When will Microsoft hand over account control in the cloud?


I have written many stories on the Microsoft cloud control, dating back to the big WPC announcement and the infamous “coownership” tag Microsoft originally put on the idea of working without a VAR in the middle.

Few talking points in the VAR world are as venomous as the topic of billing control. It falls in the same neighborhood as criticizing someone’s religion or trying to change their mind on taxes – it’s a topic loaded with belief and faith and very little fact – with the exception of one: the VARs feeling like Microsoft’s got a hand in their pocket taking their money and the profits they could (or should) be making from their clients.

Microsoft allowing partners to directly bill for cloud services is the IT resellers channels version of “iPhone on Verizon” or “Duke Nukem Forever is ready!”

The fact of whether or not Microsoft should allow for this to happen really comes down to multiple facts that nobody has an answer to: Is Google beating Microsoft for the customers? Has BPOS been a glowing success? How big are SPLA revenues?

Allow me to break down the decision making tree, free of PR junk that keeps on entering this conversation. Remember, only the bottom line $ matters here because we’re not trading emotions, we’re dealing with 3 companies fighting to please their shareholders.

Is Google beating Microsoft for the customers?

With Ozzie’s departure, Microsoft finally unwrapped it’s tombstone on the grave of the innovative company it once was. Today, even Bob Muglia left – the man who has basically built Microsoft’s server / enterprise business. Who is left? Ballmer and Turner.

With Kevin Turner at the helm, Microsoft has become about one thing: We need to beat our competitors. Simply put, Microsoft chases.

Google Apps brought you Microsoft BPOS. Google came out with a low cost email product and Microsoft had to do the same.

Milestone 1: Microsoft will turn over billing control to partners when it becomes obvious that it alone cannot outsell Google.

Has BPOS been a glowing success?

The answer to this question varies depending on who you ask. If you ask Microsoft partners who have lost clients to Microsoft or Google, it has been very successful. If you ask Microsoft and it’s PR engine, it has been extremely successful and they will quote a long list of Fortune 1000 companies that moved to the cloud with them.

Then you consider that Microsoft had to rename the product and restructure it.

Milestone 2: Microsoft will turn over billing control to partners once it recognizes that further sales depend on the partner alone.

How big are SPLA revenues?

Microsoft partner argument for billing control is on the grounds that Microsoft partners offer critical value to the end client. However, Microsoft offers all the parts needed to build BPOS – it’s even in the SKU list on the SPLA agreement any Microsoft partner can sign with Microsoft.

So if the partners provide so much value, why aren’t they building it themselves?

Or are they?

Milestone 3: Microsoft will turn over billing control to partners once the SPLA profits fall below the BPOS profits.

To sum it all up..

This is all my personal opinion of course – but the track record clearly makes Microsoft a chaser in the IT world. I’m sure they would rather sit back and just keep on cashing in on market leading Windows and Office products day in and day out.

But Google crashed the party and Microsoft had to respond. Microsoft had to respond in a way that would make them a serious contender: By bypassing Microsoft partners, Microsoft was able to control the cost and make itself competitive instead of being priced out of the competition entirely by it’s partners and VARs.

So is Microsoft beating Google? Are it’s partners building their own BPOS – to the extent that there is no reason to turn it’s control over to it’s partners – or is Microsoft losing them to Google? And finally, are partners stopping to sell Windows & Office and to what extent?

This is all that matters to Turner. This is all that matters to Microsoft.

With Microsoft trying to push Office down with the cloud, it may finally answer the question on how relevant it’s partners are to it’s success in the cloud age – and the numbers behind it are known to only two companies: Only one of them writes software for a living.

For additional perspective, download the latest Looks Cloudy podcast with Kate Hunt and Larry Walsh as they discuss the VAR control in the cloud.

My opinion remains that Microsoft has decided it doesn’t need VARs or partners in the cloud. If they are all in the cloud, and they believe they can take Google and Apple alone, then the only partners that matter are the ones that make stuff (hardware – Acer, HP, Dell, Samsung) and not the ones that deliver services that Microsoft should be delivering.

It’s all about money. Don’t expect Microsoft to share it unless it’s absolutely critical.

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