Partners Worried About Their Cut of Microsoft Online Services

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Microsoft's software-plus-services strategy saw the addition of a host (pun intended) of online services today, announced at its Worldwide Partner Conference 2008 in Houston.


Microsoft Online Services will include Sharepoint, Exchange, Microsoft Dynamics CRM, Office Communications, Office Live Meeting and Exchange Hosted Filtering. Now Microsoft must begin managing the expectations of its partners, some of whom expressed initial disappointment with the terms for the offerings. Once they're out of beta later this year, partners and resellers will receive 12 percent of the contract price for the first year and 6 percent of subsequent fees.


InfoWorld reports that Eron Kelly, senior director of Microsoft's Business Online Service Group, emphasized that partners will benefit by participating in the software-plus-services strategy and building up recurring revenue streams from subscriptions.


But several Microsoft partners told ChannelWeb they fear the loss of the relationships they've built with customers, shrinking margins on services and an unfavorable sharing of ownership. Some predict this could even drive partners to other vendors. While this particular outcome seems unlikely, or at least a premature prediction, nervousness is on full display over what sales volume to expect.


While Bloomberg is reporting that Microsoft's online software sales will balloon as much as 37 percent this year, compared to 6 percent to 8 percent for traditional software sales, partners seem less certain about growth and are saying12 percent is not enough.


They may want to review sage advice from Alex Zaltsman, who a week or so ago wrote up for SearchSystemChannel.com a list of recommendations for resellers planning for exactly these kinds of changes in the IT landscape.