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Breaking down Microsoft’s Q4 and what it means for your business.

Microsoft reported earnings last night that surpassed expectations and gave us insight into their cloud business. I am not a stock analysts, but I thought I would spend some time reviewing some of the highlights and my opinion for what’s next for the software (I mean cloud, actually, no -I meant Intelligent Cloud) giant.

Azure – Microsoft did not provide specific revenue numbers for Azure, but did say revenue grew 97% y/y.  Although exact numbers for Azure revenue is not specified, Azure is part of the all-important commercial space, which includes Dynamics 365, Azure, and a little program called Office 365.  That revenue number combined was over 18B which more than doubled last year’s number.

Office/Dynamics and Competition – Office 365 subscription business just surpassed the traditional Office model with revenue up 43%.  When was the last time you went to a box retailer and purchased software?  That’s a telling sign that more and more organizations prefer subscription pricing over box products.   Dynamics 365 was up 74%, probably because Dynamics in SPLA is about as complex as it can possibly get.  Need help with a Dynamics licensing question?  Ask your reseller.  The reseller will ask Microsoft – and then it goes into a big, dark, black hole until someone loses their mind.  Nothing happens.  Microsoft also revamped Dynamics in SPLA to make it very difficult to compete.  The same can be said for Office.  Where I see concern for Microsoft is with Google, who is just getting their foot in the door in the enterprise space.  If they make traction (and they will) it will be interesting to see the two giants go at it.  Google’s cloud platform is growing exponentially as well.

Surface Sales – I guess you can say is one of the low points of the conference call.  Surface revenue dropped 2%.  Xbox sales also dropped and became less profitable with price drops and competition.  That’s the bad news – the good news?  Maybe with the new CSP Windows 10 thing Microsoft will include Surface as part of the program to those not already a Surface Authorized Distributor, or make Surface authorization available to every CSP Direct partner.

LinkedIN – Only Microsoft can spend over 26B for an acquisition and investors are still wondering what it is they bought; and more importantly, not hurt their quarterly earnings.  Yeah, they can tie it in for Dynamics and Yammer/Teams with all those users.   They also have a pretty impressive data list of users to sell additional collaboration products and services to.  I guess the jury is still out on this.

Opinion – Microsoft recently announced a major change in their sales organization. Their sales teams that were focused on the enterprise need to focus more on solution type selling.  A lot of organizations in the industry are going through the same transformation.  It’s also not an easy thing to do.  Time will tell.

I wrote an entire article without mentioning Amazon, they report earnings next week.  It will be interesting to see how they compare to Microsoft and how much they grew year of year in comparison.  Lots of analysis say Microsoft will surpass AWS as the king of the cloud.  I still think Google is lurking in the background and might surprise some people as well.

What does all this mean for SPLA?  In my humble opinion, I think Microsoft better be careful with the way they are handling their third-party hosters.  Those numbers they threw out yesterday were great, but they can get even better.

Microsoft built a program for partners who have their own datacenters, relationships, and sales resources to promote Microsoft products and technology.   There are close to 30,000 SPLA partners (rough estimate) that have datacenters spread throughout the globe.  Nobody, can have the reach like your SPLA partners.  Google and Amazon do not have 30,000 datacenters, why disrupt it?  Don’t audit them, partner with them and help grow this business to build a true hybrid cloud ecosystem.  The strategy should be their cloud – our cloud, and customers will thank you.  Teaming with Walmart makes sense too.  Say what!

Thanks for reading,

SPLA Man

 
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Posted by on July 21, 2017 in In My Opinion, Uncategorized

 

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Dynamics 365 Licensing for SPLA

Over the past several weeks, I’ve received several inquiries around Dynamics 365 what it means for CRM SPLA partners.  In this article, we will review the changes and when the changes will take effect.

Dynamics 365 for SPLA

In today’s SPLA licensing model, there are three products available –  CRM Essential, CRM Basic, and CRM Professional.  All come with different functionality and all come with different price points.  Those products will remain up until your agreement expires.  As with other products, once your agreement expires, you should report or license the new products.  In some cases, you are allowed to downgrade and run previous versions, but you must report the latest and greatest.  As an example, SQL 2016 is the latest edition of SQL, but that doesn’t mean you have to deploy SQL 2016; you can run 2012 or 2014 or God forbid 2008.  However, once you sign a new SPLA, you must follow the terms in the SPUR at the time of signing.  In this example, even though you deployed 2008, doesn’t mean you can license SQL 2008 by processor, you must still report it by core.  Dynamics CRM works the same way.   With Dynamics, the new products are Dynamics 365 Sales, Customer Service, and Team Members.  All come with bells and whistles and all come with higher pricing.  If you have an active SPLA prior to the announcement (November, 2016) you can continue to report the old products up until your agreement expires.  Once you sign a new agreement, you must report the higher priced products.

What are the options?

I’ve worked with a couple of Dynamics CRM hosters who had their agreement expire two months after Microsoft made this announcement.  In other words, Microsoft announced these changes in September (give or take – most widely known to resellers and partners in November) but their agreement expired in October.  The poor CRM providers are really in a pickle.  Microsoft dropped the bomb on them and two months later their pricing almost doubled!  What are they supposed to do?  Blame their reseller? Sure.  Everyone does.  Blame Microsoft?  Yes.  But that only gets you so far.  Cry?  Always.

Microsoft made some adjustments and offered “transition pricing”.  Transition pricing allows SPLA partners who have an active SPLA prior to November, 2016, the ability to report lower transition pricing up until their agreement expires.  The transition pricing is lower than new pricing but still doesn’t offer much of a discount.  When your agreement does expire, Microsoft will force you to license the under the new licensing and pricing model.

My Opinion

In my opinion, CRM provider are the old Exchange provider.   When Office 365/BPOS came about, small Exchange providers found it very difficult to compete.  It wasn’t just from a licensing perspective but also managing and deploying Exchange became too costly.  What happened?  Smaller Exchange providers are now CSP or out of business.  Dynamics CRM is now the old Exchange.  Microsoft is not going to lower SPLA pricing for Dynamics CRM.  It is not in their best interest to do so.  Harsh reality?  Yes.

Allow me to put on my Microsoft hat. What do you do?  There’s a couple of ways to think about it.  On one hand, Dynamics 365 isn’t all that bad.  I do think Microsoft rushed to market with the product.  I also think there are ways to up sell customers into the latest product.  There are opportunities to offer Dynamics CRM and deploy CRM and manage CRM.  For many organizations, CRM is the lifeblood of their sales.  CRM goes down, it’s bad for their business.  In speaking to a colleague, the LinkedIN acquisition makes Dynamics 365 an interesting proposition.  If you are able to seamlessly host Dynamics 365 on your platform and integrate their LinkedIN contacts as well, there could be a compelling reason to transition to the latest and greatest.

Ok, now my Microsoft hat is off.  I think Microsoft should be more patient and lengthen the transition pricing to make it more compelling for CRM hosters and to their customers.  I think service providers are the bread and butter to Microsoft hosted offerings.  SPLA is the one program that differentiates Microsoft v. Amazon v. Google.  Thirty thousand service providers worldwide who are willing to host Microsoft technology.  You don’t want to abruptly interrupt their business.  After all, no matter if they get Dynamics from a Microsoft datacenter or from a partner, Microsoft wins.  Amazon can’t say the same thing.

Would love to hear comments.  You can email me at info@splalicensing.com or leave a comment below.

Thanks for reading,

SPLA Man

 

 

 
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Posted by on May 9, 2017 in Dynamics 365

 

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