The Real Channel

14 Posts tagged with the microsoft tag

It's a question worth asking after Sage Vice President of Channel Management Tom Miller talked about Microsoft losing touch with its partners.

 

So who is Doug Burgum and why does he matter? Burgum spent 18 years as the chairman and CEO of Great Plains Software, the enterprise software business that Microsoft acquired in 2000 in a $1.1 billion stock swap deal. Burgum then became a Microsoft Senior Vice President working feverishly for six years and five months to make sure the Great Plains partners were well cared for before he decided to step aside in 2007.

 

It is worth noting that Miller, a 28-year channel veteran, had his own Great Plains solution provider business for six years, then went to work for Burgum and Great Plains, and then on to Microsoft after the acquisition. Miller took the top channel job at Microsoft rival Sage after being recruited by former Microsoft Vice President Jodi Uecker-Rust, now president of the Sage Business Solutions division.

 

Great Plains gave Microsoft a crown jewel that would have been nearly impossible for the company to build from scratch, namely a midmarket enterprise software solutions channel that was the envy of competitors. That was in no small part due to Burgum and his team's obsessive focus on making sure its partners had enough margin to build a healthy and robust business so they could provide exceptional service to customers.

 

Burgum had a passion for the entrepreneurial skin that Great Plains partners had in the game. He thought of them as stewards of the company and treated them like customers. Yes, customers.

 

One reason for Burgum's passion for partners was his own experience as the steward of a family agricultural business that was founded in 1906 and whose mission statement speaks mountains about the man and the company:

 

To provide superior goods, services, markets, and knowledge to our customers at competitive prices. To aid and assist our customers to prosper in business.

To make a reasonable profit so we can provide: services to our customers, jobs and opportunities for our employees, and an adequate return on investments for our owners.

To be environmentally responsible. To be proactive in the communities where we do business.

 

That mission statement could be adopted by any solution provider. It is, in fact, the basis of any sound business. Most solution providers fail because they don't keep right at the top of their mission statement that ability to make a reasonable profit so they can provide services to their customers. Think of how many solution providers failed because they gave away their services.

 

When Burgum gave his official farewell to partners at the Microsoft midmarket partners show, he talked about growing up in North Dakota and his parents, grandparents and great grandparents. And how he bet the family farm on Great Plains Software -- literally. Needless to say, there were more than a few partners that had tears in their eyes. Can you imagine any partner today getting choked up about an executive's departure?

 

The Burgum experience is instructive in the current economic environment where more than a few companies are trying to cut their way back to health on the backs of their solution provider partners.

 

Miller says that Microsoft has plainly and simply lost the personal touch with partners that characterized the Doug Burgum era. That personal touch and trust, he says, are at the heart of the Sage channel philosophy, a philosophy shared by Uecker-Rust and Sage Executive Vice President of Sales Paul Johnson.

 

Miller, who has logged a lot of channel miles, is making a lot of changes to make sure that Sage partners can build a healthy and profitable business. No small part of that is what he calls the basic tenet that partners are customers. That sadly is not always the case in this day and age.

 

So do you think Microsoft has lost the Doug Burgum partner Mojo?

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Would Microsoft CEO Steve Ballmer and Cisco CEO John Chambers be willing to take their valuable time to fill out a satisfaction survey from a company they buy products or services from?

 

It's a question that Daniel Duffy, the CEO of Valley Network Solutions, a $25 million Fresno Calif. Microsoft Gold partner and Cisco premier partner, wants the answer to.

 

Duffy is frustrated with what he sees as a time-consuming and costly customer satisfaction survey process that yields little useful data. Duffy has been doing these Microsoft and Cisco customer satisfaction surveys for years so he can maintain his partner status with those vendors. But he estimates that about three percent of the data or tidbits from the surveys are of value in upping customer satisfaction.

 

Valley Network Solutions does its own customer satisfaction surveys before a customer is billed to make sure customers are pleased with any and all products and services. "If anything is wrong we put the brakes on things and try to fix it before the invoice goes out," he says.

 

Among the questions that need to be answered with regard to these surveys:

 

*Do these surveys accurately measure customer satisfaction?

 

*Can the survey system be gamed by savvy solution providers? (Note:Customer names are provided by the solution providers themselves)

 

*Are these surveys statistically accurate? (Note: The response rates on these surveys is horrendous)

 

*Are these surveys the same for a small business, midsize business and a large enterprises? (Note:Would you measure satisfaction for these vastly different customers on the same scale?)

