Can Microsoft Balance Channel Partner, ISV and $MSFT Shareholder Priorities?

Microsoft has reached a business inflection point involving cloud services revenue, shareholder and partner priorities. The background:

At first glance, all seems well in the land of Microsoft. The company's market capitalization, fueled by Microsoft 365 and Azure customer demand, stands at a staggering $1.9 trillion (with a T) -- though shares have been pressured in recent months amid a SaaS market correction.

New offerings -- such as the ISV Success Program (launching in Fall 2022) and the Migrate and Modernize with Azure program -- are designed to further strengthen Microsoft's cloud ecosystem and associated revenues.

But take a closer look, and some Microsoft partners remain concerned about a looming October 2022 shift from the Microsoft Partner Network program to the Microsoft Cloud Partner Program. Moreover, the company has evolved how it sells Microsoft 365 subscriptions. The upshot: Discounted annual subscriptions look tempting -- but if customers don't pay their Microsoft 365 bills, then MSPs and SMB partners could be on the hook for the unpaid subscription balances.

Tricky Math: Delivering $MSFT Shareholder Returns and Partner Profit Opportunities

Ultimately, Microsoft is trying to solve a financial math problem. The company needs to keep growing its cloud revenues and associated profits to appease shareholders -- many of whom became addicted to Microsoft's rapid growth and associated shareholder returns over the past decade.

Fast forward to July 2022, and SaaS company valuations are under pressure. And all eyes will be on Microsoft when the company announces Q4 2022 financial results on July 26, 2022. During that earnings call, we will likely get new clues about whether Microsoft can maintain its torrid growth -- and whether partners are truly benefitting from that growth.

All that said, Microsoft remains the top SaaS software giant that partners can't ignore. By contrast, Amazon Web Services (AWS) generally lacks credible SaaS alternatives. And Google Workspace hasn't exactly displaced Microsoft 365 from corporate desktops, notebooks and virtual computers. (Meanwhile, competition in the IaaS market -- between Microsoft Azure, AWS and Google Cloud Platform -- remains far more intense.)

Deja Vu: Previous Microsoft Cloud Partner Program Debates

Admittedly, Microsoft has hit partner program speed bumps before. The original Office 365 launch in 2010 didn't allow partners to manage end-customer billing and pricing. Microsoft's CEO at the time, Steve Ballmer, seemed more focused on direct cloud sales than partner-driven sales. By 2012, the company finally came to its senses and introduced a mainstream Office 365 partner billing option.

Fast forward to 2019, and Microsoft partners complained about planned partner program changes that would have eliminated various software discounts, support options and other perks. At first, Microsoft dug in and insisted that the partner program perks -- including free software subscriptions for internal partner use -- were too expensive to maintain. But the software company ultimately backed down and bowed to partner demands.

Now jump 2022, and some Microsoft partners have been grumbling about program changes that emphasize sales over support, ComputerWorld Contributor Susan Bradley pointed out in March 2022.

Winning Solves Everything

Still, partners often stop grumbling when they're winning and making money. If Microsoft's new partner programs manage to fuel revenue growth -- internally and for partners -- I suspect much of the partner grumbling will stop. We'll be watching for clues when those Microsoft Q4 2022 financial results surface on July 26, 2022.