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Microsoft Board Studying Cloud Channel Sales Strategy

John Thompson

John Thompson

Microsoft’s board of directors is carefully studying the accelerating industry shift toward cloud services and subscription revenues, and may overhaul the company’s sales and channel strategy to better address the shift, according to Chairman John Thompson.

Thompson’s statements surfaced in a Bloomberg article.  According to the article:

No one knows exactly how quickly sales of legacy on-premises offerings will drop off, Thompson said, but it’s “inevitable that part of our business will be under continued pressure.”

Thompson declined to be specific about what the company might change in sales and partnerships, but he said the company may need to “re-imagine” those organizations. “The question is, should it be more?” he said. “If you believe we need to run harder, run faster, be less risk-averse as a mantra, the question is how much more do you do.”

Portions of the article described how Amazon Web Services (AWS) has attracted cloud-savvy, deeply skilled partners. In contrast, the article — leveraging third-party sources, not Thompson — seemed to suggest that Microsoft’s partner ecosystem hasn’t quite caught up with the cloud.

Chasing Amazon AWS Cloud Partner Strategy?

Scores of MSPs are specifically certified to build and manage workloads on AWS. (Here, by the way, are the Top 50 MSPs managing AWS workloads.)

Satya Nadella

Satya Nadella

Steve Ballmer

Steve Ballmer

Microsoft certainly has thousands of partners reselling Office 365, and sales have been growing rapidly. But many of those deals are simple “resale” engagements rather than value-added wins, ChannelE2E believes. Plus, the vast majority of U.S. small businesses have yet to embrace Office 365. And the IT consulting market focused on Microsoft Azure, generally speaking, seems a bit less mature than the AWS ecosystem.

Still, it’s hard to criticize Microsoft’s progress in cloud computing. The cloud has destroyed or derailed dozens of hardware and software companies — including Symantec, where Thompson previously was CEO. In stark contrast, Microsoft has successfully pivoted head-on into the cloud. The media often credits current CEO Satya Nadella for the cloud focus. He deserves ample credit. But don’t overlook former CEO Steve Ballmer, who bet Microsoft’s core software business on cloud computing in 2010.

Overall, Microsoft is widely considered the No. 2 cloud infrastructure provider, training only AWS, according to cloud market share research from Synergy Research Group.

Thousands of Microsoft partners are now part of the company’s Cloud Solutions Provider (CSP) partner program. And many of those partners are now triangulating around Office 365, Azure and on-premises services. Twice today, we’ve mentioned Aldridge and its Arterian business as one such partner to watch.

Microsoft Channel Leadership Transition

Phil Sorgen

Phil Sorgen

gavriella schuster

Gavriella Schuster

Ironically, Microsoft’s board-level discussions surface amid a channel chief transition at the company. Global Channel Chief Phil Sorgen recently shifted to a new position. Gavriella Schuster is interim vice president of Worldwide Partner Group until the permanent replacement is hired. Schuster has held a range of global and regional positions at Microsoft, and is a very experience channel veteran.

The bottom line? Nobody is publicly stating that Microsoft is set to blow up its partner program. Thompson’s comments could be viewed as high-level brainstorming statements that consider the software landscape three years or more down the road.

But on the other hand, here’s a reality to keep in mind: Microsoft’s own cloud margins have slipped recently. The margins, Microsoft has stated, will vary as the company continues to scale up — or down — its infrastructure build outs. But that margin discussion spooked Wall Street a bit back in April.

If I had to guess, that cloud margin pressure is what triggered Thompson and the board to take a closer look at Microsoft’s sales and partner models…

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