Better the devil you know

Microsoft has assured its partners that it is still "all in" when it comes to on-premise, reports Caroline Donnelly

"If you don't want to move to the cloud, we're not your folks." That was how Microsoft chief executive Steve Ballmer [pictured, below right, at this year's WPC] summed up the software giant's stance on cloud computing at its 2010 Worldwide Partner Conference (WPC).

It was a phrase -- along with the firm's marketing slogans about being "all in" on cloud -- that some of its on-premise partners interpreted as a sign their days of working with Microsoft could be numbered.

At this year's WPC, however, talk centred on the role that on-premise partners will play in readying Microsoft's customers for the cloud. This point was touched on at the event in Los Angeles by the company's chief operating officer Kevin Turner in his keynote, during which he told the 15,000 attendees that those who lead on cloud go on to win more on-premise deals.

"When we sell and tell our cloud story, we sell more on-premise products," he said. "We sell more of our traditional solutions, because customers know they can bet on you [partners] for the future."

Speaking to CRN, Janet Gibbons, director of partner strategy and programmes at Microsoft, confirms that this is a trend its UK partners are seeing.

"We have data that proves this is happening in the UK," she says. "When we do CRM Online trials, we have quite a high conversion rate to the on-premise products, which is fine because they are still buying a Microsoft product."

However, that is not to say that Microsoft's cloud offerings are not compelling for customers, stresses Gibbons: more than five million licences for the latest release of its cloud-based productivity suite Office 365 have been sold since its release at the end of June this year.

"The reason that they buy on-premise is not because they do not believe in cloud. It is because they may not be ready for cloud yet," explains Gibbons.

"But they take a bet on Microsoft because they know we have a long-term road map, and this is a business that can take them to the cloud when they are ready to go."

Mark Herbert, business development director at Office 365 Syndication Partner intY [pictured, left] says he was not surprised by the attention given to on-premise at this year's WPC.

"On-premise is an important and lucrative differentiator for Microsoft, especially in the face of cloud-only types such as Google," he says. "That is why it is now building on-line capabilities into its traditional products and launching cloud versions of those products with a similar look and feel to their on-premise equivalents."

On-premise promise

While end users are still hedging their bets on cloud, partners at this year's WPC were informed of the on-premise groundwork they can do in the meantime, particularly when it comes to Windows XP upgrades.

During the opening keynote, Tami Reller, corporate vice president at Microsoft, stated that 300 million businesses are still using the Windows XP operating system, which is not a good fit for its cloud services.

And considering the fact that the operating system is now a decade old and due to enter end of life in fewer than 1,000 days, partners should be moving customers onto Windows 7 as a matter of priority.

"Many of you, and your customers, are betting on this [cloud] for competitiveness, and a modern desktop is an important step," said Reller.

"XP end of life is not that far off [which] means ongoing standard support and software maintenance will not be a part of the Windows XP experience, and that can introduce material risk to a business."

Reller added that customers will be spending more than $40bn (£23bn) on services during the coming upgrade process, which should be all the incentive partners need to go after that business.

Management opportunities

Microsoft operation chief Turner made a similar point about two of the lesser-known products in the vendor's portfolio of management tools, which he stressed were both vital bits of cloud kit.

One of these products is called System Centre. It allows users to manage both virtual and physical environments through a single computer system console. The other is Active Directory, which can be used by IT staff to manage user accounts across their organisation's networks.

"We have to have Active Directory deployed throughout a customer environment to be able to prepare them for the cloud," said Turner at the WPC. "And we have to have System Centre, regardless of when they are ready to go to the cloud, [because] these two assets make that possible."

The company wants all its partners in the cloud eventually, but this represents a good place for them to get started, he added.

"We only have 42,000 partners [in the cloud]. We need 642,000, [and] I want to remind every single one of you that there is a place in the cloud for every single partner type," said Turner.

In the meantime, Gibbons says, these deployment opportunities should allay some of the fears partners have about cloud eating into their on-premise business.

"Getting customers onto the latest technology, so they can move to the cloud at their own pace when that customer is ready, is an important message for us to push to our partners," she says.

"This kind of work has been the channel's bread and butter for a long time and we are showing partners that those opportunities are still there and are plentiful."

In light of the warnings from Microsoft about the impending demise of Windows XP, Gibbons predicts that the channel will have about 18 months to get the most out of these opportunities.

"In the short to medium term, this will be a great revenue opportunity for the channel," she says. "Partners worried that cloud will deplete the amount of business they do should not be because there is this amazing business opportunity for the next 18 months."

Beyond the deployment of Windows 7 and cloud readiness, on-premise partners will still have an important role to play in the vendor's wider hybrid cloud plans, says Gretchen O'Hara, Microsoft's senior director of cloud channel strategy.

"The Microsoft vision is about cloud on your terms, which covers private cloud, public cloud and on-premise, because partners do not want to sell just one piece of the solution," she says.

"This is because there will always be certain assets that customers have to keep in certain places, in the private cloud or on-premise, and this allows partners to offer a solution that caters for all those eventualities."

Looking ahead

Alex Hilton, sales director at hosted infrastructure provider Rise, says that Microsoft's hybrid push comes at time when many analysts and other vendors seem to be revising their earlier ideas about cloud.

"If you look at WPC a couple of years ago, the message was that the future is cloud and it is only cloud, whereas we have always said that we do not think everything is going to the cloud," he says.

"The market was not going to move everything lock, stock and barrel to the cloud because there are always going to be certain elements that customers will want to maintain tangible control of on-premise."

This is a view shared by Roger Woods, head of Microsoft technologies at systems integrator Charteris, who says that customer feedback suggests the vendor is on the right track with its cloud strategy.

"When you tell customers that Microsoft can provide them with a choice between private cloud, public cloud, on-premise or a mix of all three, the response is always a positive one," he says.

"It is good to be in a position where we can give customers the option of moving between cloud and on-premise."

Woods adds that the hybrid model should make the move to the cloud easier for the company's traditional partners. "We have been working with Microsoft's on-premise stuff for the past 12 years, and we can draw on that experience to advise customers on what works best and where," he explains.

That being said, Hilton maintains that on-premise partners would be foolhardy to think that they will be able to ignore the cloud completely.

Especially as -- according to Gartner findings released at WPC -- a third of the on-premise market is in the process of moving into the cloud, he says.

"That move is going to present a challenge to a lot of channel firms, but it does not necessarily mean that they will go out of business," he says.

"But their market opportunity will reduce if they do not have some kind of cloud offering in their portfolio, and their potential to grow in the future could be put at risk."

Overall, Microsoft's Gibbons says she thinks the vendor has done a good job at WPC of assuring its on-premise partners about their continued relevance to the company.

"I think we have given partners some good evidence as to why cloud is not a threat to their business. The message is that Microsoft is in the cloud and on-premise, and the move between the two happens at the customer's own pace, and that has landed really well," she says.

"Before the event, we had a lot of partners who could not see how they were going to make money from the cloud, but I have not had any say that to me since."