In-Depth
Microsoft Product Power Ratings
Microsoft partners tend to rely on certain products in the Microsoft stack to anchor their businesses. At the same time, the fortunes and prospects of those products are constantly rising and falling. For this feature we looked at some of the products that are most commonly sold or extended by Microsoft partners, and rated them on a scale of 1 to 10 (with 10 being the best) based on market demand, Microsoft priority, partner incentives and other factors.
Perhaps not surprisingly, the highest-rated products are the three Microsoft cloud offerings that were frequently invoked together -- or in some combination -- throughout the keynote talks at this summer's Worldwide Partner Conference (WPC) in Washington, D.C. Microsoft Azure, Office 365 and (to a lesser extent) Dynamics CRM Online were held up at the event as the next major frontiers for growth in the channel, and Microsoft unveiled a number of incentives at WPC to herd partners there.
What might come as a surprise, though, are the low ratings for Windows and Windows Phone. Microsoft is a "devices and services" company, after all -- or it was under former CEO Steve Ballmer. In early July, current CEO Satya Nadella released a lengthy memo detailing his own vision for the company that largely sidelined the "devices" aspect of Ballmer's statement in favor of the more abstract goal of being a "productivity and platform" company.
Click the links below to jump to a product:
Microsoft Azure
Rating: 9
Amazon Web Services (AWS) is still the undisputed cloud computing champion, but Microsoft's own platform has recently made some serious progress, particularly in the Infrastructure as a Service (IaaS) space. This year, for the first time, research firm Gartner Inc. placed Microsoft Azure Infrastructure Services in the "Leaders" section of its IaaS Magic Quadrant report, second only to AWS, which led the market by a wide margin. Azure earned plaudits from Gartner for its geographic coverage, competitive pricing, integration with on-premises Microsoft products, and the way Azure IaaS works in concert with its Platform as a Service (PaaS) capabilities.
"The IaaS and PaaS components within Microsoft Azure feel and operate like part of a unified whole, and Microsoft is making an effort to integrate them with Visual Studio, Team Foundation Server, Active Directory, System Center and PowerShell. Conversely, Windows Azure Pack offers an Azure-like user experience for on-premises infrastructure," Gartner said in the May report.
Among the shortcomings of Azure, however, is its paucity of IaaS partners. "Microsoft has just begun to build an ecosystem of partners around Azure Infrastructure Services, and it does not yet have a software licensing marketplace," Gartner said.
Altogether, though, Azure is one of the hottest products in the Microsoft stack, and one rife with partner opportunities. That was one of the messages Microsoft drove home throughout the WPC. During the Day 1 WPC keynote, Office Corporate Vice President John Case said that Azure adds 8,000 new customers every week, and that partners drive 35 percent of total Azure revenue.
In just the past few months, Microsoft has unveiled several ways for partners to supplement their cloud offerings with Azure. A few examples include:
Microsoft also plans to debut a Cloud Platform competency later this month that's geared toward partners that sell Azure services. [BACK TO LIST]
Office 365
Rating: 9
Microsoft is typically loath to release the hard numbers on Office 365 subscriptions, but it frequently provides more general pronouncements about the direction of its growth. And that direction is up.
"Office 365 is our fastest-growing commercial product ever," said Phil Sorgen, corporate vice president of the Microsoft Worldwide Partner Group, during Day 1 at the WPC. As an example of that growth, Microsoft said in its fourth-quarter earnings report that the number of Office 365 subscribers increased by 1 million during the quarter, pushing the total subscriber base above the 5.6 million mark.
According to Case at the WPC, Microsoft expects Office 365 to have a revenue run rate of $2.5 billion this year, up from $1 billion in 2013, with partners driving three of every four deployments. Over the past 12 months, Office 365 was deployed in 60 percent of Fortune 500 companies, he said.
