A new paradigm of unified computing, targeted at small and medium enterprises, is being rolled out across the region. So significant is the change even current channel structures will need to be revamped to accommodate the new approach to selling.
Microsoft’s Office 365 represents an enterprise grade of solutions made available to all segments of the market, who can pick and choose solutions, which best fit their business. The complete suite of solutions covering Office, Link, Sharepoint and Exchange are usually beyond the budgetary and technology resources of most SMB companies. Office 365 therefore represents a platform in which a complicated and sophisticated set of applications is made simple and affordable for the vast number of businesses operating in this market segment.
An end user business signing up for Office 365 gets multiple benefits, which includes a guarantee of 99.9% availability, full disaster recovery capability, storage on demand, full administrator rights, latest software version and 100% licensed software.
Microsoft’s channel partners are encouraging end users to avail of the free trial period to experience the capabilities of Office 365. “We are offering the free trial to potential customer with the full range of features,” says Jawwad Rehman, Managing Director, Live Route, which has been selling Cloud solutions in the region for the last two years. Office 365 offers businesses multiple plan options and users can opt and pay for the features that best suit them. When customers sign up with Live Route for the free trial they are activated with the full suite of products and features allowing them to make more intelligent decisions on what fits them best.
“Office 365 is a great proposition if people really find out what it can do for you. All the business in SME and mid market space will move to Office 365 in terms of the value it has and in terms of the capability. It is just that people need to absorb this,” explains Rehman.
Also contrary to some perceptions there is no lock-in of data with Office 365. An Office 365 customer receives administrative access to manage user rights and “nothing stops you from downloading data,” says Rehman. But for end users looking at downsizing their IT resources and management cost such actions like localised data storage would be counterproductive.
For Live Route a prospective Office 365 customer usually meets three criteria. They usually work in distributed and mobile computing environments and hence appreciate the benefits of remote logins from the public cloud. They have an inherent level of IT maturity and are moving away from additional IT infrastructure and operational investments within their business. While defining the profile of early adopter users, Office 365 is also redefining the traditional channel structure.
Resellers will find they are redundant if they visualise their role as only selling Cloud licenses. The web replaces the role of the traditional transactional reseller. An end user has the flexibility to purchase online Office 365 licenses for a period less than 12 months. If the end user purchases licenses for a period of three months for three users for example, the size of the transaction is reduced in comparison to what packaged software would generate for the same number of users and with twelve months validity. “The margins at the end of the day, the way Microsoft will collect and pay, are very marginal margins. You cannot build the business on that. A few years down the road, the snow ball effect will kick in and you may be talking about something more reasonable. But right now I cannot build the business model on the basis of Office 365 license margins. It is small as a percentage and it is percentage of a small number,” explains Rehman.
So how should resellers operating in the Cloud channel structure build their business model? “Our delivery is a key differentiator within the realm of smaller budgets and tighter timelines. We have to and must add value to a customer.”
Usually this means providing some level of professional services around various aspects of usage including what is the business expectation from Office 365; what are the user rights and requirements; is there any level of customisation required; is any data migration required; is end user training required? Since the end user has already invested in the software licenses, they would usually prefer their reseller partner to also play the role of advisor and assist them in the implementation. A Cloud reseller would then complete the above one-time tasks over a period of a few days as an administrator and at the end hand over control and disengage from further support activities. A typical professional services support of this nature would range in 1:1 ratio or above against software licensing costs, depending on the complexity of the engagement and with a minimum cost base.
Another reason for end users to engage with resellers for professional and consulting service support is because Office 365 is inherently a complex suite of enterprise applications managed by Microsoft at the backend through software as a service model. “There is a right way to use it and a potentially complicated way to use it,” especially when the purpose is to downsize running costs of IT administration. For resellers, adding value for the end user through professional services is the right way forward but this does require experience and the right set of tools.
Once the end user has begun to use Office 365 and in the event the implementation has run smoothly, the reseller may find themselves called in to support expansion of users, additional training, additional customisation, help desk provisioning and other ongoing support and maintenance services. Managed services for Office 365 end users is another possible opportunity for Cloud channel players.
Says Santosh Kumar, Business Unit Manager, Aptec Distribution and Microsoft’s VAD partner for the region: “I do not think any organisation will go for an end to end public cloud. We are looking at a complex integration scenario of on-premise and public Clouds. We will bring in the synergy of hybrid Cloud, managed services and hybrid cloud integration.”
Live Route looks at it a little differently. “What else can I do that helps me and helps the end user. Nothing stops me from capitalising on the relationship.”
“Another reason why customers like to work with a Cloud partner is because it is not their cup of tea and it is not their core competency,” says Rehman. But he claries there is no catch and there is nothing mandatory in Office 365 that makes it necessary for an end user to engage with a reseller for professional and managed services. Engagement with resellers for this level of support depends on what their expectations are from Office 365.
