The Future of Microsoft Partners in the Era of Cloud

The August 2013 Gartner Magic Quadrant for Infrastructure as a Service put AWS in a different league to Microsoft’s Azure, and anyone else for that matter.

Gartner Magic Quadrant for Cloud IaaS

If you’re an existing Microsoft partner it makes for rather nervous reading. Microsoft are pushing hard for their partners to take a cloud-first approach. On one hand they are squeezing their incentives to partners for conventional System Integrator (SI) work such as selling servers and traditional licences to customers and encouraging them to take a cloud-centric approach, but on the other they appear to be an also-ran in the cloud IaaS race; the cloud equivalent of their traditional on-premise strength.

So is there opportunity for current Microsoft SI partners?  I think that, as long as Microsoft stay the course (not traditionally a tactic them employ), a few factors are going to combine to create a big opportunity for the brave.

The Cloud Backlash

I read with interest last year that SeoMoz (now just Mozwas looking to move away from AWS and to a largely on-premise setup. This was confirmed in their CEO’s Year in Review.

Over the years, we’ve spent many small fortunes at Amazon Web Services. It was killing our margins and adding to product instability. Adding insult to injury, we’ve found the service… lacking.
– Sarah Bird

I have seen the same at my company where 3-year TCO for Windows Server workloads are up to 50% cheaper for our customers when putting fixed workloads on-premise.

The conclusion is that it’s cheaper to run on-premise for fixed workloads and burst into the cloud for elastic loads.

We see this with many new technologies — mass adoption, followed by the pendulum swinging the other way. Eventually it settles somewhere in the middle — in this case the middle is a hybrid of on-premise and cloud; hybrid cloud.

The NSA and Data Sovereignty

Further pulling the pendulum back are the ongoing NSA stories from the USA, and governments’ rush to regulate the cloud environment. I don’t believe that we’ve even seen the beginning of the fallout from the NSA revelations for American cloud hosting providers. The nature of the legal situation means that anyone who knows anything is legally bound to remain silent, whilst the hyperbolic speculators create the headlines. Once Google et al are successful in their petition for increased transparency on NSA requestsand the gag orders are loosened, the real erosion of trust of American technology companies — especially cloud providers — will start. This will further encourage business to look at on-premise-first solutions.

As the Asia Cloud Computing Association’s Cloud Readiness Index outlines, many developing countries such as Malaysia, China and Indonesia (as well asBrazil) have enacted, or are considering, data sovereignty laws that are requiring service providers to host domestic clouds to serve their country. This means building more data centres and distributing the currently centralised workloads into nationalistic clouds — often with their own regulatory requirements — and reducing the economies of scale for cloud computing and blurring the line between public and private clouds.

The legal framework for cloud services [in Indonesia] is also unclear; current regulations require any company providing a ‘public service’ to establish an onshore data centre.
– Asia Cloud Computing Association Cloud Readiness Index 2012

The Microsoft Advantage

So where is the path out of the woods for the Microsoft partners?

Despite some of these comparative shortcomings, Microsoft still owns the business operating system. Microsoft currently has a 75% share in server operating systems and Microsoft Windows still runs 95% of business computers; if you want to run your own applications you’re going to need a Windows Server machine.

This means that if you’re looking at doing a hybrid IaaS deployment, Microsoft can offer you something very valuable; consistency. Consistency of interface, of nomenclature, of the computing stack, as well as making your skills and expertise transferable.

Virtualisation is Free

Add that into the commoditisation (and therefore low cost) of virtualisation. XenServer is now open source and free, vSphere is now free, Hyper-V Server 2012 is also free. Granted, you still have to pay for the at-scale management tools for these systems, but the technology is free.

With these virtualisation technologies you can now create a homogeneous hypervisor on top of heterogeneous hardware. If you have enough headroom, you can event extend some hardware beyond its normal lifetime knowing that failure won’t lead to downtime.

SPLA

One growing area of Microsoft is their Service Provider Licencing Agreement (SPLA) which allows you to sell existing Microsoft products to customers on a per-user basis. Before this type of licencing, you could only buy Microsoft software like Windows Server, Exchange and SQL Server with pay-once, lifetime licences which were prohibitively expensive to build a scalable business upon. Seeing as you can use SPLA in cloud environments, on the Microsoft partners’ hardware or on the customers’ hardware, it could be a lifeline for Microsoft partners.

Sell Value, Not Technology

Add all of this together and you have a great opportunity for Microsoft partners. Embrace the coming preference for hybrid cloud, stop selling technologies and buzzwords, and start doing your jobs; making sense of the market and the technology and turning it into a solution for the customer that adds value to their business.

Using SPLA licencing on top of a hypervisor on existing, leased or new hardware for fixed workloads, bursting into Azure IaaS for dynamic workloads and augmented with the even more scalable public cloud SaaS offerings like Office 365, and wrapping the whole lot up into a SLA with a single billing contact for your customers is easy for them to understand, and is selling value rather than technology. Most importantly, it changes the Microsoft partner from a dumb box shifter into a company that is once again adding value to the chain, and that’s where true long term profitability comes from.