Special report: As you like it
Office 365 has done the counter-intuitive and created a market where, more than ever, the individual customer and channel partner work together for success.
This time, it's personal. Microsoft's Office 365, introduced in mid-2011, once signalled to some the heights of software commoditisation.
Computing in the cloud was an anonymised, rising tide that might not lift all boats. That is what many people thought, only a year or so ago.
In 2013 the cloud productivity suite is increasingly being used to deliver the bespoke offerings and operational customisation that businesses have long desired - and these things cannot be achieved without the channel.
Apay Obang-Oyway (pictured, right), general manager of the enterprise software and services group at distribution giant Ingram Micro, says Office 365 offers collaboration capability that fuels the potential for true business transformation - and that is what he finds most exciting.
He also says the channel margins are certainly there - although they will not necessarily just fall into the reseller's lap. "It is dependent on how you see the opportunity and how you sell it back out to the customer base," Obang-Oyway says.
"If you take it out as a commoditised sale and do not really understand the value the product or solution has to the customer, you will struggle to add more margin.
"So the partner must learn about the customers, understand the customers and where they are operating, and therefore understand how the Office 365 solution can deliver incremental value to an end-user organisation."
More than ever, success in the channel will involve a personal touch. It will mean probing deeply into each customer's situation, needs and goals. Then Office 365 becomes a part of a holistic customer approach that earns revenue for the reseller, as well as for the vendor and the customer organisation.
That may often mean a services wrap, which might require reseller transformation as a prerequisite. White-labelling potential is also there to assist, Obang-Oyway adds, as is a broader array of licensing including Open and online options.
So what are channel providers and customers experiencing so far vis à vis Office 365 out in the market?
CRN asked around for resellers that have tested the water with the cloud productivity suite so far. The responses we got were pretty positive.
Resellers report 365 success
Dan Scarfe, chief executive and co-founder of DotNet Solutions, says he is "absolutely" seeing success with Office 365, especially where Active Directory is set up to work with its own "flick of a switch" single sign-on and on-premise infrastructure, increasing ease of use.
"It's all about how we can provide a more comprehensive set of solutions to our customers, so we are moving away from traditional integration into being more of an MSP," Scarfe (pictured, left) confirms. "So being able to offer the core infrastructure via Azure and hosting/collaboration with Office 365 is just a great opportunity for customers."
DotNet is a Microsoft shop but works with Google Apps as well, and concedes some customers might prefer Google.
However, Scarfe believes Office 365 has the edge for many customer businesses - there is Active Directory and native Microsoft app integration, and you can still use PowerShell - and when it comes to cost, there is little in it, he says.
"And customers absolutely love it," Scarfe adds.
Jeremy Neal, head of online services at Imgroup, says expanding Japanese fast food chain Yo! Sushi was one of its early adopters for Office 365, with which it has been working from the beginning. It also migrated 4,000 users at West Midlands Ambulance Service to the cloud suite.
"For me, it was a clear way of helping our customers manage the challenges they were facing as a consequence of the economic downturn. It offers better services for less money," he says.
More up-to-date services, in a PAYG subscription, that can be scaled up and down and enables mobile working and collaboration across a variety of platforms? Sure, we'll have that, customers say. However, Neal warns that expectations must still be managed - and that of course is where the channel must step in.
"A lot of C-level execs have been given to believe that the cloud is a panacea to all their IT ills. They believe cloud is faster, cheaper - the IT they want as opposed to the IT they get. But it is never as easy as that; there is always a migration that has to take place," he says.
Compliance and security remain common concerns, yet Neal points out that the due diligence undertaken for cloud can actually make it easier for customer organisations to achieve ISO 27,001 certification and the like.
It is about educating the market, Neal (pictured, right) says, but the market has reached the point where customers are indeed keen to migrate - they just need the right help to achieve their dream.
Chris Lim, practice manager for Microsoft technology solutions at reseller Trustmarque - a company that has successfully transformed itself into a large services provider in the past few years - reiterates much of what Neal and Scarfe say.
"That definitely resonates with what we're seeing," says Lim. "And we are finding it is an area we can take to market quite confidently and deliver great results to customers - through professional services and consultancy."
The fact that the move from XP to Windows 7 or 8 will soon become pressing is another factor - on top of mobility, BYOD, cost pressures and everything else - that is pushing customers to move the cloud transformation up the priority list, he adds.
"If my business is clinical healthcare or local government, I don't want or need to run a massive datacentre that needs loads of storage, journalling, email handling and everything," Lim (pictured, left) says. "And Office 365 can help reduce this, delivering what I need and extending my reach."
Somebody still needs to handle the nuances - and that would be the channel, Lim assents.
