Microsoft's Ozzie Urges VARs To Climb Higher

Microsoft has been assuring VARs that they'll have a place in its Software Plus Services strategy, which weaves together client and server software and cloud-based services. Later this year, Microsoft will roll out hosted Exchange, SharePoint, and Office Communications Server offerings.

Last week at Microsoft's annual Financial Analyst Meeting, Ozzie said plans are to bring SQL Server and BizTalk to the cloud in order to "power these services at scale."

"Microsoft's opportunity in this space is perfectly aligned with that of our partners to provide them with the platforms and the tools to make this transition, leveraging our experience as well as our substantial economies of scale in embracing the cloud," Ozzie said.

Ozzie also said Microsoft will offer developers and VARs a pay-as-you-go model for the infrastructure they consume, adding that margins will increase as they move higher up in the stack.

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"I would expect that the lowest-level computation or storage or whatever infrastructure is going to have lower margins than something at the level of a building block, like a SQL in the cloud, which will have lower margins than something at the application level, and so on," Ozzie said.

Adam Smith, director of marketing at Phase 2 International, a Honolulu, Hawaii-based solution provider, says the opportunity moving forward lies in customizing, integrating, enhancing, and supporting the standard suite of business applications.

"The money is out there for the smaller firms who can figure out how to make it as easy to integrate and use your CRM, accounting package, and SharePoint as it is to rent a movie online from Netflix," said Smith.

Software Plus Services opens up a whole new market for VARs who in the past have had to turn to a LAR for the software sale, says Sandy Bateh, vice president of the Microsoft national alliance at Idea Integration. "Now we're able to provide not only the services work, but are also able to sell the software license," he said.

While the aggressive services pricing Microsoft unveiled at its Worldwide Partner Conference earlier this month was worrisome for some VARs, Chris Teets, general manager at M3 Technology Group, a Charlotte, N.C.-based solution provider, says the ability for smaller businesses to tap into services that were previously out of their financial reach will actually benefit the channel.

"The money these businesses save by going up the stack is routed back to partners in the form of recurring revenue on top of whatever professional services fees they were already charging," said Teets.

Mike Ritsema, president of i3 Business Solutions LLC, a Grand Rapids, Mich.-based solution provider, plans to focus on services with a specific vertical focus and complex integration that goes beyond simple stand alone systems.

"Microsoft's roadmap for tighter integration of their entire stack builds a defensible value-add model around which I'd like to continue to build my business," Ritsema said. "Furthermore, I fully understand and expect improved margins as I move up the value-add stack."