As it's doing with its other cloud products, Microsoft is calling for partners to sell where the selling is good. Office 365 is already available under Open Licensing. In addition, alongside the Azure-focused competency being launched this month will be two other competencies aimed at partners that sell Office 365: The Cloud Productivity competency is designed for enterprise partners, while the Small and Midmarket Cloud Solutions competency is for small to midsize business (SMB) partners. As a further enticement, Microsoft at the WPC launched the Signature Cloud Support program, which gives partners unlimited Office 365 support (the program also applies to Azure and Windows Intune, and will eventually be expanded to include Dynamics CRM Online). [BACK TO LIST]
Dynamics CRM Online
Rating: 7
(PREVIOUSLY: 8)
Microsoft itself would admit that Dynamics CRM isn't quite at the level of Salesforce.com, which CEO Satya Nadella called "the world's No. 1 CRM platform" during an analyst call in late May announcing a partnership between the two companies.
But that's not to say that Dynamics CRM is a slouch. Gartner's July Magic Quadrant report on sales force automation put both the on-premises and hosted versions of the product in the "Leader" section, trailing only Salesforce.com and edging out Sugar CRM and Oracle Sales Cloud. Gartner's report calls out Microsoft's partner ecosystem as one of the key strengths of Dynamics CRM. "[Microsoft] has a broad partner delivery network that provides the necessary breadth of application add-ons, industry vertical expertise and implementation capabilities," the firm said.
Based on the WPC keynotes, Microsoft considers Dynamics CRM to be as good a bet as Azure and Office 365 in terms of partner opportunity in the cloud.
The numbers back it up. Dynamics CRM has seen 40 straight quarters of double-digit growth, and per-partner revenue from Dynamics CRM Online has doubled over the past year, Case said at the conference. Nadella also called out Dynamics CRM's growth during Microsoft's fourth-quarter earnings call. "We are pleased to see all up Dynamics growth at 13 percent for the quarter, with CRM Online nearly doubling," he said (transcript here).
The recent "spring wave" of updates to Dynamics CRM is evidence of Microsoft's investment in the platform. That update introduced a number of improvements that were the result of multiple Microsoft acquisitions: a Dynamics Marketing feature derived from the 2012 purchase of MarketingPilot, a Social Listening feature derived from last year's purchase of Netbreeze, and a Unified Service Desk derived from this year's purchase of Parature.
Microsoft also recently expanded the availability of Dynamics CRM Online to 17 more countries, and has plans to make it available on Open Licensing sometime this fiscal year. [BACK TO LIST]
Windows
Rating: 9
(PREVIOUSLY: 6)
Microsoft may have once been the dominant name in the OS arena, but the current climate shows a much different picture. Before the PC market began its downslide around 2011, the estimate that was most often touted for Windows' market share was 90 percent. Since then, however, consumer computing devices have gotten smaller, and the Bring Your Own Device (BYOD) era has meant that even business users -- historically Microsoft stalwarts -- have been increasingly favoring those smaller, more agile devices for both work and home use.
In short, tablets and smartphones -- not desktop PCs -- are now the computing devices du jour for the vast majority of the world's users. Combined, they will make up around 87 percent of the worldwide device market in 2014, according to recent estimates by Gartner, and most of them will run the Google Android OS.
As for Windows, Microsoft admitted at the WPC that its overall device market share now stands at a mere 14 percent. (Taking into account just PCs, however, Windows would have 90 percent share.) Adoption of Windows 8 and Windows 8.1 has also been tepid at best; together, they accounted for less than 13 percent of the desktop OS market in July, according to Net Applications. Most desktop users are either on the 5-year-old Windows 7 or the 13-year-old Windows XP.
There are a few favorable market indicators for Windows, however. The tablet explosion of recent years is due to plateau as the market becomes more saturated, which should stem the PC market's decline somewhat. The PC replacement cycle should also give Windows a temporary boost as users finally move off of Windows XP.
Microsoft has taken several steps to improve the fortunes of Windows. It's offering Windows 8.1 at no cost to its OEMs for devices smaller than 9 inches, and is also working with hardware partners on affordable devices in preparation for the holiday shopping season. Appealing to multiple-device users, Microsoft has also emphasized its commitment to a unified developer platform in which apps work consistently across multiple Windows devices.
