The coming months will be the most vital for the software giant as it readies to roll out products that will not only decide its future, but that of the software industry as well
Microsoft has lined up a series of product launches over the next three months in what is termed as the “biggest launch wave in Microsoft’s history”.
Three of the company’s core products—Windows 7, Exchange Server 2010, and Server 2008 R2—are set for a joint launch on October 22. Next month will also see the company commercialize its SaaS offering—the Business Productivity Online Suite (BPOS)—which is currently undergoing a two-month customer trial. This will be followed by the launch of Azure, the company’s ambitious cloud computing platform, in November.
Each of these launches is vital for Microsoft to retain its 20-year dominance in the software marketplace that is seeing increased competition and changing business models. It’s a big bang for Microsoft as the success or failure of these products will not only decide the future of Microsoft but that of the software industry as a whole.
Windows 7: most crucial
The most important release is Windows 7, described by many as the long-awaited successor to Windows XP, what with the debacle of its predecessor Windows Vista.
XP, launched in 2001, is already eight-years-old, but is still running 70 percent of all the Windows PCs across the globe. Microsoft will end active support for XP by 2014, and extended support by 2017. That’s why Windows 7 must do for Microsoft what Vista didn’t—be a worthy successor of XP and restore the faith of the industry that Microsoft can deliver a stable PC platform.
To Microsoft’s credit, Windows 7 has received good reviews. For starters, although Windows 7 uses the same kernel as Vista’s, it’s much lighter and doesn’t require the major hardware upgrades that Vista did. This works favorably for Microsoft at a time when the world is going through an economic crisis, IT budgets are on hold, and PC shipments are sliding.
Since June, Microsoft has been running trials to ensure that both its partners and customers get to see and experience the new OS. “Windows 7 doesn’t require any hardware upgrade, runs on 512MB RAM, and Pentium and Celeron configurations. Indeed, many of our customers are running trials on four-year-old PCs,” says G Ramesh, Director, Windows Client, Microsoft India.
Microsoft is also betting on several new features of Windows 7, including DirectAccess, a VPN-killing technology that gives mobile users seamless access to corporate networks; BranchCache, which stores frequently-used data locally to improve network performance at remote branch locations; BitLocker, which encrypts data on hard drives and removable storage devices; and AppsLocker, which locks the PC when it detects unauthorized access of an application. However, some of these features are available only in the Windows 7 Ultimate and Enterprise editions.
According to Ramesh, these tools could cost Rs 3,000-4,000 per node if customers were to purchase them from a third party. “Additionally, the OS comes with an advanced power-saving mode, which, if programmed smartly, can help customers save up to Rs 4,000 per node per annum.”
Despite the economic odds being stacked against Windows 7, Microsoft expects the ramp-up for the new OS to be faster than that of Windows XP. Discloses Ramesh, “Our target is to reach 50 percent installed base by 2013. If we achieve this, it will be the fastest ramp-up for any Windows OS till date. XP took five years to reach this mark.”
Because Microsoft will actively support XP only till 2014, this will aid the adoption process among enterprises, points out Ravi Putta, Director, Alliance Prosys, a Microsoft Emerging SI partner from Hyderabad. “It will result in third-party applications limiting their XP support; hence customers will move to Windows 7. That though is not the only reason why customers will upgrade. Windows 7 is stable, and has some really great features.”
Alliance is running trials with its 20 leading customers, each having more than 1,000 installed nodes, and expects to migrate 4,000 nodes to Windows 7 by March 2010. “The early adopter is the IT sector, which has its own IT teams that are working on application-compatibility with Windows 7. In other accounts it will be a gradual adoption, and our strategy there is to first run trials for the senior management and make them experience the benefits,” informs Putta.
Pune-based Leon Computers, a Microsoft Gold Partner, is also betting on faster adoption of Windows 7 among its customers. “We are running trials with 15 customers, and expect 5,000 upgrades within 12 months. While the IT sector will lead the adoption, other sectors such as auto will adopt it after June 2010 when the trial period for Windows 7 RC ends,” opines Rahul Meher, Managing Director, Leon Computers.
