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Microsoft Leaves It To Elop To Detail SaaS Channel Plans

New head of Microsoft Business Division says channel partners must adapt to meet customer demands for hosted services

Elop received only tepid applause when he outlined the giant software vendor's plans to provide 12 percent of the first year's subscription value and 6 percent of the ongoing monthly subscription fee to partners that sell its Online portfolio of hosted services, including Exchange, SharePoint and Office Communications. "It's a pretty good value," he said of the program

Elop, who held executive posts at Juniper Networks, Macromedia and Adobe before replacing the retiring Jeff Raikes in January, acknowledged that selling on-demand software -- what Microsoft calls "software plus services" -- will be a big adjustment for Microsoft solution providers.

He said adopting software-as-a-service is necessary to meet customer demands for more choices for deploying Microsoft applications and for reducing complexity. But he acknowledged the debate over software-as-a-service has created "tension" in the Microsoft market. "This really is a transformation," he said. "This is hard." "Everyone of us has to embrace the fact that a lot has changed and will continue to change," Elop said, addressing some 12,000 channel partners Tuesday at the Microsoft Worldwide Partner Conference in Houston. "As a partner of Microsoft, your business must change as well. We need you to be successful with online services in order for us to be successful."

While Microsoft has promised to involve its channel partners in selling and supporting its hosted services, solution providers are worried that hosted applications could hurt business and give Microsoft more direct ownership of customer relationships.

Elop admitted that before joining Microsoft he thought the vendor's Software Plus Services efforts "sounded a bit like a rationalization, even a bit cheesy."

To help win over skeptical channel partners, Elop quoted estimates from IDC that software-as-a-service sales will grow 32 percent a year through 2011 to $21 billion.

Microsoft will continue paying resellers of its Dynamics CRM Online application 15 percent of the first year's subscription value and 10 percent of the ongoing monthly subscription fee. That's because CRM applications are more of a partner-sell than infrastructure software like SharePoint and Exchange, said Chris Caren, general manager of marketing and product management for Microsoft's Dynamics applications.

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