 

"We've participated in this program with Microsoft (and Cisco) for each of the last several years, and they've done nothing for us," said Duffy in a ChannelWeb Connect post. "They exasperate and bother good customers that would rather spend their time on THEIR jobs, rather than filling out lengthy surveys.  I think these surveys are a well-intentioned idea, without any consideration or respect for customer's time. "

 

"The vendors will tell you differently, and make any number of excuses how they don't take that long, or how customers that are happy with you will make time for this but really, that shows how far out of touch these vendors really are," continued Duffy. "See if John Chambers or Steve Balmer have time for this sort of nonsense.  If these guys would for once just live under the same mandates that they foist upon their loyal partners and customers, they'd wake up and finally "get it"."

 

The real big winner in the survey gambit is the third parties that conduct the surveys since they get a big fat check from the vendor.

For Duffy, vendors like Microsoft and Cisco would get a helluva lot more useful data from going back to basics by getting in a car and doing some old fashioned pavement pounding to get to know their VARs and customers.

 

"Stop trying to automate everything and make the computer do all the work," he says. "Ultimately a customer or VAR has to do the work and funnel the information into a database. The vendors need to go back to basics and talk to VARs and customers and find out what is going on!"

 

Do these surveys help the vendors get to the heart of the pain points and problems facing customers and solution providers? Would Ballmer or Chambers take the time to fill out these kind of customer satisfaction surveys?  And if they wouldn't why should their customers?

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So how much do businesses love Windows XP? Enough to pay up front for license packs and have them stored away by their solution provider partners, that's how much.

 

Robert Gregory, president of Ocean State Computers Ltd., a Providence, RI based solution provider, says he's stockpiling Windows XP license packs that have been bought and paid for by his customers. Those customers want to be sure they can get their hands on the operating system well into the future, even after the arrival of Windows 7 on October 22.

 

"The entire bottom shelf of my vault has eight 30 packs of XP Pro that are sold and paid for," he says. Gregory, who was among the solution providers that recently attended D&H Distributing's New England Show, has asked his rep to ship him an 30-pack of XP licenses every two weeks, whether he orders it or not.

 

The fact that Gregory and many other partners are buying licenses in advance for clients that want to stick with XP flies in the face of Microsoft's efforts to let XP fade into the rearview mirror. With Windows 7, Microsoft is offering XP Mode, which uses virtualization to run legacy XP apps within Windows 7. But the shaky performance of XP Mode test builds, combined with the security and management implications, are giving customers even more reason to stay on XP.

 

What's more, Microsoft is going to have to grapple with lingering anti-Vista sentiment, even though Windows 7 is being 'praised' within the Microsoft channel as a back-to-basics OS that is everything Vista should have been. "Corporate America and the general public got burnt and screwed with Vista," said one solution provider. "And they are not going to let that happen again."

 

Microsoft is trying to counteract the Vista loathing by portraying Windows 7 as a kinder, gentler OS that offer a simpler and more pleasing experience, claiming it requires "less waiting, less clicks, less hassles connecting to things…just less complex."

 

With that in mind, it is important to remember that Windows 7's biggest competition is not Vista or the Mac OS X. It's Windows XP, an 8 year old OS that remains the de facto standard for a large swath of the IT industry. XP works just fine for vertical market customers like nursing homes and police departments that run specialized, custom-built applications, and these organizations don't even have Windows 7 on their radar as yet.

 

This isn't to suggest that Windows 7 doesn’t offer advantages. Gregory says he has tested Windows 7 on a high end PC found that it runs superbly. However, the cost of that PC was $2,700. "Who is going to pay that kind of money to have performance?" he asks. "I think there will be a wait and see attitude on Windows 7. It will definitely cost more to deploy."

 

Microsoft insists that Windows 7 will run well on smaller devices, which wasn't the case with Vista. But Microsoft isn't offering an upgrade path from XP to Windows, and its expectation is that customers will migrate to the new OS on new hardware. Given the continued economic uncertainty, companies aren’t exactly champing at the bit to make that type of capital expenditure.

 

The last chance for distributors to order Windows XP is August 31.  With that in mind, distributors are stockpiling licenses, and so are solution providers. Will that be enough? Given the rabid and faithful following behind Windows XP, the answer is likely no.

 

What do you think of the Windows 7 vs. XP battle? Are you stockpiling Windows XP?

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When Paul Maritz "retired" from Microsoft nine years ago, Microsoft CEO Steve Ballmer called him "a leader among leaders."

 

What's more, Ballmer went to great lengths to point out that Maritz would "continue to work closely with me, Bill Gates and other senior leaders in the company as a consultant on key strategic and business issues."

 

Nine years later, the only key strategic and business issue that Maritz, the CEO of VMware, is working on is how to make sure that Microsoft doesn't take away his monopoly-like position in the virtualization market.

