.com 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.