Microsoft Partners Joining Cloud Essentials in Droves

New numbers released by Microsoft suggest the technology giant may finally be succeeding at persuading its huge channel to join its cloud effort.

"Today Microsoft partners have hit a big milestone. There are now more than 125,000 of you taking advantage of our Cloud Essentials program," wrote Microsoft's Jon Roskill on his "Channel Chief" blog Wednesday.

Cloud Essentials is a free subprogram of the Microsoft Partner Network that gives partners 25 Internal Use Rights (IURs) of Office 365, Dynamics CRM Online and Windows Intune; technical training, support and tools; and marketing tools. When partners join Cloud Essentials, they sign the Microsoft Online Services Partner Agreement (MOSPA) and become eligible for partner referral benefits -- basically, a 16 percent kickback from Microsoft in the first year (4 percent in subsequent years) for every seat they sell as Partner of Record.

With Office 365, partners also now have the choice to forgo the Partner of Record model and participate in Office 365 Open licensing, an approach that allows them to directly bill the customer for a package of services that includes Office 365.

The 125,000-partner milestone represents a startling acceleration of participation.

At the last Microsoft Worldwide Partner Conference in July, Microsoft claimed 35,000 Cloud Essentials participants. By November, Cloud Essentials enrollment had hit 61,000. The new enrollment figure represents growth of 250 percent from the July 2012 level.

"I don't know any program that we've had that has increased in that kind of volume in that amount of time. It's just incredibly encouraging to see the partners get interested and start to rally around the cloud," said Josh Waldo, senior director of cloud partner strategy for Microsoft, in an interview.

Waldo attributes the momentum both to practical changes within the MPN and to overall industry attitudes toward the cloud.

Microsoft recently changed its partner portal to present partners with a prominent option to sign up for Cloud Essentials when they join the MPN or when they conduct their annual membership renewal. On the back end, Microsoft also collected formerly separate steps -- signing up for Cloud Essentials, signing the MOSPA and collecting IURs -- into one integrated workflow, Waldo said.

"Now it's a couple of clicks and you're in. When you do things that make it very easy to sign up, when you support partners in practical ways, you get good results," he said.

On the other side, Waldo contends more partners are becoming more open to the idea of starting cloud practices as they observe changes in the industry and respond to demand from their own customers.

"I think industry-wide, most everyone is talking about services and devices and how cloud is the underlying piece to all of that. Partners know they need to make an investment. They know they're going to have to act on this. When they're presented with an easy on-board, I think that helps," Waldo said.

Asked how much of a factor the introduction in the last few months of direct billing, formally known as Office 365 Open, was in the increase in Cloud Essentials participation, Waldo couldn't immediately say. "I can tell you I was out in the field around the time of the [Office 365 Open] launch, and the response from our distributors and the VAR partners has been very positive around the model," Waldo said. "We've got the most expansive, largest, most powerful channel out there, and our goal is to help partners move into the cloud, move their customers into the cloud, be profitable and do it in a business model that works for them."

While Microsoft's figures indicate that nearly a quarter of the company's estimated 600,000 partners worldwide now participate in Cloud Essentials, that doesn't mean that many partners are actually selling Microsoft cloud offerings.

Converting Cloud Essentials partners to Cloud Accelerate partners -- those who sell at least 150 seats of Microsoft cloud products over three deals -- is an intense focus of Microsoft's. Waldo said 3,000 partners worldwide belong to Cloud Accelerate. Many more partners have sold some Office 365 -- either selling less than 150 total seats or selling more seats in fewer than three deals or not registering for Cloud Accelerate for other reasons. In an interview in late February, Roskill said about 20,000 partners sold Office 365 in the last year.

Waldo said that's part of the reason the IUR process is integrated into the sign-up. "The research that we have by mining the data is that Cloud Essentials partners that deploy and use the products internally are three times more likely to sell it," he said.

Posted by Scott Bekker on May 01, 2013