What's Behind CDW's Timing on Google Apps?

CDW, one of Microsoft's biggest partners generally and especially for Office 365 resales, announced plans this week to start reselling Google Apps for Business.

The deal drew immediate speculation that CDW closed the Google deal in response to Microsoft's Jan. 25 cuts in partner reimbursements. Those cuts affecting partner payouts for deploying Office 365 seats sold under Enterprise Agreements reduced the amount partners received by as much as 56 percent for some SKUs.

It is speculation that was partly encouraged by CDW's outside PR agency, which, in e-mailing the news release to some reporters Tuesday, used the subject line: "Google Gains Strategic Ally CDW in Cloud Services Battle." Whether intentional or not, the phrasing implied that CDW might be picking a new side in the cloud suite faceoff.

CDW Chairman and CEO Thomas E. Richards hit back hard against any retaliation, or side-picking interpretation in an earnings call on Thursday. During the Q&A portion of the call, Richards said of the new Google deal, "Look, this isn't about us doing anything other than finding a particular partner that had an opportunity in the marketplace and us building off of the success we had with the [Google] Chromebook." CDW started partnering with Google in February 2013 to sell Chromebooks.

Without naming names, Richards implied Microsoft when he continued, "I don't think it's going to have any impact on other partners. In fact, as it was, I think, reported in some places, it had nothing to do with our partnership with other people. We're excited about our partners and I think the strategy some of our other partners are deploying about pushing people like CDW to the cloud is absolutely the right thing to do. We've been planning for it, investing for it and feel really good about it."

"We are absolutely excited about that [Google] partnership, but it's not at the expense of other partnerships. Trust me," Richards said.

Richards' comments suggested that CDW will offer Office 365 and Google Apps for Business side-by-side to customers, which in itself is a win for Google and a loss for Microsoft. Because CDW has been one of Microsoft's strongest cloud suite partners since the Business Productivity Online Suite days and is a past Microsoft Large Account Reseller Partner of the Year award winner, the high-profile move could be a catalyst for hundreds of other partners to broaden their cloud portfolios to include Google.

Richards said that Google will develop professional services capacity to migrate and deploy Google Apps for Business seats, but for now will use partners to help bridge that expertise gap. CDW's first professional services partner is Denver-based Tempus Nova Inc., a Google Apps Premier Reseller, and CDW is looking to work with more partners.

A transcript of the question in the earnings call and Richards' answer follows:

Question from Brian Alexander of Raymond James Financial: Tom, you guys announced [an] interesting partnership with Google this week. I was hoping you could expand on the scope of the relationship; reselling versus services and implementations; the motivation for partnering more deeply with Google; and if there's any offsets with other major software partners that we should consider as you grow this business?

Answer from CDW CEO and Chairman Thomas E. Richards: There was a lot in that one question. Let me answer the last first. Look, this isn't about us doing anything other than finding a particular partner that had an opportunity in the marketplace and us building off of the success we had with the Chromebook.

I don't think it's going to have any impact on other partners, in fact, as it was, I think, reported in some places, it had nothing to do with our partnership with other people. We're excited about our partners and I think the strategy some of our other partners are deploying about pushing people like CDW to the cloud is absolutely the right thing to do. We've been planning for it, investing for it, and feel really good about it.

The actual relationship is...customers are looking for us to represent and include in our recommendations to help them reselling some of those apps as a software as a service.

As we've talked about a lot, especially on the IPO roadshow, when a customer is moving to a cloud-based solution, there is an integration and aggregation opportunity [that] exists as it gets built into their IT infrastructure. I think as we talked about, Brian, that takes some services skillsets. We don't have those today, resident, in a meaningful way to scale so we're going to use partnerships to get there.

But just as we've done in other parts of our service business, as we build momentum and we build density, then we're going to look to add that to our service portfolio.

We are absolutely excited about that partnership, but it's not at the expense of other partnerships. Trust me.

Posted by Scott Bekker on February 13, 2014