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Elop to Partners: Chill

These Microsoft people aren't stupid. When he was preparing his speech for this week's Worldwide Partner Conference, Stephen Elop, Redmond newbie and president of the Microsoft Business Division, clearly knew that this week's news about how Software Plus Services will affect partners would lead to something of a freak-out. And so it did.

That's probably why Elop made a point to hold partners' hands in Tuesday morning's keynote -- to tell them that while Microsoft, the industry and the channel have to change, Redmond wouldn't think of going it alone without its partners. He rattled off the numbers: more than 500,000 partners in the partner program, 96 percent of Microsoft's revenues generated by partners, $7 earned for a partner for every $1 earned for Microsoft, $5.4 billion in projected SharePoint sales for partners in the year ahead.

He also hammered home the quotes: "We each only succeed as the other succeeds," he said, calling the Microsoft-partner combo a deliberately dependent relationship. He went on: "In the history of Microsoft, we have only been successful when we have gone to market with you," he gushed.

Elop evangelized S+S, too. He mentioned an IDC estimate that says that the SaaS market will grow by 32 percent year over year through 2011, developing into a $21 billion market. He said that Gartner predicted that 25 percent of all new business application deployments would be in Web environments by 2011.

And then, he threw in the kicker: "Any partner can sign up for and participate in this S+S transformation."

Indeed. The "sign up for" part is relatively simple, and Microsoft is helping partners do that with a new Web site (accessible at some point this week at http://partner.microsoft.com) and other formal guidance. It's the "participate in" part that has partners concerned.

Nobody doubts that Microsoft has to have a SaaS strategy, and from the perspective of how beneficial it will likely be for the company, Redmond's S+S plan looks pretty good. It also won't hurt budding SaaS partners to have Microsoft spreading news of the model and building confidence in it. And, some partners will surely be happy to lead customers to Microsoft and then collect commissions for their troubles.

But, as we've said here before, the issue is control of customers, and Elop didn't really talk much about that, although Microsoft will be harping on S+S all week long. What partners worry about is what happens after they lead a customer to Microsoft -- specifically, Microsoft takes over. Billing, upselling, bundling new offerings -- they're all part of Microsoft's domain under this new strategy, and partners worry that losing control of the customer and those revenue streams will hurt their profitability. They also worry about getting squeezed out by Microsoft altogether.

S+S is a work in progress; Elop allowed today that he and his colleagues "don't really have it all figured out yet," so it might be too early for partners to panic. But today's keynote, while full of genuine affection for partners that seemed to reach beyond the typical WPC platitudes, isn't likely to calm partners' fears. As if Houston wasn't hot enough already...

Posted by Lee Pender on July 08, 2008 at 11:54 AM