Microsoft Partner Initiatives, Pricing Take Shape

HOUSTON - Microsoft started its Microsoft Worldwide Partner Conference 2008 with a series of announcements including a new pricing and partner model for Microsoft Online Services, as well as other announcements around the company's effort to focus on a software-plus-services strategy.

Indeed, during the opening keynote address, Stephen Elop, president of the Microsoft Business Division, announced the pricing and partner model for two new suites of subscription services as part of the Microsoft Online Services family, which delivers software as a subscription service managed from a Microsoft data center and sold by partners. With Microsoft Online Services, customers have the option to access messaging, collaboration and communications software over the Internet. These services will be sold as a suite or as stand-alone products with prices starting as low as $3 per month, the company said.

“Our vision is that everything you can do with our onsite servers, you will be able to do with our online services,” Elop said. “For partners, it’s about the differentiated value they can deliver on top of our services, as well as providing them with an ongoing revenue stream. There is incredible partner opportunity at every level--integration, migration, customization, consulting services and managed services."

Under the new business model, partners selling the two suites will receive 12 percent of the first-year contract value with a recurring revenue stream of 6 percent of the subscription fee every year for the life of the customer contract, Elop said. Moreover, to help partners get the guidance for discovery, enrollment and activation of the two suites, a new program was announced called Quickstart for Microsoft Online Services.

Taking a swipe at Marc Benioff, chairman and CEO of Salesforce.com, Elop said, "There are some self-proclaimed industry luminaries who say software is dead," he said. But there will be software on client devices and on all manner of machines, he said. And "some business applications will be completely built and deployed in the cloud," Elop said. He said Microsoft believes that people want the power of choice to decide how they want to deploy software solutions. "There is a huge opportunity here, he said, noting an IDC study that said Web deployment of business applications will grow by 32 percent by the year 2011, while Gartner said by 2011 all new deployment will be Web-based.

Meanwhile, Elop, who joined Microsoft six months ago, said that during the process of interviewing for the job and doing his own due diligence on Microsoft, he learned about the strength of the business and the health of Microsoft and its ecosystem.

"There are 500,000 partners working with Microsoft," Elop said. "And for every one dollar of revenue Microsoft generates, partners generate seven dollars."

Elop also said he learned a lot about the dedication and competitive spirit of Microsoft and the company's desire to win, along with the company's intellectual integrity and capability to recognize problems. Elop said he had a three-hour interview with Microsoft Chairman Bill Gates before getting the job. "Bill gave an unambiguous and fresh assessment" of the biggest challenges facing Microsoft, Elop said. In addition, Elop said he learned that despite the views of many in the industry, Microsoft does indeed innovate.

"We have an opportunity for impact with disruptive forces like software plus services," Elop said. "Microsoft will lead through these disruptive times."