From VAD Aptec’s point of view, Microsoft’s technical support for its channel partners is still work in progress. Amongst the queries unresolved are who will provide the back end support for technical troubleshooting with resellers during a professional services engagement? What is the go-to-market certification approach for channel partners wanting to establish competency in selected areas of Office 365, like Link for example? Who will the end user consult for higher levels of technical trouble shooting in the absence of the reseller?
Another important aspect of the channel transformation is the point of contact for Cloud decision making at end user organisations. “We are not selling anymore to the IT manager or CIO. You need to get to the CEO level and sell it there. This is different,” says Mario Veljovic, Operations Director at Aptec Holdings, who also manages professional services support for reseller partners. Veljovic believes Microsoft can help out in sales training programmes especially around how to help resellers reposition Cloud consulting services.
Large system integrators wanting to jump into the mainstream of selling Office 365 solutions may find the value of transactions to be low in comparison to their established business. And this is likely to deter a few. “Nobody is going to jump into the Cloud business, just because they want to be in the Cloud business, unless they see an ROI in the Cloud business and it takes time to build the competence,” says Rehman. There is no carrot in the distance and turning a big ship around will take time as well. But the Cloud will roll and time will tell.
Cloud and partner democracy
Mohammed Arif, Partner Strategy and Program Lead, Microsoft Gulf
Microsoft manages all its partners under one big broad programme called the Partner Network. Globally it includes 640,000 partners and in the region it includes 1,500 partners excluding Saudi Arabia. It has four levels of partners, starting with registered partners, subscription partners, silver and gold partners. The last two levels are based on skill levels across 29 specialisations including Digital Marketing, Distributor, OEM Hardware, Software Asset Management, Mobility, Hosting, Learning, Independent Software Vendor, CRM, ERP, Midmarket Solution Provider, Content Management, Portals and Collaboration, Project and Portfolio Management, Search, Unified Communications, Desktop, Identity and Security, Server Platform, Systems Management, Virtualization, Data Platform, Application Integration, Application Lifecycle Management, Software Development, Web Development, Business Intelligence, Volume Licensing and Cloud.
Says Mohammed Arif, Partner Strategy and Program Lead: “Cloud is the biggest story for us today and for many years to come. The two Cloud partner programmes are connected to the Microsoft’s Partner Network but are not melded into it. Moreover any partner who is on the leading edge of technology change will benefit.” Since the early mover status will prove decisive for a reseller wanting to actively adopt the role of a Cloud strategic advisor for an end customer, the partner eco system is likely to be democratised.
Smaller resellers may find themselves selling to larger end user customers than those addressed by big large scale system and infrastructure integrators. This open up the possibility of smaller resellers with Cloud advisor competence, partnering with system integrators used to managing enterprise grade complexities for data migration into the Cloud and other related opportunities.
Cloud partner programmes
License grant: Microsoft Office 365 250 licenses; Windows Intune Subscription for 25 PCs; Microsoft Dynamics CRM Online 250 licenses; Windows Azure platform 750 hours of extra-small-compute instance, 25 hours of small-compute instance, 20 gigabytes of storage, and 250,000 storage transactions; Microsoft SQL Azure Web Edition database: 1 gigabyte; Windows Azure AppFabric: 100,000 access control transactions and 2 service bus connections; Data transfer: 25 gigabytes in and 25 gigabytes out
Benefits: Listing as Cloud Essentials partner on the Microsoft Pinpoint online marketplace; Listing in the Microsoft Office 365 Marketplace; Marketing resources; Online sales and financial modelling tools; Presales and technical support
Enrolment: Sign the Microsoft Online Services Partner Agreement and complete introductory training and an assessment; to continue receiving these benefits in your second year of enrolment, you must meet a modest sales requirement of 50 seats per product during your first year of enrolment.
License grant: Microsoft Office 365 250 licenses; Windows Intune Subscription for 100 PCs; Microsoft Dynamics CRM Online 250 licenses; Windows Azure Platform; MSDN Premium subscription; PlatformPlus, all Cloud essentials Pack benefits; All of the core benefits provided to members of the Microsoft Partner Network that have earned a silver competency.
Benefits: Online sales and financial modelling tools; presales and technical support; training platform specialized cloud training; additional business benefits
Enrolment: Subscribe to Microsoft Cloud Essentials Pack; sign the Microsoft Online Services Partner Agreement and complete introductory training and an assessment; provide three cloud customer references; completed three cloud deals for a minimum of 150 total licenses; demonstrate your sales commitment to the cloud by completing eight deals with a total of 500 licenses.