 

But Mr. Maritz knows Mr. Ballmer better than probably any other CEO on this planet. And he surely knows that Mr. Ballmer is not going to stand by without using every hardball tactic in his Microsoft playbook to take VMware down.

 

Don't let anyone fool you. Maritz left Microsoft because he wanted to be a CEO. And he was never going to be a CEO at Microsoft.

 

So now you have the Microsoft Wannabe CEO going head to head against the genuine Microsoft CEO in what is the most strategic and explosive segment of the commercial computer market: data center cloud computing.

 

Maritz has always been viewed as the thinking man's unemotional executive. Maritz's game is to outthink you and never let you know that he was thinking about you. He's the kind of executive that would react with the same stone face whether you told him you're going to miss the quarter by a country mile or make the quarter by a country mile (That's because he already knew you either made or missed the quarter).

 

Contrast that with Microsoft CEO Steve Ballmer. There is no one that is more emotional about winning and losing. It is Ballmer's raison d'etre. Trust me, Steve Ballmer is not going to react the same way as Maritz to one of his business unit heads telling him he is going to miss the quarter by a country mile rather than make the quarter by a country mile.

 

Needless to say it's going to be the equivalent of Bobby Fischer Vs. Boris Spassky to watch Ballmer and Maritz match wits for the virtualization chips.

 

It would be easy to look at VMware's dominant market position position here and the ownership stake EMC and Cisco have taken in the company and think that it will be hard for Microsoft to crack the VMware code. But that would be a BIG mistake.

 

Ballmer has a lot of buttons he can press to make sure that Maritz and VMware feel a lot of pain and pressure. Microsoft is a $59 billion company. VMWare is a $2 billion company.

 

Ballmer,  no doubt, is talking with HP CEO Mark Hurd about how the two companies can get together to make sure that Cisco, EMC and VMware find themselves looking into the data center from outside the glass house.

 

And don't think Ballmer isn't taking this virtualization battle personally. It's all personal to him. And having Maritz trying to eat his lunch makes it more personal.

 

First and foremost, you can bet Ballmer is going to use his financial muscle to make VMware irrelevant. "I think Microsoft is going to run over VMware," says one top VAR 500 solution provider executive. "It may take a while but it's going to happen."

 

Who do you think will win the Spy Vs. Spy battle between the Microsoft CEO and the Microsoft Wannabe CEO?

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Sage Software has finally gone on the offensive with a 1,058-word letter from Sage North America Executive Vice President of Sales Paul Johnson insisting the vendor's "partner community is diverse, vibrant and strong."

 

The letter, sent Monday to Sage's 5,000 North American channel partners, comes three weeks after the death on July 6 of  MIS Group of Dallas, Texas, Sage's North American Partner of the Year for the last two years. The demise of the MIS Group, which shut its doors without seeking Chapter 11 bankruptcy protection, has sparked a feeding frenzy as rivals Microsoft and NetSuite try to woo Sage resellers and customers with special offers.

 

Johnson in his letter hits on four major points (Our Business, Our Market Strength, Our Products and Services, and A Strong And Diverse Channel). Three of the four major sections contain data points including financial data, third-party analyst rankings and reviews of its products.

 

Not surprisingly, the big gaping hole in the letter, of course, is any kind of data on Sage's "strong and diverse channel." Johnson offers not ONE single piece of data on this strong and diverse group of channel partners.

 

Johnson does say that the "financial impact" from the MIS Group demise was not "material to the overall business." Was it material to the North American business? And what is the financial impact on the damaged credibility that comes with your partner of the year based on total sales volume in North America, closing its doors because, by its own admission, "we unfortunately are not able to be viable as a business."

 

Johnson says that the closing of a reseller organization isn't unprecedented. No, it certainly isn't. But it certainly is unprecedented for a Partner of the Year for a $2.55 billion vendor to disappear without a trace a mere two months after receiving its big award. And I do mean disappearing without a trace. Can you name another solution provider of this size collapsing without so much as a shred of its remaining assets being sold? This is a case for a financial forensics expert. MIS Group has remained true to form by not following through on a pledge to provide additional customer and vendor information on its Web site "as it becomes available."

Even with this letter, Sage has yet to shed even the dimmest light on the MIS Group demise. The questions remain:

 

 

*Why did MIS Group collapse?

 

*Why didn't MIS Group provide any kind of service plan migration for its existing customers?

 

*What steps has Sage taken to assure this does not happen again?

 

*Will Sage make changes to assure that its Partner of the Year honors is no longer based solely on total sales volume?

 

*How many Sage partners have shut down in the last year?

 

*How many Sage partners are in danger of closing?

