Digital transformation key as Microsoft outlines channel growth opportunities

Digital transformation key as Microsoft outlines channel growth opportunities

Digital transformation spending will reach $1.7 trillion worldwide by the end of 2019

Valerie Beaulieu (Microsoft)

Valerie Beaulieu (Microsoft)

Major growth opportunities exist for partners in the era of digital transformation as Microsoft lays out plans to help the channel succeed.

The move comes as IDC predicts that by the end of 2019, digital transformation spending will reach US$1.7 trillion worldwide, a 42 per cent increase from 2017.

“We see how the e-commerce experience, for example, is reshaping the expectations customers have in shops driving a massive digital transformation opportunity for our partners,” observed Valerie Beaulieu general manager and chief partner officer APAC, Microsoft.

By 2019, IDC also predicts that all digitally transformed organisations will generate at least 45 per cent of their revenue from ‘Future of Commerce’ business models, with 40 per cent of digital transformation initiatives supported by cognitive/AI capabilities, providing critical insights for new operating and monetisation models.

Microsoft sees two key trends influencing the market; intelligent cloud and intelligent edge.

“Almost every experience will be multi-device and multi-sense creating a richer experience and driving more demand and expectations in enhancing this user experience,” said Beaulieu, speaking exclusively to Channel Asia.

As Beaulieu predicted, customers are more likely to focus on digital outcomes in this new era, which is forcing Microsoft and partners to “refocus a customer-obsessed approach, based on intelligent solutions rather than pure product reselling.”

However, in a world where nothing is static and customers are asking for more modular applications, taking advantage of connected data and AI to enhance their operations: partners will have to adjust their capabilities and offerings, reasoned Beaulieu.

The customers' expectations are high in this new era of accelerated change, with partners expected to bring forward the power of distributed hybrid cloud environments, access to AI and machine learning and connect the formidable data estate every company is building.

The cloud, a major component of digital transformation, represents a major growth curve for the technology vendor’s cloud partners, with IDC forecasting that worldwide public IT cloud services (SaaS, PaaS, IaaS) will reach US$141 billion revenue in 2019, a 19 per cent year-on-year growth rate.

“That is almost six times the rate of overall IT spending growth,” said Beaulieu.

Furthermore, IDC also predicts that greater cloud spending, including hardware, software, and the professional and managed services surrounding public and private cloud technology, will exceed US$500 billion by 2020.

“Businesses like Netflix and Uber have recognised this opportunity and are seizing the moment,” said Beaulieu, representing a real opportunity for the vendor’s cloud partners.

Network intelligence

As mentioned, cloud intelligence and edge intelligence are important market trends representing real opportunities for growth.

While ‘as-a-service’ business models, made feasible by cloud technology, have progressed over the years, from infrastructure-as-a-service (IaaS) to software-as-a-service (SaaS) to backend-as-a-service (BaaS), and so on, there is only so much value that can be captured here.

The cloud is much more than just a place to store content or run software applications; it can also be a place that exhibits ‘cognitive’ ability.

This ‘cognitive’ ability is the real value add for today’s cloud partners that can transform business outcomes and decision making across an organisation.

Intelligence at the edge of a network is just as important, enabling autonomous operations and analytics at the point of data collection.

For instance, the autonomous car, with 4GB of data generated every second at the ‘edge’, “that opens a new field of opportunities to analyse the data and create intelligence,” said Beaulieu.

“A lot of what AI is doing with cognitive services, enabling Bots, is to leverage data to create intelligence and that is another major trend.”

A key priority for Microsoft over the next 12 months is to “drive competency and capability in advanced workloads” such as in AI and app modernisation, where most of the demand is.

Partners will benefit from Microsoft’s renewed emphasis on co-selling, as the technology vendor looks to exercise its clout in security, compliance (General Data Protection Regulation - GDPR), AI - IoT/chatbots, cognitive services, predictive analytics, and of course digital transformation.

