- Larry Gregory
Microsoft WPC 2015 – ISV Insights
The Microsoft Worldwide Partner Conference is an intense few days of sessions, side meetings, and networking. With proper preparation, it is a highly productive way to 1) understand Microsoft strategy & incentives, 2) nurture existing partnerships, and 3) explore new partner relationships. Attendees who registered for WPC Connect can access the whopping 301 sessions of content from https://connect.digitalwpc.com. Note that the keynotes are only available as videos from DigitalWPC.
Microsoft WPC 2015 Themes
Satya Nadella (Microsoft CEO) set the stage on the first day keynote, describing the high-level priorities for the year to come as: 1) reinvent productivity and business process, 2) build the intelligent cloud platform, and 3) create more personal computing. Office 365, Microsoft Azure, and Windows 10 bubble up as top Microsoft priorities.
There was more sizzle to the keynotes this year with an eye-popping HoloLens demo as well as compelling demos of Windows 10 and Cortana Analytics Suite (voice navigation with Power BI). Cortana will be a key feature of Windows 10 and Microsoft committed to delivering Windows 10-powered Lumia phones.
What is a “Modern Partner”?
Microsoft paid special attention to the profitability of cloud partners, with multiple breakout sessions describing how delivering cloud services and solutions improves partner company valuation. “Modern partners” where referenced as those with >50% of their business from cloud offerings. Four business models were represented, with increasing profitability as they align with cloud delivery:
Product (Traditional ISVs) – tough to get more than 20% in reseller margin and ISVs themselves facing competition from more nimble cloud ISVs
Project Services (SIs) – have higher margin structure (on the order of 35%) but there’s a hard limit to growth based on employee availability
Managed Services (MSPs) – structurally you can achieve a higher level of gross margin (closer to 45%)
Packaged IP (Cloud ISV) – achieve even higher profit scale because developing once and selling multiple times results in low incremental/variable cost
Microsoft has expanded the Cloud Solution Provider program (for MSPs) to include Azure, CRM Online, and Enterprise Mobility Suite (in addition to Office 365). This will address SMB well, but Enterprise Agreements (from LSPs) are the more likely Microsoft cloud purchase option for enterprise organizations. As an ISV, you’ll have more SIs interested in cloud/Managed Service Provider licensing given Microsoft’s incentives.
Office 365 gets a new enterprise SKU (E5) which will include cloud PBX, analytics, Power BI, and advanced security. If you provide Office 365-integrated products, this represents another wave of sell-in by Microsoft resellers (and an expanded market for your offerings).
In product news, SharePoint gets new life with SharePoint 2016, Azure gets an IoT Suite, and Cortana Analytics Suite makes a play for voice-navigated Power BI. HoloLens will blow your mind, and Windows 10 will be more familiar and broadly accepted than Windows 8.
With Windows 10 being provided to most users for free and delivered as a service, app builder ISVs will have a more consistent platform to target (using the “universal Windows platform”). Microsoft expects to have 1 billion devices running Windows 10 by 2018. This broad penetration should reduce ISV development and support costs as you won’t have to test and support as many Windows platforms.
ISV Business Development
Microsoft is boosting its go-to-market support for Cloud ISVs and increasing cloud incentives across partner types. Microsoft programmatic marketing and enablement support for ISVs continues into FY16 while sales support for managed ISVs is still getting worked out (roughly entails drawing from a pool of business development managers via the assigned Partner Business Evangelist).
Time is running out for traditional ISVs. Microsoft is in year 6 or 7 of shifting its ecosystem to the cloud and has gotten sophisticated in explaining how its cloud offerings translate as financial value to partners. While cloud consumption cost and marketplace transaction fees need to be carefully weighed, the inevitability of cloud as a preferred IT platform is upon us. Leverage the profitability guidance and marketing support from Microsoft to make the transition as smooth as possible and tap into services partners that are seeking to grow from traditional consulting services into managed service providers through third partner ISV products.
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