Yasir Khokhar, Business Group Lead Microsoft Office
Office 365 represents Microsoft’s transition from selling software as a product to selling software as a service. This transition has not been created by Microsoft and represents an industry shift with its share of compelling benefits and entry barriers. An important factor to be understood and recognised is that Microsoft will continue to sell packaged software through its traditional channel partner network while in parallel building the capability of its partners to sell software as a service. This creates an opportunity rather than a threat. “A smart reseller will jump onto the bandwagon of selling both traditional software and services, explains Yasir Khokhar, Business Group Lead Microsoft Office.
Office 365 will be commercially available sometime in the first half of 2012. In the meantime, regional end users are being encouraged to sign up for 30 day free trials and sometimes longer through reseller partners. Acceptance of the Cloud based service, with multiple levels of subscription based services, features and pricing, is completed through a commercial SLA between the end user and Microsoft directly. “If the service goes down at any time, the privacy and security of the data that the customer entrusts us with, can only be maintained if we have a direct relationship with the customer,” explains Khokhar. For every financial transaction between the end customer and Microsoft, both distributor and reseller partners are rewarded by a percentage of the transaction.
In Microsoft’s services based channel, the role of a reseller is upgraded from a trader harping on price and availability, to an advisor for the end customer. By Microsoft’s scheme of things, a reseller continues to advise their customers on Cloud based data migration, user rights, CRM, ERP and is the first line of support that a customer should approach. “We know the enterprise and we know the SMB customers. We know they will need help in getting to the Cloud. That is why we pay our channel partners,” clarifies Khokhar, on why the reseller continues to play an important role even in the new channel structure.
However for a reseller partner to be effective in the new Cloud channel programme, they need to organise themselves to sell services to the end user. A critical success factor in this new model is to have an ongoing, strategic consultative relationship with the customer. On the other hand distributors are incentivized to increase the number of Cloud partners who are transacting with them. “The model of distributors as an engine to get us reach still holds very true.”
Office 365 has been launched in UAE, Kuwait and Qatar. “Cloud is on the agenda of every CIO, we know that as a fact,” says Khokhar. In Qatar and Kuwait, Microsoft has found demand in the SMB segment, but in UAE there is pent-up demand. The need for Cloud based services appears overdue for SMB’s in the UAE. For the corporate segment, defined by Microsoft as between 250 and 1,000 users, they are experiencing pain with IT departments wanting to scale back operations, move applications and large complex workloads to the Cloud and save on data centre maintenance costs.
Return on experience
Michael Mansour, Developer Platform Evangelism Lead, Microsoft Gulf
The role of Microsoft’s developer partner evangelism is to excite and make ready its developer communities around the latest emerging technologies. Last year the focus was around Cloud and this year it includes Cloud, Surface and Phone. Another key focus with developer communities is to help get their solutions to the market as fast as possible and accelerate them through their software development life cycle. While the developer partner is important so is the end customer. “We go in as brokers, to facilitate knowledge transfer and partner engagement. We will typically select the partner that can give the best value to the customer,” says Michael Mansour, Developer Platform Evangelism Lead, Microsoft Gulf. The underlying drive is to expose the customer to the latest solution innovations from Microsoft.
Continues Mansour: “There is a new paradigm approach for developer partners including system integrators and independent software vendors, which is to first excite the end user community here with mock-ups and aesthetics and then follow up with back end integration.” Due to in country aspirations and the need to be different from other markets, there is tremendous demand on developer content and web experience. Microsoft’s C-level discussions indicate there is a significant imbalance between business needs and the ability of the technical team to deliver.
The gap between business and IT continues to widen because of two reasons. The first is limited growth of skills to support quality innovation and this leads to churn in human resources, when they are imported into this market. And the second is ramping up of the delivery cycle to meet the demand for innovation. “It is my view that investment made into IT is insufficient to meet the demand required at the business level. There is a sense of urgency and yet the gap is still there with IT,” Mansour explains.
The demand for immersive application experience fuelled by the release of Surface, Cloud and the next generation of Windows continues to grow in this market. While the cost of software development in the UAE market is very close to western developed markets, certain breed of end users are no longer interested in cost benefits. “They are looking for agility, quality and brilliant return of experience. If those three are met they are happy to spend premium dollars to have such a development house.”
Microsoft’s software development process whether for a Cloud based application or any other platform like Phone, Surface or Slate is built on two independent pillars. The first is to generate a compelling visual and immersive experience and the second is to support back end software development. These two pillars are heavily leveraged in the UAE and less in other markets. While back-end software development may take place anywhere in Egypt, Lebanon, Jordan, Turkey, Pakistan and India, the requirement of having back and forth discussions with customers implies a high level creative team be based in UAE.
For the developer community, Windows Azure provides on-demand compute, storage, networking and content delivery capabilities to host, scale and manage web applications through Microsoft data centres. Microsoft SQL Azure Database is a cloud-based relational database service built on SQL Server technologies and provides a scalable, multi-tenant database service hosted by Microsoft in the cloud.