Certain expressions just jump out and smack you. Some things that people say can have a lasting impact. At the Microsoft Tech Ed Conference in New Orleans, a senior executive for the Redmond powerhouse explained his vision of their software partner roadmap quite directly: "If you're an ISV, get with the program or you'll be road kill."
Yep, that's what the man said.
Granted, Anders Vinberg surely knows his stuff. His Microsoft bio notes that he's “a Technical Fellow in the Management and Services Division, responsible for technical direction across Microsoft’s management initiatives: the products in the System Center family, the management infrastructure in Windows, and management services including Windows Update. His current areas of focus include virtualization, large-scale datacenters and clients for the new mobile lifestyles.” Vinberg previously spent 14 years at Computer Associates (now CA Technologies), as the principal architect of Unicenter, the company's enterprise management system. He holds a Master of Science in applied mathematics from the Royal Institute of Technology in Stockholm. He grew up in Sweden.
Recent numbers from IDC suggest a very strong Microsoft presence in the server market for the first quarter of 2010: Microsoft Windows server demand was positively impacted by the accelerating x86 server market, as hardware revenue increased 33.6 percent and unit shipments increased 28.3 percent year over year. Quarterly revenue of $5.1 billion for Windows servers represented 48.9 percent of overall quarterly factory revenue. This is the highest percentage of server hardware revenue that Windows servers have ever represented.
His comment still struck like a fist and seemed odd -- “road kill”? This is especially interesting in light of Microsoft's business model. Industry analyst Mark Madsen of Third Nature noted this week that, according to his source, a full 95 percent of Redmond's revenue comes from partners. That includes hardware, software and consulting partners.
This partner-focused strategy is both a strength and a weakness. In recent years, Microsoft has worked very hard to climb the enterprise ladder with SQL Server and Analysis Services. Senior execs at the conference openly admitted that enterprise customers have long questioned Microsoft's ability to service their mission-critical data-centered needs. Nonetheless, SQL Server has encroached on some territory previously owned by Oracle and IBM.
Still, as several analysts at the conference said, enterprise sales typically requires a dedicated enterprise sales team, and with Microsoft relying so heavily on partners, that's something of an Achilles heel, which a Microsoft insider openly admitted. The enterprise is a very different animal from an SMB. There are more politics, more inertia, stricter policies and much more complex environments.
So, whither Microsoft?
At Tech Ed, it was all about “learnings” - a term used by numerous presenters so frequently that there must have been some kind of messaging strategy in play. “We've learned from Bing,” proclaimed Bob Muglia, President of the Server and Tools division. He focused the keynote presentation heavily on the cloud. To that end, Microsoft is touting Windows Azure and SQL Azure, along with AppFabric. And of course, SharePoint plays a big role as well, especially in tandem with the Windows Phone 7, which was also showcased (albeit rather late, compared to the raging iPhone and Google's Android line).
There are definitely some keen advantages to embracing the full Microsoft stack. Mobile users can update Excel spreadsheets right from their phone, then save back to SharePoint for the home office and all other workers to use. And there are interesting improvements to Communications Server as well, including a soft phone that seems to be targeting the voice over IP and traditional phone markets.
And there's also the obvious reality that everything in the Microsoft stack tends to pull other parts of the Microsoft stack. So perhaps the long-term strategy is to get relatively small pieces of revenue from all kinds of different sources, such that the individual price tags look small, but the TCO is actually something more significant.
Speaking of the revenue stream, one Redmond insider with 15 years at the software giant noted that the company now gets about $50 per PC, all told. He also commented that piracy of Microsoft products is downright rampant, which just about everyone knows. So, he postulated, when you consider that the average life span of a PC is roughly three years, that equates to roughly $17 per year.
What if Microsoft instead went to a services model? (Hint: SharePoint Services!) This is the SaaS vision, after all. It's also how Zoho operates: you rent the software for small amounts of money each month. At $17 per year, it wouldn't take much in the way of services for Microsoft to increase its revenue stream quite significantly. And as Madsen notes, SaaS basically kills piracy stone dead.
The road forward is challenging, though. Without a dedicated high-end sales force focused on the enterprise, Redmond will continue to have challenges penetrating those high-value accounts. And as Google climbs the stack with Google Docs (yes, Microsoft's Office team feels the pressure), and with Apple's hardware innovations again upsetting the apple cart, Redmond finds itself in a curious position.
Consider this: Google Docs offers tremendous collaboration capabilities around editing simple documents. Multiple users can log into the same document and make changes at the same time. There's no need to ship many documents around via email, which causes lots of headaches, including the ever-frustrating pain of version control. Now imagine taking Google Docs to the next level by pointing the revered Google search engine at your file servers. Sounds a lot like SharePoint.
“We have great respect for Google and Apple,” noted our Redmond insider. He credited Apple with the ability to make “hard choices” – such as the decision to snub Adobe, whose Flash technology has certainly been the de facto standard for animation on the Web, as well as multimedia. “Can you imagine Microsoft saying that we wouldn't support Flash? That would never happen,” he said.
Thus, playing nice with partners can certainly keep Microsoft running and gunning.
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