Microsoft’s Cloud Ecosystem: Can Office 365 Migrate Partners To The Cloud?

Microsoft is stepping up its cloud efforts. During 2010, Steve Ballmer made a commitment to the cloud: “Microsoft invested $8.7 billion in R&D, with most of that devoted to cloud technologies. Today, 70 percent of Microsoft’s 40,000 engineers work on cloud-related products and services, in 2011 that number will grow to 90 percent.” With the release of Office 365, and Microsoft Dynamic's cloud version entering the market in 2012, Microsoft is living up to its “Cloud Power” campaign.

How can partners benefit? The potential of Office 365 resides in various segments:

Software license & pricing efficiencies – Distributors will mostly focus on this segment. MS Office 365 comes in various flavors. The P (SMB customers), K (Kiosk Workers), E (enterprise) and education versions all have different pricing and licensing options. With clear pricing guide lines from Microsoft, the channel has less freedom to set its own cloud pricing strategy. Microsoft will have to carefully balance its channel relationships when it comes to maintaining control over licensing and pricing strategy.

Software migration & installation services - The sweet spot for VARs and service providers that offer Microsoft solutions as part of their overall service offering. Microsoft’s Office 365 cloud offering has low entry barriers for the SMB market. VARS and SIs serving this market will use MS Office 365 as an easy entrance package for their customers, and at a later stage support their clients with transitions to more challenging (and higher service revenue margins) cloud offerings in the enterprise application environment.

Application development – The most interesting area for ISVs and VARs who have developed specific industry solutions or cross industry apps. MS Office 365 is an attractive alternative to other app stores, with the Microsoft Office 365 Market Place to offer third party products that integrate with Office 365. Though content wise it is still far behind Google, Salesforce.com and other market places, we do expect this market place to beef up quickly. The Microsoft developer community is a very active one, and the potential is huge. At the moment, Microsoft offers ISVs free Windows Azure and SQL Azure accounts for 30 days to help developers get a feel for Microsoft’s PaaS platforms. Though developers on Azure are not automatically Office 365 developers, they are only a small step removed.

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