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Do the Office 365 Payment Cuts Mark a Sea Change?

Reviewing Microsoft's quarterly results, one analyst is noting that Microsoft's entrenched position with customers and partners gives Microsoft the leeway to change its strategy to Devices and Services while comfortably raking in revenues.

But the analyst, Matthew Casey of Technology Business Research, wonders in a commentary if Microsoft's planned reduction in Office 365 referral payments, scheduled to take effect Jan. 25, marks the start of a new relationship with the channel overall:

"Microsoft's model for engaging with channel partners to distribute software solutions will continually evolve as Microsoft's applications become increasingly cloud based. This evolution was demonstrated in 4Q13 [Microsoft's 2Q14] as Microsoft announced 15-50% cuts to cloud sales commissions for its partner ecosystem, opting to begin rewarding channel partners for value-add innovation and services around solutions such as Office 365 as opposed to a referral based model. While partners will have less monetary incentive to simply resell Microsoft's products, the continued demand for Microsoft solutions as standard core business applications will help sustain the base of channel partners by demonstrating the viability of Microsoft's cloud solutions as sustainable business drivers for partners."

Posted by Scott Bekker on January 24, 2014 at 11:23 AM


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