Friday, 1 July 2011

Microsoft 365 is Out - Yippee or So What?

The top boys were rolled out at the London launch of Microsoft 365 this week and loyal resellers stood by their side.
Hails and whoops were in evidence as the long awaited official launch of the Cloud based Microsoft Office solution became a commercial reality after a longish period of beta trial. Microsoft resellers can sell the product - well sort of. Basically any end user is provisioned and billed by Microsoft, the reseller gets a finder's fee. The ongoing customer relationship is with Microsoft, not the reseller. Unless, of course, as a reseller you are big enough to host the solution on behalf of clients yourself but it's not entirely clear what the costs involved are for this and whether it will work out more expensive for users. I'll try and find out.

But there is no doubt that there is considerable angst amongst MS resellers about this very profound change in policy by Microsoft. Resellers basically will lose the commercial relationship on the product with clients and get no share in future revenue. To boot, at a start up cost of £4/user/month it is unlikely that resellers will fall out of bed in order to sell MS 365 to small users as the margin involved in a one off finder's fee sale is far less than the cost of sale. Let's face it, anything less than 100 users is a pretty grim return.

The sales model looks flawed. If Microsoft want to get into the SMB/SOHO market then they are going to have to do it themselves when most of those companies actually want the knock on the door of the friendly recommender who sells their IT kit. There is an opportunity for the likes of PC World but I would suggest Amazon might be the better chain as they are more geared for small transactions.

Somehow, it needs to be automated with lots of resellers setting up easy to configure portals where customers can get access to MS 365 quickly and with low intervention by salespeople. If all resellers could customise the portal too, then why could they not participate in the sale rather than remain a one off third party? I have no idea and it shows lack of planning.

The problem is this. I just set up, out of curiosity, Google Apps on my laptop on my own domain. It took precisely 5 minutes and cost nothing. Zip. Nada. I get 7.5Gg of email space and I have access to a ton of Google fancy apps as well as the core business ones. That's it, sorted.

The same on Microsoft costs £4/user/month and there are not the myriad of extra apps associated with the domain name. Further, SharePoint which is at the heart of MS 365 as the file repository does not allow multiple users to access the same files.

It's clear that existing Microsoft partners will all be trying to punt MS 365 to larger customers to justify the selling time so who will address the SME market space is the big question? Will that be surrendered to Google? Surely, SMEs were the point behind MS 365 and will be the heartland of Cloud applications?

Some People Don't Get The Cloud At All

You may be surprised to know that many people in the industry, even amongst the channel and the vendors, don't get The Cloud and why it is important to small businesses. Such companies constitute 97% of the hundreds of thousands of companies in Britain and carry the bulk of the workforce, around 13 million staff in total. The opportunity is pretty big is the first thing you will notice. I have heard a director at Microsoft say that they expect up to 60% of all seats of certain software will be based in The Cloud in the future.

These SME companies want scalability of services, up and down, at a smoothed cost, lower risk and without massive capital costs every so often. They don't want to add or upgrade a server every time they go above a certain size of user or find it is out dated within a year or run out of disk space every 3 months or pay for licences they don't use as they have restructured or been sold. The world is changing and companies understand that The Cloud means that they get real scalability by buying essential services through The Cloud.

The Cloud is a reality anyway. Most companies run websites and domains - these exist in The Cloud. The internet, believe it or not, is in The Cloud. Nearly every company in Britain then already uses The Cloud for some part of its business. Even huge, security befuddled companies like banks use The Cloud - internet banking, IFA portals etc are all presented as Cloud applications and are highly secure. Travel agents, supermarkets, flower shops - you name it they all have secure Cloud based options to purchase on the web which now constitutes a huge portion of our annual spend and it is growing exponentially whereas High Street trade is falling. The Cloud is actually quite passé when you really think about it.

Google as a company was predicated in The Cloud and I doubt if anyone has ever received a disk with a Google App on it - the whole thing is based in The Cloud. A significant number of people even in corporateworld have their first task each day to look at their Facebook page - in The Cloud. It's little wonder why such companies have massive valuations when they have that kind of reach.

It is a short step then to believe that the new generation of business applications will be served in The Cloud. The old objections on downtime and security have long since been dealt with. Today, the bulk of the world's financial transactions are conducted in The Cloud. What happens if internet connections are lost is the same as the corporate network failing which happens more regularly than most would admit. The fact is that I have a full mail client wherever I am in the world on any device I carry accessing the web by broadband, WiFi and 3G in any combination. I am online to all my applications from mail to CRM to travel agent to Evernote to back up manager all the time. I am trialling my accounts on NetSuite too.

I still run an Exchange server through a hosted site as I have tree hugged. But why will I continue to do this? MS Office 2007 is still the same as it was when I bought it 5 years ago. The applications have not moved on, it looks the same and crashes in exactly the same way with monotonous regularity when it cannot find its server even when my other applications work fine. Why do I keep it? Probably because I am a slave to the Microsoft machine.

Things are changing. For simple monthly costs, I can have the vast majority of every serious applications and thousands of frivolous ones served from The Cloud - securely and with 99.99% uptime - and wherever I am, using whatever device I have. As a small businessman, I don't have to worry about IT, managing servers, increasing disk space, security and the like. I just focus on creating revenue with the right tools at my fingertips, wherever I am. Scale that up to a 100 person company and suddenly you can see a fast moving, dynamic workforce dedicated to revenue creation and not encumbered by outdated or constrained systems. Even as I waited to get acces to my client's network this morning, I was able to access, my internet banking facility, Twitter and Evernote using 3G. I can be productive more easily in The Cloud, unrestrained by creaking private networks with limited accessability.

As Google says, the web is the platform not the PC. For those executives who do not get it just watch the PC market as it declines as new platforms drive sales. Just watch how traditional, on-premise licence sales will drop as SMEs drift toward buying online and only what they need, when they need it. It's all there to buy - even Microsoft is there now. The problem for SMEs is buying it all from one point, with one bill and having 'one neck to choke' if it goes wrong is not viable today. You have to buy from multiple sources, often only from the vendors themselves. The traditional channel is at risk but SMEs would not be happy to have to keep buying from multiple sources. The channel somehow has a role to play.

The change is happening. Embrace and get prepared or whither on the vine. For Microsoft, to make MS 365 successful, they need a business model that leverages their partners for fear of cutting them off. Considering that channel of thousands of partners has put Microsoft where it is today, that isn't shrewd thinking.

However, as was echoed by distributors like SDG and vendors such as IBM at the Cloud Forum this week, a value proposition needs to be clarified to see how the channel can play. Distributors want justification on the benefits - in my opinion, that shows a lack of understanding. If you want to share in the benefits, you need a plan. In my experience, markets have rarely landed on a plate. You need to go make it happen. It seems that in many cases in distribution, no decision is at least a decision. I don't think vendors will wait - as in Microsoft's case they have defined their own plan in which it is hard to see where channel exists in the future. No decision could cost distributors dearly if that's the case.

Meanwhile, MS 365 could be brilliant. It could also fail. Now wouldn't that be an unusual thing for Microsoft as Google Android and Apple start eating into their share of the device operating system market?

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