All That Google Touches Is Not Gold: Channel Partners Jump To Microsoft


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Google may love the Alphabet, but it can't spell c-h-a-n-n-e-l.

Some of Google's most loyal cloud solution providers -- including those who have been working with the vendor since it launched its channel efforts in 2009 -- told CRN it's no longer financially viable to exclusively partner with the Internet giant.

A number of those regional Google channel pioneers who had bet big on Apps, the centerpiece of the Google for Work portfolio, told CRN they are adding a Microsoft Office 365 practice. Some are even striking Google from their portfolios altogether. 

[Related: Cumulus Global, A Google Apps Reseller Pioneer, Adds Microsoft Office 365 To Cloud Portfolio]

One source with ties to Google estimated that as many as 80 percent of Google's several hundred once-exclusive regional partners are now selling Microsoft Office 365. "It's very hard to be a Google-only VAR now," said the source. "It's just not as lucrative. It has become a niche business."

The executive estimated that gross margins on Google Apps licensing and services combined have dropped by as much as 33 percent in the past two years as customers' appetites for Google services have waned, even as Microsoft Office 365 licensing and services combined margins have climbed by anywhere from 25 percent to 100 percent during that same period.

Google  -- which on Aug. 10 disclosed plans to restructure itself as a holding company called Alphabet with several of its businesses, including Google itself, underneath that as independent subsidiaries -- did not respond to a request for comment on the estimates.

In addition to the margin crunch, there are a number of other factors solution providers say make it difficult for them to maintain and grow a profitable Google Apps business. These factors suggest that Google is pivoting its channel focus to just a few large partners to fight its productivity suite war with Microsoft, undervaluing the power and influence of its more numerous regional partners, solution providers say.

"The majority of partners are just going to go away and say [to Google], 'You're not a partner at all.' The rest are just going to get pounded," said an early Google Apps partner based on the West Coast that added Microsoft to its portfolio last year.

Top of mind for some of those partners interviewed by CRN is the likelihood that they will lose their current standing as Premier Google partners once a requirement for $500,000 minimum in new business to qualify for the vendor's top partner tier rolls out in 2016.

The steep minimum will likely slash the number of premier partners from more than 100 -- many of those midsized regional partners -- to about 10 large national or global partners, estimated the source.

In addition, most of the partners interviewed for this story complained of unresponsive channel representatives, a direct sales team that either competed for their business or funneled work to a handful of favored partners, and slower-than-promised development of downstream solutions to round out the portfolio.  

"We have to reallocate those resources to more profitable efforts, which means they're going to have less people promoting Google," said the West Coast solution provider, who expects his company to lose its Premier status once the new revenue requirement goes live.


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