Customers First, Then Partners

An Open Letter to Satya Nadella

Dear Satya Nadella,

I am sitting in my hotel room in Orlando looking forward to the opening of the Microsoft World Partner Conference today, Monday. The time difference and jetlag have left me unable to get a wink of sleep—and thinking about Microsoft’s future is hardly conducive to sleeping easily…

And yet—to begin with—I am truly impressed by how Microsoft has changed already on your watch as Chief Executive Officer. The slogan “Cloud First, Mobile First” is in my option fundamentally right. I would like to add to it my personal conviction that without mobile there is no cloud computing.

I would further like to add, however, that without a clear vision for the partners in the Microsoft ecosphere there can be no success for Microsoft. That is why this year’s WPC may well be the most important ever. The classic sales streams that were a result of the predominant PC business are starting to dry up. The course corrections toward “Cloud First, Mobile First” that you have ushered in came not a moment too soon. What now matters is to implement them, and that requires a common vision for Microsoft, customers and partners.

This vision is not necessarily apparent. At present, every partner must find his own way to the cloud. The maps that exist are, as yet, inadequate. One point is clear, however. There is an obstacle on the road to the cloud that both Microsoft and its partners must surmount. It is the “Vale of Tears” that lasts for around three disappointing fiscal years.

The road to the cloud is not merely a technical and not merely a marketing adventure. It is, above all, an accounting challenge due to the change of business model from license sales to rental revenues that it involves. In the first quarters rental revenue comes nowhere near to offsetting the downturn in license sales. Until now we have all been able to decide when we embark on the journey through this vale. It now looks as though the market is making this decision for us. Falling sales figures in the PC segment are already showing Microsoft that this is what is happening.

But for many partners—always assuming that they have accumulated sufficient reserves to survive this journey through the Vale of Tears—what actually awaits them at the other end of the vale is still not at all clear. Where are the sources of revenue in a cloudified world? How can existing solution portfolios be carried over into the new world—and with them the customers?

These are questions to which this WPC must provide answers. Instead, what we have heard in the run-up is irritating news. Pricing policy for SQL Server licenses is a case in point. In Germany alone around 200 software partners have marketed 400 to 500,000 SQL Server licenses. As a rule they have been the less expensive runtime version that will no longer be available for the cloud. What this means for customers and partners is that they will not only no longer be able to transfer existing on-premises solutions to the cloud one-to-one; they will also have to switch to a much more expensive version. That alone would use up the cost benefit that going for the cloud is supposed to provide. What we need, in contrast, are functional arguments arising from additional services that are available from the cloud. And that is precisely where a common vision has so far been missing.

That is why we partners have developed a cloud maturity model. Starting from the customer’s current usage situation, it envisions a step-by-step road to the cloud that offers the user additional benefit with each step. It begins with the transition from on-premises to the cloud—partly as a hybrid solution. Then comes additional functionality, such as for mobile use, in the form of cloud services that third parties can provide. Finally, there is the full transition to a service-oriented architecture. Only on the basis of a growth model of this kind that enables customers and partners to cost the transition to the cloud in the first place can the transition succeed.

SAP with Business by Design and IBM with its cloud activities failed not least because they were unable to offer their partners a comparable vision. Are we now about to hear one from you, Satya Nadella? I sincerely hope so for all our sakes.

We need a vision that implements “Cloud First, Mobile First” for the entire ecosphere. And then we must spread it. First to the customers and then to the Partners.

Sincerely Yours,

Heinz-Paul Bonn

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