Microsoft Exec: The Next Few Years Are Going To Be A Land Grab For Annuities

Microsoft is delivering a portfolio of cloud-based services empowering small businesses in a way never before possible, said Cindy Bates, vice president of U.S. SMB and distribution at the software giant, in a keynote Tuesday morning at NexGen Cloud.

Microsoft saw $2 billion in annual revenue in the U.S. from the small and midsize business market, Bates said, and from a show of hands, it's a market almost every solution provider gathered in San Diego for The Channel Company-sponsored event is pursuing.

The possibilities in that market are especially unique and exciting, Bates said.

[Related: NexGen Cloud: Cloud Is Still A Gold Rush]

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"Solutions previously available only to very large companies are now available to the smallest," Bates said. That's "opening up a wealth of opportunity for all of us together."

Microsoft, she said, offers the solutions the channel needs to capitalize on the democratization of technology ushered in by the cloud.

That starts with Office 365, the Software-as-a-Service office productivity suite.

Then come the products that can be attached to Office 365, said Bates, like Enterprise Mobility Suite for mobile device management, and Dynamics CRM Online for customer engagement.

There’s also the Azure public cloud, which is on pace for an $8 billion run rate. Azure is growing at a frantic pace, with 24 regions around the world and 90,000 new customers a month, Bates said.

The next few years are really going to be a land grab for all that annuity business, she said.

But to seize the rewards made possible by the evolving IT landscape, partners must themselves evolve. The "partner of the future" is not primarily doing a low-margin transactional business, Bates told attendees.

"Ultimately, we don't think that's a successful business model for the future," she said of simply reselling cloud services.

Partners of Redmond, Wash.-based Microsoft can leverage the Cloud Solution Provider program launched earlier this year to drive new, more-lucrative forms of revenue, Bates said.

That starts with reselling the products, but continues with migration and deployment services, and then can ramp up to value-added IP -- either specific industry solutions, or bundled enhancements like unique portals or dashboards.

"That's really where the profit margins lie," Bates said. "The only limit to what you guys can do here is your own creativity."

Bates invited onto the stage to attest to those possibilities representatives from two Microsoft partners: Jerod Powell, CEO and founder of InfinIT Consulting, San Jose, Calif., and Dean Edouarde, group vice president of UGM Enterprises, Los Angeles.

"It allows me to be what I want to be," Powell said of the CSP program. "I want to offer complete business transformation solutions to my customers. I never liked transacting."

Since the first fiscal quarter, InfinIT, an early CSP partner, has increased revenue by more than 300 percent, Powell said.

By focusing on Microsoft’s cloud technology stack, InfinIT is preparing customers for "the third platform" -- an interconnection of cloud, mobile, social and big data technologies, according to Powell.

As an example of one such modern architecture, Powell described a solution recently implemented for a customer: workloads hosted in Azure running on Canonical’s Ubuntu operating system, with Magento, the open-source eCommerce platform, integrated with Jitterbit back to NetSuite business management software.

Edouarde told attendees CSP has been a boon for his company as well.

UGM does a lot of work for Hollywood studios, he said, and in the wake of the Sony Pictures hack, Enterprise Mobility Suite, with its device management and authentication features, hits a sweet spot, he said.

That technology, coupled with the CSP program, allows UGM to become something more to customers. ’You become not just a vendor, but a strategic partner,’ he said.

And there is a land grab taking place for that type of business.

"This is the time to get in," Edouarde told NexGen attendees. "Get it now, as fast as possible."

Powell advised his peers to hire software developers to prepare for the coming channel model.

"The explosion that's going to happen over the next five years is going to be intense. Be prepared for the third platform," he said.

Bates ended her keynote by reminding attendees there are still millions of servers out there that are in need of modern technology, especially those running no-longer-supported software like Windows Server 2003 and SQL Server 2005.