Microsoft, Services and Partners: Survival of the Fittest

Partners need to be nimble when Redmond ventures into new territories, but they also have to wait.

One of Microsoft's innovations in product development is the "Darwinian" approach, and we're seeing a very public version of that in Microsoft's quest for a services model that resonates with customers and partners.

As I've outlined in this space before, Microsoft is among the few companies in the world that can simultaneously attack the same problem from several sides. The theory is that if several product teams work independently on a problem, one is likely to emerge as a winner. The net cost of backing three -- or in some cases a half-dozen-contenders, and having only one survive -- may be lower than the net cost of backing one loser.

This strategy requires deep pockets, but in its restless quest for yet another monopoly like its Windows and Office businesses, Microsoft leaves no stone unturned. The next big thing appears to be managed services, or hosting, or Software as a Service, or Service-Oriented Architectures, or advertising-supported services, or Software Plus Services. So Microsoft is doing all of them, often with more than one offering.

The company is trying to keep up with a market that's leaning into a new curve, toward an always-on, always-connected, always-available, always-accessible world, using wireless connections, multiple devices and both applications and data stored in the Internet cloud. Microsoft's desktop-bound business is a poor fit for this future, and putting Microsoft into the center of a services ecosystem will be as hard as moving planets around. And your question, of course, is: "What's in it for partners?"

I don't see that Microsoft has an answer. That's not a slam against the company, but a necessary, if temporary, reality. Before Microsoft can define a role for partners, the company must define the business it will be in. After one or more of its services experiments turns out to hit that sweet spot, the company will start thinking about partners.

Microsoft's shotgun approach to creating a services business means that there's no overarching strategy, but that's to be expected. It's not easy to develop a business plan for the future when there's little data to work with. Accomplishing that task typically requires not only a lot of smarts but an ear tuned to the market's unspoken longings, a gift that neither money nor science guarantees. Furthermore, such uncertainties usually condemn business plans. It's always safer to follow.

But Microsoft can't afford to follow. Its goal is not merely a profitable business, but a dominant one, which sets an exponentially higher standard.

At the moment, that situation leaves partners in the dark. New business models haven't been defined, and thus new channels haven't been identified and designed.

Furthermore, current partner businesses aren't guaranteed a place in Microsoft's future businesses. Partners' roles in service-based businesses are far different from those in product-based businesses. Today, Microsoft's partners are primarily services partners for Microsoft's products. What happens when the products themselves are services?

But their focus on services may give partners the edge in defining a future in which services reign. For one thing, they don't need a new business model. Today, they profit from their knowledge, their skills and their close customer relationships. All will be needed tomorrow, and huge opportunities remain. After all, most of the world isn't using yesterday's technology, let alone the future's.

So the best tactic for partners will be to hang tight while Microsoft struggles. Partners can make their own deals with each other. They can prod Microsoft for opportunities to take the products that it has to market. That may be, in the end, where the biggest money is.

The only caveat: Don't forget the lessons of Darwin. Only those best adapted to their environments will survive.

Microsoft can afford to back many channels to the future, knowing that not all will make it. Few partners have that luxury. You'll have to make some hard choices, remain flexible and above all, focus on what makes you valuable to your customers, most of whom are trying to solve today's problems, not tomorrow's.

About the Author

Paul DeGroot is principle consultant with Pica Communications, which provides consulting services for customers with complex Microsoft licensing issues.