Microsoft Partners Hungry For SaaS Details

As Microsoft prepares to hold its annual Worldwide Partner Conference in Houston next week, channel partners are hoping Microsoft will finally clarify how they'll fit into its software as a service strategy.

Microsoft's SaaS strategy, which it calls Software Plus Services, involves a melange of on-premise software and Web-hosted applications and gives customers the option of buying services hosted by partners or by Microsoft. At last year's WPC, Microsoft COO Kevin Turner said the transition to SaaS would be tough, but that Microsoft was commited to the services path, and partners should follow its lead.

This year, partners are hoping Microsoft will reveal nitty-gritty details on SaaS commission structures, how services will be sold in the cloud, and to what extent partner compensation will change in the Software Plus Services future. The fact that Microsoft hasn't yet offered this information has contributed to uneasiness in the channel, according to some solution providers.

"There's a general fear out there in the partner channel, and it stems from the fact that we really don't have a lot of good information," said Matt Makowicz, president of Endeavor Technologies, a Somerset, N.J.-based solution provider. "Microsoft knows they have to be very careful with their message, because like diplomacy, one wrong word at the wrong time can be taken the wrong way."

In March, Microsoft announced plans to sell hosted Exchange and SharePoint services to companies of all sizes, reversing an earlier policy of allowing channel partners to handle deals of 5,000 seats or less. Predictably, this news didn't go over well with channel partners already uncomfortable with the notion of Microsoft selling services directly to end users.

Ravi Agarwal, founder and Senior Executive Officer of groupSPARK, a Burlington, Mass.-based firm that offers private label hosted Exchange services, says the lack of information has been a legitimate source of concern for channel partners.

"Most partners are still in the dark because Microsoft hasn't done a good job of being proactive and sharing this information with partners. Even within Microsoft, this information hasn't been widely shared," he said.

But despite Microsoft's mixed signals on SaaS, Michael Sullivan, president of Quest Business Solutions, based in Dallas, is confident that Microsoft will clearly articulate the channel's role and come up with a SaaS model that's workable.

"You're always going to have some partners questioning what the next move is," Sullivan said. "But Microsoft is responding to what customers are demanding, and that's SaaS, and they're working hard to keep the channel in the game."

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SaaS is a source of concern for some VARs who believe that centralized, standardized services will inevitably cut into their revenue streams. However, most VARs agree that with the appropriate model, there's a place for both partners and vendors to make money in SaaS.

For a company of Microsoft's size, though, coming up with a SaaS model that's acceptable to all partners is no easy task. "Pricing models are a really complex animal, which is why Microsoft has got so much work in front of them trying to figure out the price point for services," said Matt Scherocman, vice president of consulting services at PCMS IT Advisor Group, a Cincinnati-based solution provider.

Regardless of what Microsoft announces at WPC, some partners don't see a rosy future for the channel once Microsoft begins to flex its services muscle.

"Microsoft is replacing the thing that we are actually making money on. If you can't charge for pre-sales support, how do you make money when you're not going to be able to sell the product directly? I'm not going to promote services that help Microsoft take my clients away from me," said one solution provider and Microsoft Gold partner, who requested anonymity.

Another solution provider said the size and diversity of Microsoft's channel makes it virtually impossible for the vendor to come up with a one-size-fits-all SaaS strategy.

"I don't think it's possible for them to have concrete answers, because there are too many splits in terms of the interests of people involved. It's hard for them to say something that will please a lot of people, because they're being pulled in many different directions," said the source, who also asked not to be named.

Gavin Steiner, president of Interprom, a Microsoft Gold partner in Barrie, Ontario, says the only way for channel partners will have to generate a huge amount of SaaS volume to maintain a profitable business.

"Microsoft's pricing is going to be so dramatically low, and the attractiveness of services to customers will be so high, it's really going to be a battlefield out there," said Steiner.

Services has traditionally been an area in which partners have led, so for Microsoft to lead now will change the dynamics, which makes it all the more important for it to communicate details to partners at this year's WPC, Dave Sobel, CEO of Evolve Technologies, a Fairfax, Va.-based solution provider.

"Microsoft has been a good partner in the past, but with Google and other services on the horizon, I need to get better insight into their intentions, or else this goes from a partnership to something else," said Sobel.