Tag Archives: Direct

IBM moving away from Sun

IBM has backed off buying Sun, so where does that leave Sun? This may be a negotiating tactic on the part of IBM. Presuming it isn’t and Sun must go solo, it is worth re-examining Sun’s announcements of last week. Sun is laying off staff and announced a channel re-organization. Was that re-org a strategic choice, or a tactical one? Last week the company announced that its primary route to market would be via its indirect sales channel. On the face of it, it looks smart. The company already has a good partner program. Sun said that it had put into place a new inside sales organization in North America to generate leads, a new lead distribution system, training for partners and better partner access to technology. Under the new program, direct sales people will focus on the top 300 accounts. Provided those accounts are named and the direct sales ring fenced, channel partners will be happy – good fences, good neighbours.

In addition, the old sales organization was too complex with too many in-house fingers in a single customer’s pie. An account will now have fewer people involved in selling into an account. That is often the problem with large sales organizations that matrix the customer into confusion – one person for the geographic territory, one person for the customer’s industry, one person for each product line – all commissioned in some way for the sale into that customer. One ends up with an N dimensional sales force and the customer, by being overly served is poorly served through poor coordination and communication. Internally, you can end up with competing fiefdoms.

In the light of all the recent turmoil, are these changes enough to turn the company around or by adopting a more indirect strategy during a downturn, will it accelerate a demise? Anything that involves a major route to market change is going to have a short term negative impact on revenue. No-one can accurately predict the depth or breadth of that dip. Will that Sun be able to ride out the short term to see the long term gain?  Personally I hope so, because the industry is more interesting with an independent Sun than without.

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Filed under Direct, IBM, Indirect, Sun

Microsoft’s Business Productivity Online Suite and Partners

Yesterday I attended a partner briefing at Microsoft UK for their new Business Productivity Online Suite (BPOS) which goes live in a few weeks in Europe and Japan.  The service has already been up and running since November in the US.  I was particularly impressed by the level of investment Microsoft is putting into their data centres – with a primary one in Dublin, a secondary centre in Amsterdam as well as installations in Virginia, Washington State and Singapore with plans for more in APAC.   BPOS is Microsoft’s online offering of Live Meeting, SharePoint, Office Communications Server and Exchange Server with a minimum of 5 seats and around 13,000 seats max for standard (their multi-tenanted version) and a dedicated version intended for larger installs that is also finding favour amongst small customers.  At $15/user/month it is more than three times the price of Google Apps. The types of clients interested in BPOS cluster at the low 5 to 50 seat end, and surprisingly for Microsoft, the very high end blue chip clients. 

It is plainly evident that the company has put a lot of thought and effort into this. It has clear competition from Salesforce.com and Google and is determined to get SaaS right.  It is important to note that the service is not Microsoft Office online (yet) nor does it offer full telephony (yet) or CRM (yet)  but it doesn’t take a crystal ball to predict that they will soon flesh out their offerings.  Their sales projections are, on the other hand, relatively modest.  That is the issue I have with many new Microsoft ventures.  The company is huge and experienced sales hands know how to game the system.  They know to sandbag and slightly over-achieve.  An ambitious sales target presents higher risks – and lower individual rewards.  But that can also mean a new venture fails to find support in the company, and it flounders through lack of investment. That does not seem to be the case here as Microsoft feels the hot breath of competition and still retains much of the DNA that drove them to strive for share and seek choke points. 

By extending BPOS down to 5 users, and offering 5G of mail storage per user, they are competing squarely against their own SharePoint and Exchange hosting partners.  It must be said that if you add up all the company’s hosting partner’s mailboxes it doesn’t amount to more than 20% of the total number of Exchange seats, so though significant, partners have been at that game for a number of years and haven’t grown as quickly as Microsoft or they had hoped.   And that is because hosting Exchange technically isn’t easy – as Microsoft is finding out, because these partners started small and have been  growing organically, and because, importantly – most customers mid tier and up are loathe to give up their data.  For small companies, who don’t have an IT person, there isn’t a choice, so the data issue is not significant – but those small companies can be as difficult to service as ones 10 and 100 times their size – and can have the same cost of sale.    

