Microsoft has a growing problem that it can only solve by taking a hit on its own business model. This past week we witnessed dueling announcements on Internet-based mail services from both Google and Microsoft. On the same day, both titans unveiled upgrades to their mail services. In Microsoft’s case, it was Hotmail; in Google’s, it was Gmail.
The real battle, however, is taking place among solution providers, some of which are finding ways to leverage Gmail as the back end and Outlook as the front end in an effort to cut customers’ mail costs. It’s in the private cloud where internal infrastructure is used to leverage the external cloud offering to bring down costs.
By eliminating Exchange and replacing it with Google -- while keeping the richness of the Outlook user interface -- there is a cost savings.
More partners I talk to are offering the option to their customers as a cost-savings initiative that doesn’t change the user experience but makes the organization more efficient through lower costs.
So what’s Microsoft to do? In my opinion, it needs to get way out in front of the trend and flip the model while it still has a dominant share in both the front and back ends of the mail infrastructure. It is moving in this direction, but it’s best to get in front of Google on this one and be the champion and driver of the trend. The likelihood is that in the midmarket enterprise world, this trend is only going to build. While a loyal partner base of solution providers can slow it down, at some point that same partner base will accelerate the trend as a customer-service initiative. In the end, the loyalty on the part of the partner base is really toward the customer. And customers are looking for cost savings.
This really speaks to the bigger issue for Microsoft and, by default, its solution providers. The world of software sales, deployment and support is rapidly changing, and over the next few years we are going to increasingly see a movement to the private cloud before a longer-term move to the complete and external cloud, which may never completely take hold.
Over the past 30 years, the channel has made a lot of money selling and deploying Microsoft solutions. The company is a focused channel player and it would be beneficial for the channel if it continues to have success and works with solution providers to do so. It’s a dilemma for Microsoft, as the tendency of every company is to hold onto its legacy moneymakers and protect them. The trouble is, of course, that companies that try to hold onto and protect their technology get into trouble when a disruption like this comes along. All this is not lost on Microsoft, which is heading to the cloud itself. The only real question is will it make the jump as quickly as it needs to, or will the natural drag to want to hold onto its old physical licensing model hold it back?
There is little question that the mail/calendaring solutions of the future are going to look much different than they have in the past, and Microsoft is very likely to have a less dominant position.
Google is and will continue to win some engagements here at Microsoft’s expense. The Googlers certainly don’t get the channel the way Microsoft does, at least not yet. But everything has a tendency to change over time and being the winner usually means leading the change, not following it.