 

There's no telling whether Sage truly does have a strong and diverse network of channel partners. To determine whether that is true, Sage would have to answer questions like these and provide some specific data on the financial viability of its roster of partners as ranked by profitability from its smallest  group of consultants to its midsize partners to its largest group of partners. Is Sage one of those vendors that receives 80 percent of its sales from 20 percent or less of its partners? If so, that by its nature is a recipe for channel disaster. The channel changes, and it changes fast. Those vendors that try to make it by sticking with those same big partners will always run into trouble.

 

Sage also needs to look at whether it needs to make a change in solution provider tiering from a pure sales volume formula to net profitability sales model.

 

There's a lot going on in a partner base as complex as the Sage channel ecosystem. But let's not fool ourselves. Just because Johnson says Sage has a strong and diverse channel does not make it true.

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The world has changed. We all knew that. But now it's official. The 20th century PC era is dead. It's a brave new Web 2.0 world of Google search engines, Apple iPhones, Software-as-a-Service (SaaS) and cloud computing. And none of them depend on Microsoft's Windows operating system or Office or for the most part any other of its many, many products.

 

For first time since its initial public offering more than 23 years ago, Microsoft has reported an annual decline in sales. Granted it was only three percent. And it took a worldwide economic collapse to make it happen. Nevertheless it has happened. And I've got to tell you, I feel old. I never thought I'd see a year in which Microsoft's sales were down. Not as long as Microsoft Chairman Bill Gates and Microsoft CEO Steve Ballmer were driving the business.

 

Microsoft is Gates and Ballmer. There is no company that has for so many years truly matched the personality of its two top executives. At their fast-paced and fever- pitched best, no one was more competitive than Gates and Ballmer. Side by side they successfully navigated every major twist and turn in the technology business for nearly a quarter century.

 

Does Microsoft still reflect Gates and Ballmer's competitive fire? Given that Gates is playing statesman in India at the very moment Microsoft is grappling with its current crises, probably not. That said, today the two of them are smarting. Believe me, that 3 percent drop in annual sales to $58.44 billion and 18 percent drop in net income to $14.57 billion pains them more than any two people on the face of this planet. They keep score. They are not happy about those numbers, and you can bet they are working furiously on their plan to turn those declines into big annual gains.

 

Microsoft made the transition to the Internet era. But it clearly has not made the transition to the Web 2.0 era. And that is not going to be easy. The fourth-quarter numbers are worse than anyone could have imagined. It's not good when the Wall Street Journal uses a five column banner head to describe quarterly results that reads: "Hit By PC Blight, Microsoft Profit Skids 29 Percent." PC blight is right. Microsoft's Windows client division revenue plummeted a mind-numbing 29 percent to $3.11 billion in the fourth quarter, down from $4.35 billion in the year-ago quarter.

 

Every single one of Microsoft's businesses were down in the quarter. Its Microsoft Business Division, which includes it Office franchise, was down 13 percent to $4.56 billion; its server and tools division down 6 percent to $3.5 billion; its entertainment and devices division down 25 percent to $1.18 billion and its online services business (the Web 2.0 unit) down 13 percent to a mere $731 million (search engine revenue was flat for the quarter). Overall, Microsoft's sales in the quarter were down 17 percent to $13.10 billion, while net income was down 29 percent to $3.05 billion.

 

Microsoft CFO Chris Liddell put a happy face on all of this, suggesting that "there is some sense we have hit bottom."

 

"Regardless of the macroeconomic conditions, we feel extremely good about our relative position and our product delivery plans," he said. "Macroeconomics may be the winner in the short-term, but product quality will drive medium-term growth."

 

"So in my view," Liddell continued, "the shape of the year will therefore be probably the most interesting of any year in recent memory." He's right. It is going to be an interesting year. No matter what kind of happy face Liddell wants to put on the future, the world has changed. Right now, Microsoft is a 20th century man living in a 21st century worl

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If you want to know just what kind of hot water you can get your company in with a faulty channel strategy, then check out the fallout that Sage is experiencing courtesy of the sudden death of its largest partner, MIS Group of Dallas.

First Microsoft and now NetSuite are jumping into the fray to recruit Sage partners and customers. Sage has gotten a channel black eye like you read about and is trying to fight back. It promises to communicate directly with its channel partners early next week. That said, if ever there was a time for the company to go on an all out campaign to all of its constituents (shareholders, customers, partners, press, analysts) it is now.

MIS Group was Sage’s partner of the year for two years running. When your partner of the year closes up shop in the dark of night and leaves town with nothing more than a post on its web site saying that the company has ceased all business operations, it’s not a sign of a solid channel.

