"They're spooked," said David Hurley, managing director of Anglia Business Solutions Ltd., a Cambridge, U.K.-based Microsoft Dynamics NAV partner.
This despite the fact that Microsoft's story -- that its infrastructure and apps can run on premises, hosted by partners or hosted by Microsoft -- at least gives partners and their customers a deployment choice. That sets Microsoft apart from Amazon Web Services (AWS) and Google, as Microsoft CEO Steve Ballmer pointed out.
"We're the only company to support all three models," Ballmer said in his Tuesday morning keynote. "Amazon and Google do not."
That doesn't comfort partners barraged by cloud computing hype, said Dave Sobel, CEO of Evolve Technologies, a Fairfax, Va.-based managed services provider.
"All these guys have been hearing is that everything's moving to the cloud, and they don't know what to make of it," he said.
The truth is that not everything is moving to the cloud. Still, Microsoft's message that many applications and associated data will remain on premises hasn't resonated yet with all of these partners.
Partners with virtualization smarts will hold the key, Sobel said.
"If you manage the virtualization, you can be the gatekeeper between on-premise and cloud stuff," he said.
Moving on up the stack
Microsoft execs acknowledged that some hosting partners may want to reevaluate their model.
"If you're in the business of selling capacity, that has nothing to do with us," said Prashant Ketkar, director of product marketing for Windows Azure. "Amazon is already doing bad things to you anyway. Most hosters want to evolve and move up the stack to managed services, a higher-margin, value-add business."
One Microsoft Gold partner who offers an array of hosting services said he has to look at Microsoft's pricing model carefully to see if it makes more sense for him to resell Microsoft's storage rather than his own.
Several sessions at the Worldwide Partner Conference (WPC) dealt with Azure pricing and partner opportunities. Microsoft promised discounts to MSDN and Microsoft Partner Network members, as well as to other development constituencies.
In one packed session on Monday, there was no time for questions, but several partners in the room privately voiced concerns.
"Of course there's fear," said Frank Bennett, a Microsoft partner who co-authored a book on selling Microsoft Online Services.
But partners have no choice but to forge ahead because the model is here to stay, Bennett said. "Microsoft has been honest about the challenges," he added. "You can't just sit back [as a partner]. You've got to do work."
Voicing their concerns
Early returns on Microsoft Business Online Productivity Suite (BPOS), a Microsoft-hosted email and collaboration service, have been mixed. But Rand Morimoto, president of Oakland, Calif.-based Convergent Computing, made the leap anyway.
"We feared BPOS as a threat to our traditional on-premise business, but when we thought about it, we realized that customers are asking about online services, and either we offer it or they'll go elsewhere to find out about it," Morimoto said via email.
With the BPOS option in its quiver, Convergent can demo, discuss and even migrate customers if needed.
"The services revenue is big in BPOS because it's just like migrating from Lotus Notes to Exchange," Morimoto said. "You have to run tools to migrate user's mail and calendars. You have to make changes to every user's desktop, you have to train administrators, you have to provide user training if they haven't used E2007 OWA, etc."
Another East Coast partner, who declined to be quoted by name, was blunt in assessing whether Microsoft will compete with its partners as it moves more into services.
"Look, if Microsoft got anything right, even the second or third time around, half these people wouldn't be here," he said, gesturing around the WPC show floor. "The fact of the matter is Microsoft doesn't do best-of-breed anything. It's a platform company."
And that leaves room for partners, he added.