The rate at which Microsoft is driving Azure-based revenue through the channel should significantly accelerate in the months ahead as the number of third-party software-as-a-service (SaaS) applications and consulting services made available on the Microsoft AppSource online cloud store substantially increases.
Microsoft has aggressively expanded the amount of co-selling it engages in across the channel in the last year thanks mainly to changing the way it compensates its internal sales team and channel partners. Now Microsoft is gearing up to extend that co-selling model to providers of SaaS applications that made available via Microsoft AppSource on the Azure cloud, says Toby Richards, general manager for partner programs within the One Commercial Partner (OCP) business unit at Microsoft.
That effort will extend a massive sales alignment initiative that Microsoft began last year that is focusing the efforts of over 17 million salespeople residing within Microsoft and partner organizations on digital business process transformation opportunities being funded primarily by lines of business executives, says Richards. Previously, Microsoft’s sales efforts had been mainly focused on getting IT leaders to sign off on enterprise licensing agreements, notes Richards. That shift requires partners to lead with a solution that is more application-driven rather than the price of an enterprise license agreement for Microsoft software, adds Richards.
Richards says those efforts are also driving much higher levels of consumption of Azure services.
“We see eight times more consumption of Azure services through partners,” says Richards.
To facilitate that transition Microsoft has been developing a broad range of partner programs aimed both at vertical industries and emerging technologies such as artificial intelligence (AI) that are all delivered via the Microsoft Azure cloud. Microsoft is already seeing 70 percent of Microsoft Azure cloud revenues being driven by partners that span traditional solution providers to independent software vendors (ISVs), notes Richards. Much of the reason for that success is attributable to the services revenue that partners can generate. According to estimates published by International Data Corp. (IDC), partners generate $9.64 in services revenue for every dollar of Azure revenue.
Richards says that biggest challenge many partners now face is that cloud opportunities enable them to deliver applications and services well beyond their traditional local markets. Microsoft will be focusing on the months ahead on helping partners globalize services, says Richards.
Like all cloud vendors, there is some overlap between what IT vendors are trying to accomplish using an online app store in the channel and the traditional role distributors play. But Richards says the total addressable market for cloud services is so large that Microsoft expects little conflict with what it views as complementary efforts by distributors.
It may take a while for partners to navigate all the changes to selling models that come with the transition to cloud computing. But the one thing that is clear now to everyone in the channel is there’s lots of profit to be made for everyone involved.
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