If you really want to experience what a channel and public relations mess that MIS Group has gotten itself into with this partner of the year stuff check out this photograph from Sage’s annual Insights partner conference in mid-May.It shows Sage Business Solutions Division President Jodi Uecker-Rust, MIS Group CEO Robert Muir, MIS Group President Greg Boyd and Sage North America Customer Chief Officer Doug Meyer all smiles on what you would have thought would be a celebratory evening. But were they really celebrating in Nashville that evening? Didn’t any of the Sage and MIS Group executives that were playing out the awards scene on stage have a view into what would transpire a mere two months later? Were any of these executives on the stage shocked when MIS Group closed down? Didn’t Sage executives have any idea they had bet too heavily on a partner that was going down? Shouldn’t they have known? What does it say about the company’s channel strategy? All questions that deserve to be answered given what Sage is going through now.

Microsoft made its play earlier this week to Sage customers and partners “concerned with the stability of the Sage Software channel.” Now NetSuite is getting into the act. What’s different about NetSuite is, it’s a pure Software-as-a-Service (SaaS) pitch. Just to make sure their pitch doesn’t fall on deaf ears, NetSuite is offering a 50 percent revenue share. You read it right:  a whopping 50 percent revenue share. That is an amazing offer. NetSuite has even set up a website to wrangle in those Sage channel partners that screams: “Now’s The Time To Move Your Business To The Cloud. Join The NetSuite Solution Provider Program.”

The ERP market may be hurting. But not the on-demand software market. Gartner forecasts the SaaS market will grow at a compound annual growth rate of 19.4 percent through 2013. NetSuite sales were up 41 percent last year and 22 percent in the first quarter. Sage sales in North America were down 9 percent for the half year ended March 31. What Sage calls organic subscription revenues declined three percent in the first half, while organic software and software-related services revenue declined 22 percent.

The NetSuite offer is the real deal. It’s a whopping 50 percent margin to get into the growing  SaaS market. Sage should be worried. Are Sage Business Solutions Division President Jodi Uecker-Rust and Sage North America Chief Customer Officer Doug Meyer smiling now? Probably not.

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That’s the view of a top Sage partner who vented in the wake of the failure of Sage’s largest partner, MIS Group of Dallas, Texas.

The partner points to shrinking reseller margins and Sage’s failure to keep its MAS90/200 product current. “They are years behind on the 4.x rewrite and have not added any of the market demanded features like multi-bin and multi currency,” says the partner. “Instead they keep claiming how much money they spend (without any progress). In the mean time they are shrinking resellers margin and cutting the reseller maintenance margin. It’s no wonder that MIS group failed when you add obsolete product to a market where new sales are dramatically off. Expect this to play out for more resellers. Sage is totally destroying its reseller channel at an alarming rate.”

The Sage partner says that even Sage employees are worried and acknowledge the problem, but “no one in management does anything to make it better.”

“They do continue to promise to be profitable by cutting reseller margins but that isn’t going to work,” says the partner. “Their coveted maintenance revenue stream is about to constrict it a manner that will cause a large drop in revenue and there won’t be anything they can do about it because their resellers and probably more importantly the end user customers are fed up with Sage’s bullying behavior.” 

That “coveted maintenance revenue stream” is under fire from both customers and solution providers. “The VAR has to mostly make money from new license sales and implementations - support alone certainly won't keep the lights on,” says another solution provider in a ChannelWeb Connect post. “But the publisher keeps nearly 100 percent of the highly lucrative ongoing maintenance stream- which is where the fat publisher operating margins come from.   When new sales evaporate, the VAR's business model can turn bad in a hurry.”

“I do think that the channel will shift to the subscription model - where the VAR keeps a percentage of ongoing subscription fees forever,” says the partner. “Think about the difference in a VARs business model when you can keep 30 to 50 percent of the ongoing subscription fees of every client you have ever signed up - you'd build a significant ongoing revenue stream, so you could weather a storm like we are having now. Why should only the SAP's, Microsoft's, Oracle's and Sage's get to benefit from ongoing, 90 percent plus margin ongoing revenue streams?” Good question. Sounds to me like a clarion call for a recurring revenue managed services model which begs the question: why aren't more vendors bringing a managed services business model to the channel table?

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Noticably absent from the blizzard of hype at Microsoft's  worldwide partner conference this week is precisely how much the software giant will spend in sales support helping partners close deals.

One sign of a big cut in that total sales support  is Microsoft’s decision to eliminate telephone sales support for thousands of its partners. The changes come after Microsoft laid off an undisclosed number of Telephone Partner Account Managers (TPAMs) who provided sales assistance aimed at helping partners close deals and navigate the Microsoft bureaucracy. Partners say that TPAMs had a direct effect on their total sales and profits.

