Seismic Shifts To Reshape Infrastructure Environments

*Editor's Note: This is the fourth of 10 installments of our 5 Hot-Button Issues series, in which we spotlight five things solution providers should keep an eye on over the coming year in various IT and channel categories.

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Infrastructure partners are facing great uncertainty as they brace for major shifts in the operating system platform business in fiscal year 2007, led by the release of the first upgrade of the Windows client in five years, a new emphasis on delivering software as a service (including operating systems and business applications), and increasing adoption of virtualization technologies and open-source alternatives.

All of these shifts will revolutionize how software is licensed and delivered and will undoubtedly reshape the reseller and services channels in the next few years. Here are the five most pressing issues going forward.

1. Will Microsoft Delay Vista/Office Beyond Early 2007?
Partners aren't expecting customers to deploy Windows Vista or Office 2007 out of the gate, but they expect the release of Microsoft's latest cash-cow products to stimulate and pump up their overall services and consulting business, as well as drive a major PC refresh cycle.

The products have been delayed for more than a year and are now promised to debut in early 2007. But another serious slip will undermine confidence in Microsoft and could impact customer IT spending plans. Partners are quietly wondering if Bill Gates' recent handoff of technical leadership to Ray Ozzie and his plans to resign in 2008 are an ominous sign for the software powerhouse that has led the industry for more than a decade.

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2. Will Microsoft's Live Platform Catch On, Or Should VARs Mull Partnering With Google?
No one seems to know whether Google will expand beyond consumer search and gain more leverage on the business desktop with its coming suite of word processing, spreadsheet and presentation services online. Many have tried to usurp Microsoft's stronghold on the desktop over the years -- Netscape, AOL, Novell, Sun Microsystems, Red Hat, Firefox -- with nary any success.

Microsoft's built-in advantage of integrating new capabilities into the base desktop Windows OS seems to stymie and stump any competitor that enters the ring. But the advent of software-as-a-service (SaaS) flips the ways users compute from the desktop to the Internet and for the first time opens the door for competitors like Google to move in. Partners are watching closely to see if Microsoft's Live becomes the dominant SaaS platform, or if the empire falls prey to a new breed of vendors. 3. Xen 3.0 Virtualization: A Threat To VMware?
What will happen to VAR margins if the Xen 3.0 virtualization platform erodes VMware's market power? Partners are making boatloads of money selling and providing consulting and integration services for virtualization platforms from the likes of VMware and Microsoft.

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Virtualization software, a huge growth segment, allows customers to squeeze every ounce of processing power out of their servers and run multiple workloads more securely and cheaply on the same system. It's been a big party to date, but the introduction of the Xen open-source virtualization engine is threatening to commoditize the profitable industry -- so much so that VMware decided to offer its core VMware server for free and Microsoft to provide its Virtual Server, already a low-cost offering, as a free download.

The availability of Xen in Novell's Suse Linux Enterprise 10 in July 2007, and availability in Red Hat Enterprise Linux 5, Virtual Iron and XenSource's XenEnterprise late this year will likely impact the economics of the market and force partners to move higher up the virtualization stack, and possibly add a new Xen practice.

4. Will Software-As-A-Service Help Or Hurt Microsoft Partners?
Microsoft claims Windows Live, Office Live and CRM Live will offer its channel reselling and service opportunities, despite the fact that Internet services are delivered directly from the data centers of Google and Microsoft on a pay-per-use or subscription plan to cost-conscious SMB customers.

Microsoft, for its part, says it will give partners agent fees for selling these Internet services and that partners can make money adding them to their customers' on-premise software or customizing them for a particular customer's needs.

Still, Microsoft's ambitious Live platform, along with its incubation of managed "solutions," aka managed services for enterprise customers, has made partners very nervous about competing against Microsoft in this promising market space. Many SMB partners that built managed services platforms are angry Microsoft is moving into managed services -- enterprise or not -- and are evaluating other options for the future.

5. Will The Uncertain Business Environment Impact Partners' Pipeline?
Economists say rising oil prices and interest rates will cause a substantial economic slowdown later this year. Microsoft partners are already preparing for a fourth-quarter slowdown but now have to take into account the latest gloomy predictions.

Currently, Microsoft partners are reporting brisk business activity in server application deployments like SQL Server and BizTalk, which are lining their pockets as they wait for the next major Longhorn wave of Microsoft products to drive even more growth through fiscal year '07. Yet the latest developments in the global economy and the geopolitical tensions surfacing throughout the world stage, threaten to cut IT spending and services spending dramatically.