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The Microsoft Online Store: Clouds on the Horizon?

It's like the humidity that hangs in the air on a summer afternoon. Kind of annoying but mostly non-threatening, and it's surely nothing that would actually produce a rain cloud and ruin a cookout or a picnic. Right?

And then those clouds start to roll in, heavy and gray, slowly eating blue from the sky. A few warning drops fall and then BAM! Cloudburst, rainstorm, and you're scrambling to get your burgers and baked beans into the house before everything gets all soggy.

Microsoft opened an online store this week. Two, actually -- one in the U.K. and one in Germany. Customers can buy Microsoft basics -- Office, Works, Vista (as if anybody would want it) -- directly from Redmond through the new stores. There's no word yet on when a U.S. store might open.

The new stores are just another small example of Microsoft bypassing its partners and getting into the direct-sales business. Some of those examples, actually, arguably aren't so small. For instance, Redmond is setting up its own shop to host popular technologies such as Exchange and SharePoint, as well as Dynamics CRM -- initiatives that effectively make the software titan a competitor with certain members of its own channel.

But all of that's no big deal, right? After all, the old-fashioned, pure-play reseller is about to become a thing of the past, and Microsoft doesn't really have that many hosting partners, anyway. Besides, partners who want to succeed in working with the new Microsoft need to focus on business process development and customization and need to go vertical, like, yesterday.

That last sentence, at least, is what Microsoft keeps telling us, along with repeating the mantra that the company is as committed as ever to its channel.

Mostly, we have little reason to doubt Redmond on those points. Microsoft's 600,000 partners are still the company's sales force and arguably its most valuable asset. And Microsoft and partners alike seem to be doing pretty well right now, despite a flagging economy. So, it's nothing to worry about, right? This humidity hanging in the summer air?

Probably not. But...we hear rumblings from partners about how Microsoft is distancing itself from them, setting up structures in the partner program that make contact with key people the company harder, not easier. The direct contact with product groups in Redmond that many partners used to enjoy is dwindling (or has disappeared), we hear, in part, surely, because Microsoft's partner base is bigger and ostensibly harder to manage than ever before, and maybe also because Microsoft -- 80,000 employees strong -- is more of a battleship than it has ever been before. One partner even characterized the partner program itself as a buffer between Microsoft and its channel rather than a conduit for communication.

Plus, Microsoft doesn't seem to have entirely figured out how to work partners into its Software-as-a-Service plans, which will clearly be critical to the company going forward. Customize, Redmond says, and build off what we're doing. Again, that makes sense...but check out what one partner (to be fair, the same one we quoted indirectly above) told RCPU last week about Microsoft's announcement that it would host Exchange and SharePoint:

"Microsoft was incredibly quick at going to market and painting a vision of how they are going to host these products on behalf of customers, and they have yet to deliver a model on how their existing hosting partners will be able to tie into that vision. They failed to create that marketing message that really weaves the partners in. You see those partners gearing up to go head to head with Microsoft, and that was unnecessary."

We've seen the same confusion, the same concern from partners over the last couple of years over Microsoft's hosted CRM plans. The good news for partners is that Microsoft remains probably the most channel-friendly company in the industry. The other news -- we won't call it bad yet -- is that in its rush to adopt SaaS, compete with the likes of Google and SAP, and pretty much be everything to everybody, Microsoft has started to alienate part of its partner base. And opening an online store, while probably totally innocuous for most partners, isn't exactly a vote of confidence from Microsoft in the channel. In fact, at least symbolically, it's just the opposite.

We're not sounding the tornado sirens here. We're not trying to cause a panic. We're only saying that partners should keep an eye on what Microsoft's doing with and without the channel and how it's going to affect them, and voice their concerns to Redmond (if possible -- or, even better, tell us about them) if they see things they don't like. The radar might be clear, but there's definitely a little humidity in the air. You might just want to bring an umbrella to that big summer cookout.

Are you concerned by Microsoft's moves to sell directly to enterprises and consumers? Are you happy with the level of contact you have with Microsoft? With how Microsoft treats the channel? Sound off at lpender@rcpmag.com.

Posted by Lee Pender on June 05, 2008 at 11:54 AM