Microsoft powering ahead with partnerships

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Redmond's new approach to the channel is paying off, says Billy MacInnes

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6 February 2019 | 0

I listened to a very interesting and bullish briefing this week by Microsoft corporate vice president Gavriella Schuster entitled Microsoft State of the Channel 2019. And there’s no doubting that Schuster had a lot of encouraging things to say about Microsoft’s channel and its partners.

For example, she revealed that more than 7,500 partners were joining the Microsoft partner ecosystem every month and that the number of partners transacting through the vendor’s Cloud Solution Provider (CSP) programme had grown by 31% in the past year. In addition, the IP co-sell programme, launched in July 2017, had generated $8 billion in revenue since its inception. “That’s not Microsoft revenue, that’s partner revenue,” Schuster stressed.

She claimed that IP co-sell deals closed three times faster, projects were six times larger and Azure consumption was six times higher. Microsoft had almost 9,000 wins and 78,000 joint deals in the pipeline so far this fiscal year, Schuster added, compared to 11,000 wins and 100,000 joint deals for the entire previous fiscal year.

The vendor had also enjoyed “tremendous success” with its Azure MSP programme, increasing the number of partners from 32 to 43, with most partners in the scheme driving more than $100,00 a month [in Azure consumption] and some reaching as high as $2 million. A large chunk of the volume for this business is in migration services from SQL Server and Windows Server 2008. Microsoft estimates the opportunity for partners to help customers move existing on-premises workloads to Azure is as much as $50 billion, Schuster revealed.

Flexibility

Microsoft’s flexible business models for Azure also presented ISVs with “a faster pathway to profit”, she claimed, with partners developing scalable SaaS solutions on Azure seeing an average 64% ROI and a gross profit margin of up to 70% on a recurring revenue basis. “That’s huge,” Schuster exclaimed, adding Microsoft wanted to make it easier for the vendor’s entire ISV ecosystem to tap into that kind of profitability.

The vendor was also helping ISVs to collaborate with each other to build integrated cloud solutions and reach new customers, Schuster added, echoing a point made in an earlier blog post by Toby Richards, Microsoft general manager, partner GTM & Programs, who wrote: “Partners shouldn’t overlook partner-to-partner (P2P) opportunities when creating their go-to-market plans. IDC estimates that partners can increase their revenue by up to 20%, and our own data suggests that win rates increase by up to 15%, when partners work together to contribute their expertise and deliver integrated solutions that address the needs of small and large businesses, and unique industry needs”

The briefing also highlighted the benefits of the Azure Marketplace and AppSource for ISVs and partners to co-sell with Microsoft and each other to customers.

Frontiers

One intriguing piece of information which may not be quite so welcome for channel partners came in a slide headlined New Frontier of Modern Partnership. Describing it as “something we didn’t expect”, Schuster went on to say: “What we’re seeing more and more is that our customers are becoming partners” as they build solutions with Microsoft and co-sell them with the vendor.

She cited the example of US retailer Kroger which had designed a retail-as-a service solution with Microsoft that it decided to sell to other retailers. It demonstrated how the vendor was helping companies understand how to tap into the data tied to their operations and use their own technology to propel growth beyond their traditional business models by creating whole new revenue streams. Kroger estimates it will add an estimated $400 million in operating profit by 2020. Schuster described this approach as “a game changer”.

No doubt, a few partners and ISVs would agree with that statement although their view on this new frontier of partnership might not be quite as rosy as Schuster’s.

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