How does Microsoft’s re-org impact partners?

On 11th July there was an announcement of a major re-organisation and strategy change at Microsoft. I have been waiting to see what analysis would be about the impact of the re-org on the Microsoft partner base, but the comments I have seen related mainly to the Dynamics (ERP and CRM) partners -for example, here and here . The sector of the partner base I am interested in is the Application Development (AppDev) partners, what used to be called ISVs (Independent Software Vendors).

Firstly, let’s agree that Microsoft is not what it used to be. As one journalist has noted:

Microsoft’s glory days are behind it [although] it remains enormously important to the entire technology industry …

Secondly, as an analyst commented, the announcement showed that Microsoft’s CEO Steve Ballmer believes the company needs to shift focus:

from a software company to a company that builds software powered devices (e.g. the Windows tablets) and software powered services (e.g. Azure) …  trying to become a platform company, that brings together all the different pieces of the large Microsoft product family

What I have not seen yet is the recognition that one of  the challenges is going to be getting Microsoft’s partners to buy into the strategy change. Microsoft has a large partner base and derives much of its business via its partners, who in turn generate revenue from selling and implementing Microsoft products (IDC). According to a report from the recent Microsoft Worldwide Partner Conference (WPC), the buy-in from partners is not happening to the extent Microsoft wants it – only about 3 percent of the partners have got involved in cloud services business (20,000 out of 650,000). Another report notes that Microsoft customers have not bought into the cloud either – 89 percent are not using any of Microsoft’s cloud products.

The scary question to partners at WPC from Microsoft’s COO Kevin Turner was “where’s the other 630,000 we have? What do you need?”. It’s scary on a number of grounds.

  • Microsoft seems to have accepted the hype that everyone wants to switch to the cloud, and therefore its partners should be moving in that direction. That does not recognise what a huge disruption that will be for partners, like the App Dev ones. My response to Mr Turner would be “How much are you willing to pay us to move?”
  • It may indicate that innovation from Microsoft is going to be focused on the cloud, and that for “on-premise Windows networks, your days are numbered.”
  • There is an apparent inability to differentiate between between the needs and buying decisions of the enterprise and consumer markets. For a consumer, moving to the cloud can be accomplished quickly and without much disruption, although there are still concerns about privacy and security. For the enterprise, the ramifications can be much greater, and the process more complex and with significant disruption.

Against the view that the cloud is the new way to go, a survey of solutions providers showed that conventional software sales are still the biggest segment of the market, and still growing. Also, customers may be interested to hear about cloud solutions, but when the decision comes they opt for a conventional sale.

Some years ago I wrote “Is Microsoft like ‘old’ IBM? and made this comment:

IBM had 20-30 years as ‘master of the universe’ until the early 1990s. I wonder how long Microsoft’s good times will last?

Microsoft’s good times may now have ended, and they are going through the same upheavals that IBM had to go through in the 1990s to stay relevant. It took IBM a long time to change, and for Microsoft it is still probably early days. Even before the WPC event and the re-org announcement, David Chappell remarked after Microsoft Build (the developers’ conference) that:

The level of change we’re seeing right now is extraordinary. Both servers and clients are changing at the same time

And although he was referring to Windows 8, this comment could apply more broadly:

Given the magnitude of the change, though, it’s going to take everybody a while to work out how that change should look

Microsoft has given its partners the company’s new vision, but it is not going to be easy for either Microsoft or its partners to make the changes to achieve the vision, nor will it be easy to persuade customers to agree to them. Who knows where we will be in 3-5 years time?

If you are a partner, is this change threatening or promising? Do you now need to re-evaluate your Microsoft partnership status and objectives?


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