Looking ahead, the next version of Windows -- widely rumored to be called "Windows 9" -- promises to bring improvements aimed at traditional mouse and keyboard users, which may appeal to enterprises still waiting to make the move from Windows XP. To sweeten the deal, Microsoft is reportedly planning to make Windows 9 a free upgrade for users of Windows XP, Windows Vista and Windows 7. Whether these efforts will translate to a resurgence in the OS remains to be seen, however. [BACK TO LIST]
Windows Phone
Rating: 4
(PREVIOUSLY: 3)
The good news for Windows Phone is that it's poised to be the fastest-growing smartphone OS over the next four years. The bad news is that all of that growth will be from an extremely low base, and is not likely to pose a serious challenge to the more entrenched Google Android or Apple iOS at any point in that period. (The other bad news is that similar growth forecasts for Windows Phone in the past haven't panned out.)
Even as global demand for smartphones has ballooned, the Windows Phone market share has been perpetually mired in the single digits. The signs point to Windows Phone remaining a distant third behind market leader Android and runner-up iOS for some time to come, owing to the Android stranglehold on the affordable smartphone market and the iPhone brand strength and rich app marketplace.
Despite the glaring demand problems of Windows Phone, however, Microsoft continues to invest in the platform. The company is placing its bets on the low end of the smartphone space -- traditionally the Android sweet spot -- via the addition this year of 11 new Windows Phone OEMs, many of them located in emerging markets such as India and China. It has also decided to transition the entry-level Nokia X family from a forked version of Android to Windows Phone in an effort to attract first-time buyers.
Microsoft has made strides with the platform itself. The company took aim at the iPhone "Siri" digital personal assistant with "Cortana," which debuted in Windows Phone 8.1. For enterprises, Microsoft has added support for virtual private networks (VPNs), S/MIME and mobile device management (MDM) capabilities. A forthcoming update will expand support to larger devices with a wider range of resolutions, as well as enable the use of interactive "smart cases." And Microsoft's vision of unifying its PC and smartphone platforms -- from both an engineering and a UI perspective -- could, eventually, translate to greater market acceptance.
Of course, the most obvious sign of Microsoft's faith in Windows Phone is the acquisition of Nokia, the second-largest acquisition in the company's history. At the time of the deal's announcement last September, Microsoft projected the acquisition would propel Windows Phone to a 15 percent market share by 2018. Industry analysts have much more conservative outlooks, however, with Gartner predicting a 10 percent share and IDC a 6.4 percent share by 2018. And even with those lowered expectations, Windows Phone still has significant ground to cover: By most measurements Windows Phone market share currently hovers at around 4 percent or lower. [BACK TO LIST]
Exchange Server/SharePoint Server On-Premises
Rating: 5
To be fair, there are many organizations still running on-premises versions of Exchange and SharePoint, and many partners still doing good business supporting them.
It's no secret, however, that Microsoft has been pursuing a cloud-first agenda with its products. For this reason, Microsoft has been encouraging organizations still running purely on-premises deployments to go hybrid.
While Microsoft has promised before to continue releasing new versions of on-premises Exchange and SharePoint, those versions will inevitably arrive later -- and be updated less frequently -- than their hosted counterparts. In some cases, there may not be feature-parity between the two.
Microsoft said as much this past March, when it announced new versions of on-premises Exchange and SharePoint wouldn't appear until next year. Jared Spataro, Microsoft's general manager of Enterprise Social, warned at the time that certain improvements in SharePoint Online -- namely related to Yammer -- will not be included in SharePoint Server.
"While we're committed to another on-premises release of SharePoint Server -- and we'll maintain its social capabilities -- we don't plan on adding new features," he said. "Our investments in social will be focused on Yammer and Office 365, so that we can innovate quickly and take advantage of the viral user adoption that's so important to the natural network effect that makes social so powerful." [BACK TO LIST]
Lync Server/Skype
Rating: 8
(PREVIOUSLY: 7)
The Microsoft unified communications (UC) platform practically went unmentioned in the WPC keynotes, which is surprising, given that Lync is a $1 billion business for Microsoft.
