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The path to profitability is less than one year for nearly two-thirds of new cloud practices, according to Microsoft partner research that the company released today.
Sixty-four percent of the 1,100 Microsoft Azure partners responding to Microsoft's cloud practice development survey said they were making money within 12 months of launching their cloud businesses. Among those partners, the median cloud-based revenue contribution to overall revenue is 20%. The proportion of revenue derived from cloud-based products and services is expected to more than double in two years, when the survey projects cloud revenue will contribute 47% of overall revenue for the Microsoft Azure partners surveyed.
The survey suggests partners with active cloud practices are optimistic about their growth prospects. That said, partners in the Microsoft survey also identified barriers to cloud adoption. Among U.S. partners, 32% cited keeping their employees up to speed and trained on the latest technologies as the top challenge for their cloud practices. Generating leads (31%) and overcoming cloud objections (27%) from customers rounded out the top three barriers cited by Microsoft Azure partners.
While Microsoft's study polled partners already in the cloud, many channel partners have yet to add cloud offerings to their service portfolios. Such companies may be reluctant to leave traditional IT customers behind or may have concerns around cash flow as they transition from IT project sales to a recurring revenue model.
Against that backdrop, Microsoft has created four cloud practice development playbooks, also launching today and available for downloading. The playbooks cover Cloud Infrastructure & Management, Data Platform & Analytics, Cloud Application Development and Enterprise Mobility & Security.
Zoiner TejadaCEO, Solliance
The cloud research and practice development playbooks mark the latest stage in Microsoft's bid to encourage partners to offer cloud services. In 2016, Microsoft sponsored IDC research that projected a $500 billion-plus cloud spending by 2020. The resulting ebook, The Booming Cloud Opportunity, stated the case for entering the cloud, noting cloud partners outperform their peers in revenue growth and profitability.
Eduardo Kassner, CTO of Microsoft's Worldwide Channels & Programs, called last year's publication "a book of whys" and referred to this year's effort as "a book of hows."
"The playbooks are like the missing manual for building a successful consulting practice with Microsoft and Azure," added Zoiner Tejada, CEO of Solliance, an Encinitas, Calif., consulting firm and one of the partners that helped Microsoft author the playbooks.
The playbooks, Tejada said, describe what partners should be doing -- as well as the "why" -- when it comes to building a successful cloud practice.
Dave Sasson, chief strategy officer at Hanu, a Microsoft Azure partner based in Princeton, N.J., that also contributed to Microsoft's cloud practice development effort, said he was "pleasantly surprised at the amount of resources and information available to partners" in the Microsoft playbooks.
"Sometimes it is hard to keep up with all the information Microsoft publishes to partners, and these playbooks help bring some welcome order and processes that help partners like Hanu make their clients' cloud journey more successful," he said.
Sasson said the playbooks are a great resource for established Microsoft Cloud partners such as Hanu, as well as new partners.
"The step-by-step approach will be extremely helpful to partners, as well as a way to help partners navigate through many of the resources available," he said.
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