Ballmer: Microsoft To Offer Mix of Managed Services, MCS IP

At his keynote wrapping up the annual partner conference in Minneapolis Sunday morning, Ballmer said Microsoft has not made any final decisions on its plan but will likely sell a mixture of managed services over the Internet, including desktop management services, and MCS services information as a product.

He also told thousands of partners in the audience -- many of whom make money selling managed services and consulting services to their customers -- that they need to move to other value added opportunities in the next decade regardless of Microsoft's moves because such services are increasingly becoming commoditized.

"Ten years from now things that get done individually [today], unique customer-by-customer, we probably won't have the same reinvention of the wheel customer after customer," Ballmer said, adding that Microsoft and partners need to reduce operational costs for customers in a consistent way.

"A managed service is designed more like a product or standard offer and less like customized outsourcing ... we're going from infinite customization to world of standardization and we want to come out with a product managed desktop service," the CEO added.

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Ballmer's comments were issued in response to a question asked by partner Brett Dawson, CEO of Dimension Data, based in South Africa, a former IBM partner that is basing its future growth offering professional services for Microsoft environments. Dawson, like several other partners at the show, expressed concerns about Microsoft's interest in managed services in light of its managed services pilot with Energizer Holdings.

As part of a pilot test, Microsoft confirmed it is managing the desktops of Energizer Holdings and plans to add two or three more customers to the test. Ballmer said Microsoft will take that learning and use it to productize and sell best deployment guidance or deploy it as a managed service over the Internet.

Many partners today offer managed desktop management and security services to their customers as a way to generate recurring revenue and maintain a strong relationship with their customers.

Ballmer told partners not to worry because the plan is more of a long-term vision than an imminent announcement and that the company will likely offer a mixture of products and services and leave many other managed services opportunities to partners.

"We'll build managed service that's configurable like a product instead of infinite customization, and [our work]with two or three other customers you can consider those are product design and leanring experiences so now we can figure out how to productize that service, from us, with customization [opportunities ]for you, or maybe we'll turn the learning over to you. "We don't know where it's taking us .. we're in the product development and design stage."

In recent interviews with CRN, however, top MCS executives have insisted that the primary intent is to offer MCS services "IP," or intellectual property, for sale by the company's sales force and its partners. But they did not discount the possibility of Microsoft launching managed services over the Internet.

In a recent meeting with Rick Devenuti, Microsoft Vice President of Services and IT, for example, he said Microsoft is in discussions with EDS about cooperating on managed services is actively engaged with another unnamed systems integrator on the Energizer product.

While he indicated that managed services would be delivered by SIs, other partners at the conference this week said that managed services is a major aspect of Microsoft ramped up outsourcing effort in India. One source close to the company, for example, said Microsoft has invested $100 million in the India project and appointed one U.S. Microsoft executive to go to India to lead the managed services charge.

Yet another source close to the company said Microsoft is mulling a number of other managed services including security services and is incubating a potential Active Directory Domain Setup service. For its part, Microsoft has said it will offer enterprise antivirus subscriptions but not a comprehensive enterprise security service for corporations, similar to the Windows OneCare all-in-one PC health services for consumers and small businesses. Devenuti said there is not Active Directory domain setup or DNS hardening service in pilot testing.

Even as partners worry, Ballmer said during his keynote that the goal is to evolve in conjunction with partners. Over the next decade, partners will see more opportunities in business process development and vertical industries and declining opportunities in infrastructure services, many of which are being commoditized as customers push vendors to lower operational costs of their desktop and server infrastructure.

"I see us trying to figure out what can be standardized, and implemeneted, and what should be implemented in the cloud, maybe by us, or what should be from partners. We're trying to sort that through and there will be mixture of all of these things, but we come into that looking at partner opportunities. We have to get smarter about what managed services look like as we go forward in next 10 year."

Yet one East Coast Gold Certified Partner said she doesn't buy that Microsoft can make this managed services plan partner friendly. "I wish they'd just come out and say 'we're competing with you' because we can offer better solutions at a better price," she said. "We don't have their overhead."