It's probably not a coincidence that Microsoft left what may be the most important session regarding just what kind of sales assistance partners can expect for the last day of the conference. That’s an 11 a.m. CT session at the Ernest N. Morial Convention Center in Rooms 275 and 276, hosted by Chris Weber, vice president of Microsoft's U.S. enterprise partner group, and Phil Sorgen, vice president of Microsoft's U.S. small and midsize business partner group. It’s all about how an overhaul of Microsoft’s partner program will affect the SALES SUPPORT partners get from Microsoft.

PLEASE anyone out there attending those sessions let the community know what the real channel story is in terms of sales support that you will get direct from Microsoft.

My questions for partners out there – those few U.S. partners that attended the Microsoft extravaganza (remember there are only 2,000 US partners at the show) and those that did not:

Are you getting more, less or no change in Microsoft sales support this year?

Are your Microsoft sales up, down or no change this year?

Are your Microsoft profits up, down or no change this year?

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Don’t look now but the so called Bing gains in market share are not all they are made out to be.

ComScore released its June qSearch market share figures on Tuesday showing Bing making a modest 0.4 percent gain in search query volume against Google and Yahoo to 8.4 percent, compared to May, 2009, up from an  0.3 percent jump in search market share for Bing from May to June.

 

Those number are just not right. Microsoft is no doubt getting credit for a slew of search engine users that have watched in horror as Bing hijacked the Internet Explorer 6 toolbar. I am speaking from experience here. It has happened to me. And I have no clue how to fix it. I just know that now when I want to search it is just that much harder to get to Google and perform a simple search. So have I stopped using Google for search? No. Am I technically running Bing? Yes.

Check out the post titled “Bing Hijacks IE6 Toolbar, Google Users Upset” on Search Engine Roundtable or even a wave of  posts on BroadbandDSLreports.com. Some claim Microsoft has issued a fix that was pushed out to all infected browsers. If that is the case the the fix certainly didn't give me back control of my search engine toolbar.

I’m skeptical of any search engine shift share numbers. Given the funny business that has gone on with Internet Explorer 6 the question should be asked: Are the Bing market share gains real?

One sign that Microsoft will do anything and everything in its power to leverage its Windows and Vista operating system, Internet Explorer browser and Office franchises to make gains with Bing is Microsoft CEO Steve Ballmer’s comments this week from Microsoft’s Worldwide Partner Conference.

Ballmer told Microsoft partners that Bing is "as good a demonstration of our tenacity and commitment as anything you've ever seen." Tenacity and commitment translates into any technical path that can be taken to get users to favor Bing versus Google.

"Our track record of having that tenacity turn into success has been quite high, and that's why many of you keep coming back," Ballmer told the more than 6,000 partners. "Because if we can't turn our great ideas and tenacity into success, then you'll go to someone else's partner conference."

 

Whose partner conference would that be? It certainly wouldn’t be Google’s since the search engine giant views the channel as nothing more than a blip on its screen with nary an investment in partner programs.

 

Microsoft would stand a lot better chance of gaining search engine market share if it had a search engine strategy that leveraged its thousands of solution provider partners. Even Google has recruited partners to sell its Search Engine appliances. What’s the Bing play for partners? Can you make money with Bing?

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Give it up for Zoho CEO Sridhar Vembu, who is the only one who has called out Microsoft CEO Steve Ballmer his muddled plan to try to stop the commoditization of the $16 billion Microsoft Office franchise with a software plus services strategy.

“What we see here is more evidence of Microsoft's strategic muddle,” said Vembu in a prepared statement blasted out to the press after Microsoft announced its “no cost” Web Office offering which is set to be delivered 12 to 18 months from now.. “How far do they want to go with their online offerings? They clearly recognize the risk — almost $16 billion in revenue (and almost the same in gross profit) is involved here, one of the largest franchises of software. We do not believe the $16 billion in revenue/profit is defensible, but our guess is that Steve Ballmer does not want to be the CEO who gives that news to shareholders. Not when the other multibillion franchise is also looking a bit wobbly.”

Vembu has gotten right to the heart of the matter. Microsoft is clearly not willing to take on the Zohos and Google Docs of the world head on. The software giant is, in fact,  facing the same dilemma that made one-time minicomputer pioneer Digital Equipment Corp. a footnote in computing history. Remember it was Digital Equipment Corp. Founder Ken Olsen who once said that he saw no reason for someone to have a computer on their desk.  What Olsen refused to do was respond to the new market conditions, namely the PC explosion. He was more interested in protecting his minicomputer fiefdom than attacking booming new markets. Microsoft is taking the exact same stand with its Office 2010 and its software plus services strategy. Software plus services = we refuse to play in the same sandbox as Google Docs and Zoho.


