Directions

The Middleman Is Dead, Long Live the Middleman!

• By Paul DeGroot
• November 01, 2010

Once upon a time (2005, actually), Microsoft said it was just trying something out -- hosting Exchange and SharePoint for a customer. Just an experiment to give Microsoft first-hand experience at managing products for a customer. The lab was run by a group called Microsoft Managed Services (MMS), part of the internal Microsoft IT department.

About 18 months later, in late 2006, MMS was put into a regular product unit, Server and Tools, which makes commercial software. The experiment apparently had been a success, and Microsoft was ready to take it to market. Executives said the goal was to create something that partners could sell, giving Microsoft platforms wider adoption. The company had no intention of providing services around hosting, such as deployment to customers of hosted services.

In June 2007, Ron Markezich, the head of MMS, told me that managed services "is a business for us. This is not an R&D effort." Redmond would make it available initially for customers with more than 5,000 seats, but eventually it would be available for the entire business customer base.

"Eventually" was less than a year. By February 2008, the current product offering -- dedicated Exchange and SharePoint servers for large customers, shared servers for any size customer -- was mostly in place, and that summer Redmond announced that partners could earn commissions on the subscriptions they sold.

And in 2010 Microsoft took the wraps off Microsoft Premier Deployment, in which the company not only offers the products, but planning, deployment and migration services for them, particularly for any customer with 2,300 or more seats.

Get the picture yet? Within the space of five years the company has moved from an experiment with a single customer to a full-blown operation that has steadily trod on one self-imposed threshold after another and is now encroaching on work that it said partners would do.

Given that trajectory, where will it go from here? My advice is to assume that it will go all the way. Assume that before the end of this decade, a new computing device will either include or will automatically connect to a full set of hosted applications and maintenance services that regularly update its capabilities and fend off malware and configuration errors. The device may even be "free," when you subscribe to all the applications and services. Most important for partners, this will all be sold direct to customers.

That's a scary prospect for partners, who face "disintermediation," otherwise known as "knocking out the middleman."

But I'd argue the picture is bigger than that, and the logical outcome will be positive based on current trends.

Microsoft Online Services are getting steadily better and richer. Deployment and maintenance tools are steadily improving in quality, scope and level of automation. Hosted services are more widely accepted, choices are increasing and prices are dropping. New services such as Windows Azure are emerging.

Microsoft isn't the only company in this game today, and there's little chance it will dominate tomorrow. The Internet has been a godsend for innovative and niche players, giving them inexpensive access to a global market at a level that was unthinkable 20 years ago. It's the biggest disintermediator of all, and in the last decade we've seen one startup after another emerge from obscurity to major competitor with breathtaking speed.

I can't predict what the partner role will be, except that there will be one. Someone needs to make devices, applications that run on them, systems that connect them to applications. Someone needs to guide businesses through a myriad of choices and rescue those businesses from bad decisions.

Perhaps most important, someone needs to map hardware and software against human needs and wants and help people and businesses integrate the digital landscape with people, processes and products. Those skills will be as rare and valuable a decade from now, just as they are today.

Next Time: The Language of Incentive