Microsoft Rolls Out Incentives For Server 2003 Upgrade, Cloud Adoption

Microsoft is offering its Synnex partners a set of incentives and programs to help them get customers off outdated infrastructure and onto the cloud.

With end-of-life for Windows Server 2003 less than three months away, the Redmond, Wash.-based vendor is offering solution providers a 10 percent subsidy for every Windows or SQL Server (the latter is a relational database management system) sold through Synnex, according to Cindy Bates, Microsoft's vice president of U.S. SMB and distribution.

End users can then use the money from the subsidy to purchase ancillary services and technologies through their solution provider partner, Bates said.

[Related: Synnex Expanding Solutions Facility, Hiring New Cloud, Digital Signage Staff]

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"It really is important that we proactively get these folks to modern infrastructure," Bates told hundreds of Synnex partners Monday during the Varnex spring conference in Atlanta.

And to facilitate the move to hybrid infrastructure, Bates said Microsoft also is offering an 8 percent incentive to channel partners who can convince their clients to use the Azure cloud computing platform for services such as backup or disaster recovery.

"In my 15 years in Microsoft, I have never seen the level of incentives that we now have in market," Bates said, noting the incentives make it possible for partners to earn margins up to 47 percent.

With 60 percent of Varnex members still not selling Microsoft cloud products, Bates hopes the incentives will prompt more transactional-focused hardware partners to go after the emerging market. Microsoft partners with at least 35 percent of their business in the cloud are seeing 60 percent more profit and 140 percent more revenue growth than partners who are still mostly based on-premise, Bates said.

"Market share is going to be won and lost in the next couple of years," said Bates, noting that early adopters of cloud have gained market share.

Roughly 35 percent of Microsoft's install base -- or 9.4 million servers -- are still using Windows Server 2003, all of whom are at risk of losing Health Insurance Portability and Accountability Act (HIPAA) or Payment Card Industry (PCI) compliance once Microsoft support ends as of July 14.

Many of the remaining clients don't know they still have Server 2003 in their ecosystem since -- unlike with the XP support expiration -- no warnings appear when they're booting up their system, according to Neal Potter, Microsoft's general manager for U.S. channel and distribution. These customers often are using Server 2003 in more of a capacity fashion to run secondary applications, he said.

Potter, therefore, urged solution providers to not just take customers at their word when it comes to the presence of Server 2003 in their ecosystem, but, instead, ask if they can send someone over for an on-site assessment. Customers who weren't even aware they were still using Server 2003 are usually amenable to an upgrade once a solution provider makes them aware of the situation and risks, he said.

Given the current incentives, partners would be wise to pursue more than Server 2003 upgrades. Microsoft will be phasing out support for SQL Server 2005 next year, and given that one in six businesses are still running the outdated database management system, Bates said partners should seek upgrades in this space as well.

In addition, Potter said partners should ask their customers if they are interested in moving legacy applications currently housed on Server 2003 over to Azure. Many end users were otherwise prepared to stop using these applications given the perceived hassle of migrating them to another on-premise server, he said.

To make it easier and more profitable for partners to operate in the cloud, Bates said Microsoft has introduced a cloud solution provider (CSP) program that, for the first time, puts partners fully in charge of setting prices, billing and integrating their own services.

The CSP was unveiled following two years of collaboration with companies like Synnex, she said, and aligns well with the distributor's CloudSolv platform. Partners can integrate migration, provisioning or deployment services from CloudSolv, Bates said, or leverage the distributor for help with cloud marketing.

Louis Muirhead, president of Trenton, N.J.-based Lucille Maud Corp., a Microsoft and Synnex partner, had been frustrated with Microsoft's insistence on directly invoicing cloud customers out of fear that Microsoft's involvement could make it easier for the vendor to begin circumventing his business.

Now that the CSP program allows Muirhead to deal directly with customers on every aspect of the business, Muirhead said he's much more motivated to sell Azure, Office 365 and other Microsoft cloud products.