Mark Herbert, director at distributor intY, says: "Office 365 is a great product, in my view, with a non-IT background. And the quality of the services is without question."
The changes to the partner programme will continue to raise sales, he predicted, with an expanding range of options available to resellers and their customers.
"But resellers must focus on working out where they add value and do that, to build that revenue stream, and it may take some time before it starts to feed through.
This means a focus on CRM, ERP and other business software suites, with Office 365 being the key to unlock sales and encourage a broadening view of the possibilities among customer organisations of different sizes.
"There is a great opportunity in being an integration partner and providing support services," Herbert (pictured, right) agrees.
Paul Talbot, chief technology officer at veteran managed services specialist Adept4, says his business is growing rapidly and winning more deals - and some of that is certainly down to the introduction of Office 365, coupled with the approach of end-of-life for other software and services.
"We have always been a traditional provider of managed services, where we took the technology and hosted it in a datacentre," he says. "But the past three years have been very positive."
Adept4 has reported it is on track to see its £3.5m revenue in 2012 inflate to £6m in 2014 as it taps into more contract opportunities around its oil and gas sector speciality. It also opened an office in Aberdeen and took on 10 new staff.
"People have begun, once again, narrow-investing in new technology," Talbot notes. "And Office 365 has proven a panacea for a number of issues."
Taking away the pain
For instance, it can improve overall compliance and governance by taking away the pain around licensing and who uses what software where. Pay-as-you-go moves the cost to opex - something which the channel should never underestimate as a driver of IT refresh, Talbot suggests - and on-premise overheads can be reduced as well, freeing up resources to do even more with less.
"And it is more cost-effective for us to deliver over the core, and then do the services wrap," he says. "Customers want broader and better services, 24/7."
Ingram Micro is offering an array of support, including online tools such as Cloud Profiler that help partners identify and classify end-user opportunities, geared to help any reseller at any stage of the process achieve these goals.
Obang-Oyway points to its education portfolio tailored to help resellers both with the technical and the services delivery aspects.
The LearnSmart initiative means partners are encouraged to consume education at their own pace, he says.
"There's Managed Services Provider University (MSPU) for service provider transformation," he adds. "And we have very capable people from service providers, some of whom have sold on the end-user level. They understand how to add value and bring that to bear.
"We also help with business planning, marketing planning, and acceleration - we can also help, in some cases, with securing opportunities. But the key is to educate people."
Microsoft itself is now seriously committed to cloud computing. Since Steve Ballmer's oft-quoted "at Microsoft, for the cloud, we're all in" comment back in 2010, the vendor has ratcheted up its cloud offering, and it has just announced a major realignment of the entire company in favour of devices and services, both for consumers and business users.
Ballmer (pictured, left, speaking in the US about the company's 2013 realignment) said in 2010: "Seriously, this is the time, it's the opportunity and the cloud forms the basis between the microprocessor and the internet...
"For all of you and all of us who are participating in this industry, it's just a great time to be all-in and really drive the next generation of technology advances."
Microsoft may not have ever traditionally been considered a leader in the SaaS field, but its massive, global installed base, especially in business, means that where the vendor goes in this area, the channel should surely follow.
Chris Rothwell, channel development group manager at Microsoft, says Office 365 seems to be going from strength to strength, and "thousands" of resellers are already selling the suite.
Customer momentum
"Partly that is down to customer momentum. Twelve months ago, people who thought cloud was the right way to go were perhaps in the minority, and it's definitely not a minority now," he said. "And partners now have more choice of how to go to market with Office 365."
He says the next 12 months will see even more partners begin to sell it for the first time - and those that do not make the move could well be left behind as customers of all sizes and industries migrate off-premise, looking for savings and services.
"Certainly two years ago there were lots of questions about how it would affect the partner base, and we have now seen some of these things come true. But I was talking to a reseller two months ago, and for him Office 365 is a way to win new customers.
"And then you are able to sell them additional hardware, software (if you want to call it that), an IT refresh, support contracts - there is a good amount of additional sales to these customers. And he knew that, and was seeing that come through, so is now investing more in Office 365," Rothwell says.
With Office 365, services such as Lync and SharePoint that used to be too expensive and complex can be adopted by much smaller organisations, supporting flexible, mobile workplaces and users. One example, Shine Therapy, no longer needs an office, accessing all its services from home or from the client's location, using any convenient internet connection.
Rothwell says these kinds of customers now find cross-sells and up-sells much more appealing and convenient as well.
"Cloud has reached a tipping point within SMB, and the majority of customers now think that cloud is a key part of their IT strategy over the next few years," he says. "And cloud is leading to more customers buying more software."
And Office 365 is said to be one of the fastest-selling products so far for Microsoft.