“Therein lies the fundamental dilemma for Microsoft and the fundamental opportunity for players like Zoho,” said Vembu in email missive.  “What are considered crown jewels on the desktop today will become features to be integrated into a variety of business applications, and not on fat clients, but on the Web.”

What’s interesting about Microsoft, Zoho and Google Docs is none of them have come to the table with terms and conditions for managed services partners to offer online apps under their own brand. There are tens of thousands of partners that are already making the majority of their sales and earnings from recurring revenue.

What does it say about just how far removed from the channel day to day are these companies when they don’t GET the BIGGEST AND MOST POWERFUL CHANNEL BUSINESS MODEL?

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By now the entire free world knows that Microsoft will finally offer a free version of its wildly popular Office productivity suite – including Word and Excel – to compete against the rapidly proliferating Google Docs office productivity suite.

The software giant used its annual Worldwide Partner Conference in New Orleans to reveal that its new Office Web applications will be available through Windows Live in a move that Microsoft proudly proclaims will give "more than 400 million consumers"  access to Office Web applications at "no cost.”

Be careful on how you apply that “no-cost” definition. The question is: Does “no cost” mean FREE? Not in my reading of the Microsoft tea leaves. Remember, Microsoft CEO Steve Ballmer has talked in the past about the company getting users to give up personal information that it can sell to advertisers to make its no-cost model work. My bet is there is going to have to be a serious exchange of some kind of Internet currency – as in, 'Will you switch lock, stock and barrel to Bing, eliminate Google as your search toolbar preference and get rid of all remnants of Google Docs?'

One clear sign that the Microsoft no-cost Office Web applications are not fully baked is the fact that the software giant has no information on how the thousands of Microsoft partners will play in this new Office Web  world. Ironic, given that the big Microsoft announcement came at the partner conference. Check out this article from ChannelWeb Senior Editor Richard Whiting that gives the Microsoft partner spin. Takeshi Numoto, corporate vice president of Microsoft Office, said Microsoft hasn't yet worked out just what role the channel will play in selling Office Web.

Numoto said Microsoft intends to deliver Office Web to consumers through its Office Live service, which today includes both ad-funded and subscription-based software. Another clear sign that Microsoft is hedging its bets: Office Web is a follow on to its Office 2010 product - clearly Microsoft priority one. Office 2010 has already entered its technical preview stage and will be available in the  first half of next year. 

Microsoft said that all customers with Office 2010 volume licenses, including more than 90 million Office annuity customers, would have the right to run Office Web on their premises as well. So, just think, all corporate customers funding Microsoft’s sales and earnings juggernaut will get to use Office Web on their premises at no cost. What’s more, Microsoft said that Office Web will be available via “Microsoft Online Services, where customers will be able to purchase a subscription as part of a hosted offering.” Microsoft intends to eventually provide a Software Plus Services component to all its applications. That’s part of what Microsoft calls its Software Plus Services strategy rather than Google’s Software as a Service (SaaS). As far as I can figure out, Software Plus Services means you pay for the software and then get the services.

Don’t get too heated about all these "no-cost" issues since Office Web will not be available sometime until the second half of 2010. That should just about be the same time that Google unleashes its Chrome operating system for netbooks – a direct hit against Microsoft’s operating system franchise.

Microsoft’s Office Web applications are a long way from competing with Google Docs and other online office competitors such as Zoho, which are eating away at Microsoft Office like a cancer.

The fact that Microsoft, once again, has failed to rally its thousands of partners to take up arms against the true pure online SaaS office productivity suites is not a good sign for Microsoft. Indeed, it shows that Google and the like have the upper hand here.

What Microsoft needs is a clear Office Web strategy – and it doesn’t need to be FREE – and you can bet it won’t be. What it needs is to engage its thousands of partners to stop Google Docs, Zoho and all the other online office  producitivy suite competitors.

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It’s a question worth asking given the sudden death of Sage’s largest software partner, MIS Group of Dallas, and Microsoft’s recent partner moves that are taking center stage this week at Microsoft’s annual Worldwide Partner Conference in New Orleans.

David Siegel, a Microsoft and Sage business consultant based in New Orleans, takes on that very question in a blog post in our ChannelWeb Connect Community.

“We have seen recent indications from both Microsoft and Sage that they want to concentrate their channel business with larger VARs,” said Siegel. “In Microsoft’s case, this means firms with at least 50 employees. Perhaps the fate of one of the country’s largest midmarket VARs will lead the channel management leadership at both companies to rethink the ‘bigger is better’ mind-set.

“There is a role in the marketplace for both the large VAR with broad product/service offerings and geographic coverage as well as for the small VAR who successfully serves customers with five or fewer consultants and deep expertise in one or two solutions (Wayne Schulz, who too modestly calls his firm a ‘small nobody VAR,’ is an excellent example),” said Siegel.