At the second annual Lync Conference earlier this year, however, the growth around the Lync ecosystem was an inescapable theme. Gurdeep Pall, corporate vice president of Lync-Skype, told attendees at the February event that Lync had had 38 straight quarters of double-digit revenue growth. He also noted that with its combined Lync-Skype offering, Microsoft is now the top provider of enterprise UC voice lines in the world. Pall credited Microsoft's 1,300 certified UC partners for that success.
As of last September's financial analyst meeting, Microsoft claimed to have deployed 5 million Lync voice seats and counted 320 million Skype users. The company has much loftier goals for its UC platform, however; by the end of this decade, in fact, Pall predicted that 1 billion people worldwide will eventually use the Microsoft UC services.
Whether the 1 billion mark is feasible, the opportunities for partners to make money on Lync are larger than ever. Part of that can be attributed to natural market cycles -- companies adopting Lync as they replace their aging PBX systems, or moving to full-fledged Lync deployments after trying out the technology in pilot programs. But a significant contributor to the growing interest around Lync is what Microsoft has done to make it a must-have for enterprises. This includes the Lync-to-Skype video-calling feature that was demonstrated at the conference, support for iOS and Android smartphones and tablets, browser extensibility, and other conferencing improvements. [BACK TO LIST]
SQL Server
Rating: 7
SQL Server -- by many measurements the most-used database in the world -- was one of the highlights of the most recent fiscal quarter for Microsoft, contributing to a 14 percent increase in server licensing revenue. FY 2014 was a "breakout year" for SQL Server, Nadella said during the earnings call, highlighted by April's release of SQL Server 2014.
"With SQL Server 14, we released industry-leading in-memory technology across all database workloads of online transaction processing, data warehousing and business intelligence. And we grew our SQL business by more than 19 percent," Nadella said.
At last year's financial analyst meeting, Microsoft COO Kevin Turner described SQL Server as being "at the heart" of Microsoft's approach to big data -- good news for partners, since the Big Data market is expected to hit the $24 billion mark by 2016, according to IDC. Turner pointed to Microsoft's willingness to interoperate with Apache Hadoop as a key differentiator.
"When you look at our Big Data assets...the ability to bet on Hadoop is at the heart of our Big Data story," Turner said at the meeting (transcript here). "So what we've done with Hadoop is we've made a full bet...As Hadoop evolves and changes, the ability to be aligned with Apache on that is something that we offer that a lot of companies don't." [BACK TO LIST]
System Center
Rating: 7
Like SQL Server, System Center recorded double-digit growth in Microsoft's fiscal fourth quarter, helping buttress the company's commercial licensing revenue for the period.
Alongside Windows Server and SQL Server, Nadella singled out the network and datacenter management platform as exemplifying "that phenomena where our servers are becoming much more competitive."
Microsoft has pointed to MDM as a particularly productive area for partners to mine with System Center. In the financial analyst meeting, Turner said that one of Microsoft's goals was to be a leader in the MDM space, and that System Center was key to getting it there.
"With the new release of System Center [System Center 2012 R2], we not only manage Windows devices, we also manage iOS and Android devices really well. And wrapped with Intune, we have an incredible story to be able to bring mobile device management to a whole new level across all devices," Turner said. "So in the Bring Your Own Device world, we have a great solution with System Center."
Microsoft doubled down on the MDM pitch for System Center at the WPC. Tony Prophet, corporate vice president of Windows marketing, gave a keynote talk on some of the advances in Windows hardware that were designed for enterprise BYOD workers. Like Turner, Prophet pointed out how System Center can help organizations manage and secure all of the disparate devices in their networks: "When a Windows device enters an enterprise that has System Center and Active Directory, whether that device is corporate-owned or BYOD, that device integrates seamlessly with the customer's existing infrastructure, security and management policies." [BACK TO LIST]