“With so many companies looking at driving digital transformation of their businesses, we want to help our partners who have developed unique IP solutions or innovative services on our platform to go to market,” said Beaulieu.

“With a combination of financial incentives, market-boosting events, enhanced visibility and fostering partner-to-partner collaboration, we believe we can bring value to our customers much faster,” asserted Beaulieu.

Valerie Beaulieu (Microsoft) addressing partners during Inspire 2017
Valerie Beaulieu (Microsoft) addressing partners during Inspire 2017

Other key priorities for Microsoft over the coming year, are to capture the hybrid cloud opportunity as well as identify and recruit Independent Software Vendors (ISV) to “unlock the growth potential of SMBs through the power of digital transformation,” said Beaulieu.

Looking ahead, Beaulieu remarked, “the next big trend is how this intelligence gets distributed, and that is really the new frontier from a technology point of view.”

“This is where micro-services, serverless models are driving a transformation that is much more profound than virtualisation.”

Accelerating partner growth

“More than 90 per cent of our revenue comes through partners. And we are committed to fostering a rich and thriving ecosystem for them,” said Beaulieu.

For partners to find success, “they need technical skills to stay abreast of the latest technologies and credentials that highlight their areas of expertise,” remarked Beaulieu.

A certification process is provided by the technology vendor via a Microsoft competency. This “helps partners market their expertise based on what the customer is looking for,” said Beaulieu.

“When they earn a competency, partners earn a range of benefits designed to enable business growth and profitability.”

In a move to help make it easier for the technology vendor’s customers to find partners who can respond to the growing demand for cloud services, the company made changes and shifted investments to optimise the Microsoft Partner Network’s competency portfolio.

The company then “took the next step in making it clearer for our customers who our best partners are,” said Beaulieu.

“For the first time, we are coupling our Microsoft logo with the Gold Partner Brand to make it stand on its own, and we are continuing to look for ways to make this endorsement clear across multiple forms of media,” said Beaulieu.

Many partners have already transformed their business to leverage the opportunities of digital transformation. There are many more who are in the process of doing so.

“We are helping this new generation of partners capitalise on the opportunity and maximise their profit potential through technology and business enablement,” said Beaulieu.

“Partners that have are already taken advantage of the cloud opportunity are seeing tremendous profitability.”

To help close the skills gap, a major concern in today’s fast-changing tech landscape, the company launched the Microsoft Professional Program (MPP) at its Microsoft Inspire event in July 2017.

“The first program of its kind to offer employer-endorsed, university calibre curriculum for professionals at any stage of their career,” said Beaulieu.

The initial curriculum will focus on the Data Science Degree program to provide critical skills and experiences in this rapidly evolving industry.

“A set of pioneering partners have been participating in a pilot alongside 400+ Microsoft employees since May 2016 to evaluate and validate this new data sciences curriculum,” said Beaulieu.

More access will also be provided to free software and services via Internal Use Rights (IUR).

The app certification process has also been simplified. “The new Certified IP paths in Windows & Devices and Cloud Platform are designed to align to application builders’ business models, enabling them to earn competency status based on the quality, customer value and market impact of their applications,” concluded Beaulieu.

Partner transformation

While Microsoft can provide the tools, processes and incentives, partners will also have to drive their own transformation. “They need to decide where to focus,” said Beaulieu.

“Partners will have to decide where they want to build their unique value and where they want to partner with others.”

The evidence points to successful partners as partners who are more focused on one particular industry.

“They tend to have a win rate close to 80 per cent with a cost of sales that is a third of that of a partner that would not have a specific focus area,” said Beaulieu.

Partners also need to develop their own organisational capability, meaning their people skills in technical and solution selling as well as compensation plans.

Lastly, partners need to re-invent their offering portfolio - where they transform project-based services into repeatable services and develop a unique value proposition and rethink monetisation strategy (subscription-based managed services for example).

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