Will Microsoft's New CEO Change The Channel Status Quo?

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Microsoft partners have little doubt that new Microsoft CEO Satya Nadella has the technology chops to deliver a healthy dose of innovation to the software giant's product and services portfolio. But the jury is out on whether the 22-year Microsoft veteran is going to be willing to alter a channel program that many partners believe is heading in the wrong direction after a series of cloud computing sales incentive cutbacks.

Some of these cutbacks are small ones, such as limits on phone support, while others stand to have a huge financial impact on partners, such as the recent cloud incentive cuts for partners selling Office 365. In fact, CRN has reported that partners that sell Office 365 and other cloud services in Microsoft's Advisor Enterprise Agreement Deploy program expect to see their incentive payments drop as much as 40 percent to 50 percent.

Microsoft, Redmond, Wash., claims Office 365 is its fastest-growing product ever and that the number of partners selling Office 365 has doubled in the past year. But the way partners see it, if Microsoft values their role in making Office 365 successful, it should be increasing incentives rather than cutting them.  

[Related: Channel Beat: A New CEO For Microsoft]

Some partners initially reacted to the incentive cuts by vowing to sell Google Apps. While this sounded like an emotional response at first, some partners are now following through. CDW, one of Microsoft's top licensing solution providers and No. 8 on CRN's Solution Provider 500 list with $10 billion in annual sales, last week said it would start selling Google Apps For Business.

"At the end of the day, Microsoft partners are saying enough is enough," said the CEO of a large national solution provider who did not want to be identified. "We need to go where the money is. We are hoping the new CEO pays attention to this. He comes from the cloud business. His first statement is: mobile first and cloud first. But if you are going to lose the channel that is selling your technology I don't care how good your technology is, you will lose."

Microsoft's cloud incentive cuts come as Google and Amazon are stepping up their channel game by offering significant new incentives to partners. "Google is putting tremendous incentives out there; Amazon is building a tremendous channel," the solution provider CEO said. "They are both competing with Microsoft. In the past, we did not have those choices. The Microsofts of the world in the past were able to squeeze partner margins because there was no other choice. Guess what? Now we have choices with new incentives from Google and Amazon."

In a recent poll of solution providers conducted by CRN's Channel Intelligence Council, 34 percent said they're planning to add Google Apps For Business to their product portfolio. In addition, 70 percent of partners polled said they plan to increase their recommendation of Google Apps For Business in response to the Office 365 incentive cuts.

Industry partnerships also are threatening Microsoft's influence in the desktop PC market. Last week, Google teamed with VMware to let Windows apps, data and desktops run on Chromebooks for the first time, using a jointly developed technology they're pitching as a cost-effective option for Windows XP migrations. The technology marries VMware's View desktop virtualization software with Google Chromebooks, with access to Windows apps enabled by VMware's Blast HTML5 technology.

NEXT: Microsoft Says Nadella Gets The Channel


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