MCS Chief: Plan To Productize Services IP Won't Hurt Partners

At the company's annual partner conference in Minneapolis, Microsoft Senior Vice president of Microsoft Services and IT Rick Devenuti told partners that Microsoft Consulting Services (MCS) is in the first stage of developing a "Microsoft-proven" services "SKU" that its sales force -- and its partners -- can sell to customers. The company is working on it first offering and isn't expected to finish it until the end of the year. Pricing is not decided.

"Historically, we've been descriptive about how we use our technology [internally] and not prescriptive," said Devenuti, who told partners not to worry about MCS cannibalizing their revenue stream. "We want to package that IP up, and offer prescriptive product to customers. As we build them, they will be key enablers for our partners."

Channel partners said it's good that Microsoft is eating its own dog food but worried that selling and feeding its IP recipes to customers will take a bite out of their own infrastructure business revenue and potentially their managed services business.

As part of the incubation of its services IP, for example, Microsoft is providing managed services for customer Energizer Holdings as part of a pilot test that will run from six to eight months. And, it is li ning up more customers. The results of that learning will be codified, packaged and sold as a product that customers and partners can use to deploy reliable solutions fast.

Microsoft is providing Energizer with managed desktop services and hasn't ruled out the possibility of launching more managed services, which it dubs managed solutions. "It's their third attempt to make a go of it. We're watching it but we're not afraid," said Stephen Moss, chief operating officer at NSPI, a Microsoft partner based in Roswell, Georgia, at a roundtable discussion with CRN on Friday. "If they want to give me the blueprint, then fine."

One MBS Partner said the move may impact a select sets of partners, but he thinks that the availability of Microsoft services "IP" will help him build his classic Microsoft software practice faster.

"Nearly every innovation impacts [partners'] revenue stream, but that is not the goal," said Thomas Dill, chief executive at Dill and Associates, a technology consulting partner based on St. Charles, Missouri. "As they become one Microsoft, you have to have a way to deal with all their products with expertise."

Microsoft now sells more than 350 products, company executives said.

Yet another source close to Microsoft said the company will move into managed services and is making its consulting services IP a steady revenue stream for the company.

"I see it as competitive in a way," said an executive at a Microsoft Gold Certified Partner, noting that the Energizer deal and major outsourcing efforts in India signal a changing landscape in the way Microsoft software will be delivered. "They want MCS to grow and get bigger."

"It's a paradigm shift,' said another partner, John Joseph, president of J4 Systems, a networking and web development specialists based in Roseville, Calif., who said partners must start developing business process expertise and vertical industry practices. Other partners acknowledge that some infrastructure services such as integration services and desktop management are becoming commoditized but still a fair number continue make their bread-and-butter revenues implementing and deploying infrastructure and increasingly, offering managed services.

IT Advisor is earning its bread and butter revenues from Windows Server 2000 to 2003 Active Directory and Exchange deployments, yet executives realize they need to move beyond infrastructure services and harness shared services such as collaboration and management to ensure future profitability. "We've got to move up the stack," said Marc Scherocman, director of Cincinnati-based PCMS IT Advisor Group. This parnter, like several other partners interviewed by CRNat the roundtable, plans to spend more time deploying SharePoint and Microsoft management products including System Management Server and Microsoft Operations Manager.

Richard Opal, vice president at Peters and Associates, of Elmhurst, Ill., said many of the traditional service practices are becoming commoditized anyway. "There's more revenues in business process consulting," Opal said. "We have to continue to figure out how to move with it."