Much of the discussion at the Microsoft Worldwide Partner Conference was in helping partners make the transition to a Software Plus Services world. Microsoft has recently announced that they are offering a series of email, collaboration and productivity tools in an online, hosted model. If you're an IT Services company who is used to selling and supporting onsite licenses, this could be seen as a Very Big Threat to your business model and livelihood.
Here is Microsoft's value proposition for Partners, in case you're talking to an IT firm who is feeling a little nervous these days:
Most customers would rather lose voice service than email
Pretty bold statement there and I just wish my pen was faster, as I missed the specific statistic. But it was 'lots' for sure. The premise is that more and more business is done via email today -- so much so that email is the essential service.
Service Providers would rather not have to repair on-premise Exchange servers
The logic goes like this: If you signed on as the service provider for a small business email system, and email is more important (or at least, as important) than voice, do you really deal with outages with a single-server, on-premise email solution? Fixing customer outages is not the path to loyalty no matter how good you are. Preventing outages is where it's at!
Recurring revenue streams are a Very Good Thing
Telcos love them. So does Microsoft. Now IT partners can benefit from the peace of mind that recurring revenue streams bring. As one partner said, once your contracted, recurring revenue stream exceeds your overhead, it's very easy to sleep at night!
Customers are interested in Software + Services models, if it's from their local, trusted partners
Microsoft cited that 70% of SMB customers are interested in S+S. They see an opportunity to free up staff and avoid capital investments. They are especially interested in hearing about S+S from their existing IT service provider partners. Small business trust solutions coming from their local partners -- more so than offers from large corporations like IBM or Microsoft.
Most S+S customers are new to the VAR
Software + Services provides a solution for the customers who have said No to on-premise solutions. This grows the VAR's customer base and revenue stream.
VAR's can move up-market
A VAR who is too small to support a 200 seat on-premise solution may be 'just right' to support a 200 seat S+S solution
The "+ Services" part of the equation is all revenue for the VAR.
Microsoft is clear that there is a difference between S+S and SaaS. They look at partners to deliver the value-added services such as directory integration, application integration, training and end-user support. They see the Services work to be worth several multiples of the Software fees -- anywhere from 2X to 7X depending on the situation.
This certainly aligns with our conversations with TriCon Technical Services. It'll be interesting to see how this aligns with our IT Service Provider interviews later this summer.
What do you think?
Where does SaskTel fit in the value chain with Microsoft, IT Services companies and small businesses? More thoughts on this later.