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Office 365 Open Finally Enlists All Partners in Microsoft's Cloud Fight

In the fight for cloud share, Microsoft is finally unlimbering one of its best weapons: a uniquely huge channel with unrivaled SMB reach.

Since Microsoft first joined the cloud productivity suite market with the Business Productivity Online Suite (BPOS) in mid-2008, the overall deal with partners has been that Microsoft would bill the customers, while partners would get advisor fees and the opportunity to sell add-on services around the edges.

And since the beginning, partners have been saying, in effect, "We're interested, but with the nature of the cloud, we'd be far more interested if we controlled the billing."

BPOS and its successor, Office 365 launched in June 2011, have been on the market for five years. To take the last 12 months as an example, Microsoft says 22,000 partners have sold Microsoft public cloud services, and the ecosystem for Office 365 -- when you add in training and supplemental services partners -- is about 50,000 partners. Impressive numbers, sure, but nowhere near leveraging Microsoft's frequently-cited partner base of 600,000 companies worldwide.

Jon Roskill stepped into the role of global channel chief for Microsoft in late June 2010 at the height of Microsoft's "all in" cloud mania. He immediately faced insistent questions (from RCP as well as many partners) about when Microsoft would let partners handle customer billing, and if not, why?

Roskill
Jon Roskill

After getting his bearings in the job, Roskill let out a hint in a Town Hall meeting in November 2010 that Microsoft was thinking seriously about making direct billing possible. Today, two-and-a-quarter years later, partners can bill customers directly with the availability of Office 365 Open and Full Packaged Product. Microsoft told partners at its Worldwide Partner Conference in July that Office 365 Open was coming, but it's taken seven months to arrive.

In general, Microsoft is now enabling partners to own the billing process, capture top-line revenue and margin on the resale, sell and service customers in ways that make sense for cloud business models, and earn rebates and co-op funding. The Open Licensing option is in addition to the existing advisor model, which will continue, along with a syndication option for about 100 partners worldwide and specialty programs for government and education partners.

In a telephone interview Tuesday, Roskill said, "It's something that has been a bit of time coming, but something that we're really excited about because we think it's really going to open up the whole next wave of Microsoft partners to get in and start selling our cloud offering."

Between mid-2010 and this July, Roskill contended that Microsoft recognized two main things as an organization.

"We've noticed since early on that deals that have a partner involved wind up with a larger deal size. They wind up getting deployed more quickly and we wind up with higher customer satisfaction. So everyone is very aligned that having partners involved in these deals is a good thing for everybody," Roskill said.

The other realization involves the importance of small and midsize businesses for cloud suites. "If you look now at the data on Office 365 customers, what we see is that over 90 percent of them are from businesses with 50 or fewer employees. Small business is at the core of this product customer base, and the fact that we're talking 50 or smaller, it really does show the partner opportunity is huge," Roskill said.

As for critics who say Microsoft was too late last July, let alone now, in delivering direct billing to meet demand for cloud suites, Roskill strongly disagrees: "Although we're selling a lot of [Office 365], the penetration is still in low single digits. So there's a great opportunity for us and partners to make a lot of money here."

The more specific delay between the WPC announcement and today's delivery involved internal engineering and process changes. "The licensing keys, the commerce platform and the product itself all need to basically come together," Roskill said. "The old world of channel and product being able to be separate is no more. Core changes had to be made in the product by the development team to be able to accommodate this, and we had to make some changes in our commerce platform."

Roskill is setting an aggressive goal for partner participation in the next five months. From the baseline of 20,000 partners selling Office 365 in the last year, Roskill said, "My expectation is that we'll double that reach by the time we get to WPC."

That projection is based on a very specific, and strategic set of partners -- partners who handle Open License transactions for other products such as Office, Windows Server and Exchange. Microsoft has about 4,000 of those partners in managed relationships, mostly through telePAMs, and 100,000 Open partners who work exclusively through distributors.

"I think the big deal here is getting that 100,000-plus Open transaction partners into the cloud game. They're sitting there on the sidelines right now. We want them in the cloud game on our side," Roskill said.

Some of those partners provided statements of support to Microsoft for the Wednesday announcement that were more revealing than the usual fodder -- a testament to how big a deal this is for the Microsoft channel.

Christopher Pyle, president and CEO of Champion Solutions Group, emphasized how Microsoft always talks about choice but is now actually delivering it in the cloud.

"The biggest thing for our company -- and the channel overall -- is that Office 365 Open gives us the power of choice," Pyle said. "We can choose how we want to work with Microsoft and how we want to work with our customers. If we want to provide value-added services on top of Office 365 all on one bill, we can do that. On the other hand, if you don't want everything on one bill, you can stick with the Partner of Record model."

Others praised Microsoft for responding to five years' worth of partner requests.

"Office 365 Open proves to us that Microsoft is listening to its partners and sees value in partners delivering total solutions to their customers," said Andy Vabulas, CEO of I.B.I.S. Inc.

On the SMB side, an Ingram Micro executive in the Netherlands related Office 365 Open to the hole left in the Microsoft portfolio by the sunsetting of Windows Small Business Server. "In the Netherlands, Windows Small Business Server is/was very popular," Storm Rohnstrom said in his statement. "Given that SBS will no longer be available in Open License, we see a huge possibility for end users who formerly would buy SBS server. Now Office 365 not only 'ties' them to their reseller, but partners can also give service."

Even before any potential bump in the number of Microsoft partners reselling Office 365 because of the direct billing option, Microsoft argues it has the biggest cloud partner ecosystem by far.

"We believe [Office 365]'s ecosystem is more than 10 times the next biggest competitor. More than 10 times Google, more than 10 times Salesforce, more than 10 times Amazon. If we can double this in the next five months, obviously that makes us more than 20 times. I think this is a really important milestone in our establishing the channel cloud leadership that we're going after," Roskill said. "The way that we're going to get to [cloud leadership] is through the way we always have from a Microsoft perspective, which is driving partner scale."

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Posted by Scott Bekker on February 27, 2013 at 11:58 AM


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