Siegel’s right. Vendors like Microsoft and Sage are trying to focus on fewer midmarket partners. Don’t let anyone fool you. That’s what Microsoft’s much-ballyhooed decision to overhaul its channel partner program -- including doing away with the current "Gold," "Certified" and "General Register" designations in favor of ranking partners according to their competencies -- is all about.

It’s no mistake that at the same time Microsoft announced the partner overhaul it has eliminated  telephone support for thousands of its partners. The changes come after Microsoft laid off an undisclosed number of Telephone Partner Account Managers (TPAMs) who provided sales assistance aimed at helping partners close deals and navigate the Microsoft bureaucracy, sources said.

Some Microsoft partners say the move is a precursor to decreasing its partner base as it moves to a cloud computing model. Microsoft, meanwhile, insists that it has some 640,000 channel partners and wants to grow its partner base to more than 1 million during the next two to three years. Who’s kidding who? One million!  Microsoft may be interested in 1 million consultants around the world. But it definitely isn’t interested in 1 million partner companies.

The fact is both Microsoft, Sage and a number of big players are moving to the bigger-is-better mind-set. That mind-set, however, is code words for cutting partner costs in the midst of the current economic downturn. The MIS Group’s death is a sign of the times. Bigger doesn’t mean you can’t fail. It just means that more people feel it when the giant falls.


What MIS Group’s failure shows is that the bigger is better channel strategy is a foolish play. And for my money, you’d be wise to make sure you have the right mix of big partners and smaller partners. Smaller partners like Siegel and Schulz are more often than not smarter and have more talented technical help than some of the larger midmarket VARs. This is not an indictment of any midmarket partner, just a plain fact that often smaller partners will do a better job than a larger, more scattered and distracted partner.

 

What do you think of the bigger-is-better channel partner strategies from the likes of Sage and Microsoft?

 

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Google’s new Chrome operating system for netbooks is still a year away. But there is little doubt that it is already keeping Microsoft Chairman Bill Gates and CEO Steve Ballmer up at night.

Gates and Ballmer built a $60 billion business that was ignited by a deal to provide IBM with an operating system for the IBM PC based on a per-unit license rather than a onetime fee. The deal for an OS that Gates bought from a company called Seattle Computer Products also included an agreement that let Gates and Microsoft license the OS to PC makers other than IBM.

This, of couse, goes down as Gates’ greatest moment. It represented a financial windfall that was the seed of all of Microsoft’s PC power and profits.

What’s ironic about this new chapter in the soap opera that is the highly lucrative technology business is that Google CEO Eric Schmidt, formerly of Novell, is taking a page out of the Gates playbook to hammer his old nemesis.

Gates and Ballmer, by the way, left Schmidt’s old company bloodied and beaten in the network wars. Remember, Novell was the leader in the network operating system market. And Gates and Ballmer used their business and technology savvy to leave Novell as an afterthought in the network OS world.

Now, Schmidt and Google are using the same tactic that allowed Microsoft to make a comeback in the browser wars in the early days of the Internet—offering Internet Explorer for FREE. That’s right, free is a great strategy when you have cash to burn and the product is not your primary cash cow. Free killed Netscape.

A free operating system is just what Google is planning to bring to netbook makers with its Chrome OS.  Google has, in fact, said it will offer the system free under an open-source license.

For Microsoft, whose operating systems business is already smarting from a PC market meltdown, this represents a financial migraine the likes of which  it has never before experienced.


The Wall Street Journal reported earlier this year that Microsoft makes just $15 per netbook with Windows XP Home, compared to between $50 and $60 for PCs running Windows Vista. Take the netbook phenomenon, which is transforming the market and putting a huge dent in the desktop PC market, and then add up the operating system financial hit Microsoft is likely to take.

Believe me, Gates and Ballmer are swapping e-mails right now on how they are going to take the shine off Chrome with a public-relations blitz. And watch, Microsoft will spend more money battling Chrome before it ever gets off the starting line than it will getting the channel locked and loaded with Windows Azure, its forthcoming cloud computing platform.

The sad thing about the operating system firefight between Google and Microsoft is that both these companies will spend mountains of money wining and dining the top netbook makers but will do little to influence solution providers and system builders. Those partners who are able to private-label netbooks and then support customers using them for business and play are the wild card in the operating system wars. Sadly, they are often looked at as a pawn rather than a strategic piece on the chessboard, even though they represent the majority of the PC market.

Google and Microsoft will likely fight the war without giving much thought to the channel. That may be the biggest and most foolhardy mistake they will make as they battle for netbook OS supremacy.


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