Can Microsoft balance the priorities of channel partners, ISVs and $MSFT shareholders?


Microsoft has reached a business inflection point involving cloud services revenue, shareholder and partner priorities. The background:

LinkedIn: Nicole Dezen, Director of Partners, Microsoft.

At first glance, all seems well in the country of Microsoft. The company’s market capitalization, fueled by Microsoft 365 and Azure customer demand, is $1.9. trillion (with a T) – although equities have come under pressure in recent months amid a SaaS market correction.

New offerings, such as the ISV Success program (launching in fall 2022) and the Migrate and Modernize with Azure program, are designed to further strengthen Microsoft’s cloud ecosystem and associated revenue.

But look closer, and some Microsoft partners remain concerned about an impending move in October 2022 from the Microsoft Partner Network program to the Microsoft Cloud Partner program. Additionally, the company has evolved the way it sells Microsoft 365 subscriptions. The result: Discounted annual subscriptions sound tempting, but if customers don’t pay their Microsoft 365 bills, MSP and SMB partners could be liable for unpaid subscription balances.

Tricky Math: Delivering returns to $MSFT shareholders and profit opportunities to partners

Ultimately, Microsoft is trying to solve a financial math problem. The company must continue to grow cloud revenue and associated earnings to appease shareholders, many of whom have become dependent on Microsoft’s rapid growth and associated shareholder returns over the past decade.

Fast forward to July 2022, and SaaS company valuations are under pressure. And all eyes will be on Microsoft when the company announces its fourth quarter 2022 financial results on July 26, 2022. During this earnings call, we’ll likely get some new clues about Microsoft’s ability to sustain its meteoric growth — and whether the partners really benefit from this growth. .

That said, Microsoft remains the premier SaaS software giant that partners can’t ignore. In contrast, Amazon Web Services (AWS) generally lacks credible SaaS alternatives. And Google Workspace hasn’t exactly replaced Microsoft 365 desktops, laptops, and enterprise virtual machines. (Meanwhile, competition in the IaaS market — between Microsoft Azure, AWS, and Google Cloud Platform — remains much more intense.)

Deja vu: Previous debates on the Microsoft Cloud Partner Program

Certainly, Microsoft has already encountered speed bumps from partner programs. The initial release of Office 365 in 2010 did not allow partners to manage end customer billing and pricing. Microsoft CEO at the time, Steve Ballmer, seemed more focused on direct cloud sales than partner-focused sales. In 2012, the company finally came to its senses and introduced a standard billing option for Office 365 partners.

Fast forward to 2019, and Microsoft partners have been complaining about planned partner program changes that would have eliminated various software discounts, support options, and other benefits. At first, Microsoft dug in and insisted that Partner Program benefits — including free software subscriptions for internal partner use — were too expensive to maintain. But the software company eventually backed down and complied with partner demands.

Now jump into 2022, and some Microsoft partners are complaining about program changes that emphasize sales rather than support, ComputerWorld contributor Susan Bradley pointed out in March 2022.

winning solves everything

Yet partners often stop grunting when winning and making money. If Microsoft’s new partner programs succeed in fueling revenue growth — internally and for partners — I suspect much of the partner grumbling will die down. We’ll be watching the clues when those Microsoft Q4 2022 financial results come out on July 26, 2022.

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