July 9, 2008

Microsoft Addresses Partner Worries

Microsoft partners meeting in Houston responded with resignation and some optimism Tuesday to the company's move toward more Internet-based software and services, despite worries that it could cut into some of their business.

The company unveiled details of the plan during the annual meeting of thousands of partners that form the crucial link between Microsoft and its customers. About 7,500 partners and 2,500 Microsoft employees are attending the Worldwide Partner Conference at the George R. Brown Convention Center.

The partners' chief concern is that the company's new software-plus-services move will freeze them out because Microsoft will take on services that the partners have been providing.

In announcing details of the program, Stephen Elop, president of Microsoft's business division, acknowledged that anxiety, and tried to ease the partners' concerns.

"We each only succeed if the other succeeds," he said. "This really is a transformation. This is hard. But we're going to have to charge through this because it is what our customers are asking for."

He cited data from technology research firm IDC that predicts $21 billion growth in Web-based applications. The sector is expected to grow 32 percent per year through 2011.

This is hardly the first time Microsoft has moved into its partners' turf, so most of them should be prepared to adapt, said Kerry Gerontianos, president-elect of the independent International Association of Certified Microsoft Partners.

He recalled, for example, the company's development of the Exchange e-mail program that offered a service partners were providing at the time.

"As they get into new technologies, they are always stepping on toes," said Gerontianos, president of New York-based Incremax, a technology consulting firm. "Am I concerned about it? Sure. Microsoft has always changed the game from time to time."

But when Microsoft changes the game, it does a good job of telling partners where the new opportunities will be, he said. That's a big reason for the annual conference.

"They're going through a lot of cost and effort to make us informed about what they're doing," he said.

On Tuesday, Microsoft said it will sell a package of four server products -- Exchange Online, SharePoint Online, Communications Online and Live Meeting -- to U.S. firms by the end of the year for $15 per PC user per month, and to global businesses in the first half of 2009.

The company also plans to sell a lightweight version that gives limited e-mail and Sharepoint access to "deskless" workers like nurses, factory employees and salespeople for $3 per user per month.

Today's scheduled highlight is a keynote speech by Microsoft Chief Executive Steve Ballmer.

At a training session Tuesday, Chris Capossela, a Microsoft senior vice president, used the Exchange e-mail system as an example of how the changing game can benefit nervous partners.

Instead of making a little money installing an e-mail system for a customer, the partners can make more money advising the company on e-mail policy, configuring the system and other "professional services," he said.

The company unveiled an incentive program to give partners a cut of contracts for online services, totaling 18 percent the first year and 6 percent each year after.