Will Nadella change the chan­nel sta­tus quo?

CRN - - EDIT OPINION - STEVE BURKE E-mail Steven Burke at sburke@thechan­nel­com­pany.com

Mi­crosoft part­ners have lit­tle doubt that new Mi­crosoft CEO Satya Nadella has the tech­nol­ogy chops to deliver a healthy dose of in­no­va­tion to the soft­ware gi­ant’s prod­uct and ser­vices port­fo­lio.

But the jury is out on whether the 22-year Mi­crosoft vet­eran will be will­ing to al­ter its part­ner pro­grams that many part­ners be­lieve is head­ing in the wrong di­rec­tion af­ter a se­ries of cloud com­put­ing sales in­cen­tive cut­backs.

While some of these cut­backs are small, such as lim­its on phone sup­port, the other in­cen­tive cuts, mostly on sales of Of­fice 365, are quite deep and will have a huge fi­nan­cial im­pact on part­ners.

In fact, CRN has re­ported that part­ners that sell Of­fice 365 and other cloud ser­vices in Mi­crosoft’s Ad­vi­sor En­ter­prise Agree­ment De­ploy pro­gram ex­pect to see their in­cen­tive pay­ments drop as much as 40 per­cent to 50 per­cent.

Mi­crosoft claims Of­fice 365 is its fastest-grow­ing prod­uct ever and that the num­ber of part­ners sell­ing Of­fice 365 has dou­bled in the past year. But the way part­ners see it, if Mi­crosoft val­ues their role in mak­ing Of­fice 365 suc­cess­ful, it should be in­creas­ing in­cen­tives rather than cut­ting them.

In a re­cent poll of so­lu­tion providers con­ducted by CRN’s Chan­nel In­tel­li­gence Coun­cil, 34 per­cent of the 229 leading Mi­crosoft part­ner re­spon­dents said they are plan­ning to add Google Apps to their prod­uct port­fo­lio due to the in­cen­tive cuts an­nounced by Mi­crosoft. What is more alarm­ing is that nearly 70 per­cent of the part­ners polled said they plan to in­crease their rec­om­men­da­tion of Google Apps in re­sponse to the Of­fice 365 in­cen­tive cuts.

Not just that, Mi­crosoft is also suf­fer­ing on the in­dus­try and OEM part­ner­ship front which an­a­lysts be­lieve could threaten Mi­crosoft’s in­flu­ence in the PC mar­ket. In­tel along with many PC OEMs too are launch­ing Google Chrome­books and hy­brid An­droid de­vices.

More re­cently, Google has teamed up with VMware to let Win­dows apps, data and desk­tops run on Chrome­books for the first time, us­ing a jointly de­vel­oped tech­nol­ogy they are pitch­ing as a cost-ef­fec­tive op­tion for Win­dows XP mi­gra­tions. The tech­nol­ogy mar­ries VMware’s View desk­top vir­tu­al­iza­tion soft­ware with Google Chrome­books, with ac­cess to Win­dows apps en­abled by VMware’s Blast HTML5 tech­nol­ogy.

Clearly, Nadella has his task cut out. While he puts the plan to­gether that will steer the trans­for­ma­tion at Mi­crosoft, he must re­al­ize that tak­ing the com­pany’s large part­ner ecosys­tem along will be a key to its suc­cess go­ing for­ward.

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