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Microsoft execs re-pledge partner participation in the cloud

Ray Ozzie and Ron Markezich say Microsoft cloud has plenty of room for partners.

CAMBRIDGE, MASS. -- Microsoft's chief strategist and its top online service exec reiterated Wednesday that VARs and integrators will have plenty to do in that company's cloud computing ecosystem.

At two separate Boston area events on Wednesday, chief software architect Ray Ozzie and corporate vice president Ron Markezich tried to dispel the vision of Microsoft-hosted software and services as a force of channel disintermediation.

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It's not an easy sell. Of all the vendors in the cloud fest, Microsoft has to navigate the trickiest path. Facing pressure from, Google and others, it must offer self-hosted services. But, because of its channel legacy, it must also carry its partners along for the ride. Google doesn't have the same burden to bear.

Of course, Ozzie and Markezich both painted the partner ecosystem as a Microsoft strength -- with hosting partners, developers, VARs and integrators all playing a role going forward. Microsoft gets 90 to 95% of its revenue through partners, Ozzie told attendees of the J.P. Morgan Technology, Media and Telecom Conference 2009 in Boston. And, he said, the continuing need for localization and customization does not end because software is delivered from a vendor server farm.

"We're a very, very partner-friendly company by our nature. And in order to succeed in this realm, ultimately because of local regulations, there will be data centers everywhere on earth. Every country will have data centers, and customers who want to serve those end users or businesses in those countries will have to have a footprint there," Ozzie said.

Not even Microsoft can build a cloud in every country. For that it needs partners that must be connected by what Ozzie calls the Microsoft cloud operating system.

Markezich told that Microsoft's decision to offer delivery models, including self-hosted, partner-hosted and on-premises software, means continued choices for VARs as well as customers. VARs can even garner consulting opportunities to help customers select the right delivery model for their needs.

That channel partners worry about losing business to cloud delivery is not surprising, he said. "I see that. But what's being taken out is inefficient stuff …. The channel can focus on higher-value things," such as application development and systems integration, said Markezich.

Cloud suits some apps more than others

Markezich maintains that the soft economy is prodding heretofore hesitant companies to try cloud-based services. Microsoft can demonstrate 10% to 50% savings for companies moving from on-premises mail and collaboration services to Business Productivity Online Suite (BPOS), he said. The savings come in hardware upgrades, training and migration costs. In some cases, IT people that were maintaining these systems can be moved into a higher-value consultative role with users. Of course in other instances, IT staff is cut, he admitted.

Microsoft now offers its hosted CRM Online and BPOS. Its Azure development cloud is in beta; and Office Web applications -- Word, Excel and PowerPoint functions usable from a browser -- and Office 14 are due in 2010. Also on tap for next year is System Center Online, another Microsoft-hosted cloud service.

Some partners lose in services push

Still, there are partners and then there are partners. Many in the channel say hosting partners that sell their own hosted Exchange Server mail and SharePoint collaboration programs are now in the hot seat vs. BPOS.

With the prices Microsoft charges, it is hard for these smaller providers to make money. Microsoft's price for hosted Exchange Server lists for $10 per user per month for mail and calendaring; instant messaging is another $2.50 per month per user, etc. But a customer buying the full suite gets a deep discount and those customers with volume Enterprise Agreements (EAs) can put their subscriptions under the EA for an additional discount. The fact that Google offers even lower cost (and free) email means Microsoft will continue to be pressured on price. That, in turn, will pinch partner margins.

VARs see cloud upside in integration, app dev, plugging gaps

Some partners are playing many angles of Microsoft's cloud picture. Raheel Retiwalla, chief technology officer for Clearway Technology Partners Inc., Medfield, Mass., said his company resells Microsoft's BPOS hosted Exchange and SharePoint. It also builds on SharePoint to build software that augments hosted SharePoint. Clearway spun out a separate company to build and sell those applications. That company, Monitor Analytics, uses Silverlight to build analytic applications that plug into either on-premises or cloud-based SharePoint and on-premises or cloud-based databases.

It probably does not make sense for Clearway to host Exchange, but in some instances, channel partners might want to host their own iterations of Microsoft Office Communications Server to add capabilities Microsoft itself doesn't yet offer, Retiwalla said.

He acknowledged that as Microsoft continues to add features and capabilities to its foundational software, partners have to be nimble to stay ahead of the curve. But those with integration expertise can always find high-value work tying new services into legacy data and applications. "My value is systems integration," Retiwalla said. "We add the last mile to what they offer and we build on their foundation."

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