It looks like there are significant teething problems for Microsoft at the low end. Microsoft needs partners in that segment. Their infrastructure software out of the box needs integration and support.  And it needs a sales force, so it can’t afford to alienate its partners.  By offering partners an 18% finder’s fee the first year and 6% thereafter and pledging not to offer end user help desk support, it is hoping to sweeten the medicine.  But by transacting directly with the end customer, the company is asking the partner to become an agency, and that is a point to which many partners are openly hostile.  Partners hate to lose control of their customer and a vendor transacting is a threat.  Microsoft tried to spin it, saying it was taking the credit risk, but it wasn’t sufficient to disperse the unease in the room. Yet many partners haven’t been transacting for on-premises Microsoft licenses anyway for years. There is no margin in it and they leave that to license specialist resellers.  Microsoft point to a 7:1 partner services vs license revenue ratio of opportunity for partners.    But that is also a problem. If you have to spend another $7 to get value out of $1 of software, that is an opportunity for a competing SaaS vendor to embed value in the service directly,  lower cost of ownership and time to value.  However, if there is one thing I have learnt from 25 years of competing against and working with Microsoft, it is this – they are extremely tenacious.  Eventually, they get things right. It may take five years, it may take ten, but they are determined.  And partners, as they have always done, will first bob and weave, then adapt or close shop.

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Filed under Direct, Google, Indirect, Microsoft, SaaS

Zoho’s routes to market

One normally associates software as a service (SaaS) vendor with direct sales channels – either enterprise sales people or direct over the web.  Some pure play SaaS vendors are developing more traditional indirect routes as they realize that a Web 2.0 offering doesn’t mean that there exists a quick and effective Web 2.0 way to reach potential customers – especially business customers.

Zoho is one such company, a SaaS vendor with a wide portfolio of business productivity applications.  Their partner programme, Zoho Alliance Partner Progam (ZAPP) has been going for 18 months now. The company now claims 200 resellers and at least one ISaaS (independent SaaS partner) in Huddle.net.   They also team with service providers such as Swisscom.

Ian Wenig, Zoho’s senior director of strategic alliances writes

“We try to be as transparent and fluid as possible, making it easy to do business with us while maintaining professionalism and focus on revenues. As a product-focused, passionately driven software engineering company you might also expect ZAPP to share some of these attributes. And it does. We are making some innovations on the product front which enable our partners to take our applications to their customers, blurring the line between vendor and partner. You’ll hear some interesting news about this moving forward. We have also developed a few tools for our partners to easily manage their interactions with Zoho as well as provide a level of automation that helps them be more self-sufficient and profitable. These include a secure Reseller Store, a Partner portal and the capability of allowing resellers to offer Zoho services from their websites.

As the world adjusts to an economic downturn and SaaS matures further, we will continue to see a steady rise in new businesses wanting to jump into the cloud computing space as well as take part in the newly emerging “Cloud Channel” that Zoho and its partners are in the process of creating. While Microsoft, IBM and other large ISV’s have mature, multi-level channel programs in place, my guess is they are still working on models for their SaaS business. I am not so sure they will get it right the first time or anytime soon. Our competitors like Salesforce have done a poor job in creating a vibrant channel mostly because their heart is in closing direct sales in large accounts. While our program is far from perfect, we are committed to our partners and will be focused on executing on our strategy of addressing a globally diverse customer and partner base employing the latest technologies and business models.”

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Microsoft’s new direct retail channel

Two weeks ago, Microsoft announced that it had hired David Porter, a veteran of DreamWorks Animation and WalMart as their corporate vice president of Retail Stores.  Just as Sony announced it would close its flagship PlayStation store in San Francisco, Microsoft decides to follow Apple’s well developed path by opening up its own retail channel, at least in the US.  Coincidentally, it was in the very same centre as the ill fated Sony store that Microsoft ran its own store from 1999 till 2001.

As part of the Vista launch last year, the company had already experimented with the store in a store concept once so often finds in department store cosmetics.    Apple hit on a successful formula that supported the notions of simplicity, personality and flair, in an accessible, come try me, environment.  They are destinations that Mac fans flock to.  They were developed as Apple’s response to a lack of control over its indirect retail channel.  Now Apple has 251 stores across the world with plans this year to grow that by 10%.  The stores are a source of comfort to their consumers, places where they can have problems easily sorted out. Microsoft has much broader, more well- developed indirect channels and a much more complex product portfolio that requires third party hardware platforms. It faces the same challenge of control Apple had, yet in an ecosystem where so many variables are beyond Microsoft’s control even in retail.  Does this mean that Microsoft will also risk producing or labelling a Microsoft PC?

If the company can develop its positive personality through a friendly, accessible, cool retail environment, then its entire channel stands to benefit but it is a bold and risky move.

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Filed under Apple, Direct, Microsoft, Retail, Sony