Adds Suresh Ramani, CEO, TechGyan, a Mumbai-based Microsoft Gold partner, “In no uncertain terms this is a huge release for Microsoft, especially after what happened with Vista. Vista was such a disaster that many customers who bought it downgraded to XP due to compatibility and performance issues. By contrast, the buzz around Windows 7 is really positive, and this should come as a relief to Microsoft. The biggest USP of Windows 7 is that it is better than Vista in power and functionality, with XP-level resource requirement and compatibility.”
Server 2008 R2
With Windows Server 2008 R2, Microsoft intends to break into the enterprise league where it wants to prove that the NOS can run mission-critical applications. Core to the new release of the server OS is the enhanced Hyper-V server, an indication of the company’s serious efforts to streamline its virtualization strategy to take on market leader VMware.
Usually, R2 represents an incremental enhancement over the original version. However, Pallavi Kathuria, Director, Server Business Group, Microsoft India, claims that Server 2008 R2 is transformational. “It’s not a service pack upgrade but a completely new server OS. It incorporates new features and improvements including Hyper-V support, power management, scripting tools and server management tools.”
Kathuria’s claims are vindicated by the recent CRN Test Center Review which has termed Windows Server 2008 R2 as Microsoft’s best-ever server OS. According to the review, the features that make R2 the best among all previous editions are the Active Directory Administration Center; DirectAccess and BranchCache which work in tandem with Windows 7; improved power efficiency via the Power Management tool; and more features in Hyper-V.
Hyper-V in Server 2008 R2 supports up to 64 logical processors. This is important in two ways. First, it means Hyper-V can support a greater number of virtual machines. Second, administrators have greater flexibility in allocating CPU resources in a virtual environment.
The Live Migration in Server 2008 R2’s Hyper-V allows moving virtual machines between two hosts without any interruption of the service of that VM. “The enhancements in the Hyper-V could help Microsoft in acquiring mindshare in the virtualization space because it’s far more cost-effective than VMware. Now one needs to see how these features work in a live environment,” comments Shailesh Mallya, Manager, Marketing, Lauren Information Technologies, a Microsoft Gold partner in Mumbai.
Rahul Meher of Leon Computers partly agrees with Mallya. “If the truth be told, VMware is miles ahead of Microsoft in virtualization. However, the new Hyper-V looks impressive, and Microsoft has a chance to capture more marketshare.” He adds, “If you notice, VMware is strong in the 50-100 servers solutions segment. Microsoft was so far targeting this segment, but now they have realized that VMware is well-entrenched here and enjoys a great brand-recall among CIOs. It is in the 5-20 servers solutions segment where Microsoft is now focusing, and this change in strategy will bring marketshare.”
According to Kathuria, Windows Server already enjoys a marketshare of 75 percent in the x86, and with a highly-rated new server OS round the corner, Microsoft is doing all it can to consolidate the share. Says Kathuria, “We will be rolling out several demand-generation programs. Sales readiness training for partners is on the cards, and we intend to help partners create PoCs to demonstrate the functionalities of R2 to the customers.”
Exchange 2010
Microsoft’s other big release is Exchange 2010 which for the first time combines on-premise management with online services.
Some of the key features include Exchange Federation which allows cross-premise sharing of resources including federated messages and calendar sharing both within and outside an organization; support for SATA which allows customers to use the standard desktop HDD to store and archive data without having to invest in costly SAN boxes.
“Exchange 2010 has been designed with an eye on bringing down the cost of running it. The major innovation is in form of Failover Clustering to ensure high availability with half the physical infrastructure than earlier needed. Also the new platform doesn’t require expensive SAN boxes to archive data and can even store on desktop class SATA disks. This can drastically bring down the infrastructure cost to run Exchange and this will be a big draw for companies to upgrade,” says Sanjay Manchanda, Director, Business Division, Microsoft India.
Other feature enhancements include role-based access control; device security that allow admins to set up mobile device policies; voice-mail review that gives a text-based preview of voice-mail messages; protected voice mail to prevent voice-mails from being forwarded outside the organization; and multi-mailbox searching.
Product reviews done so far suggest that Microsoft has a winner with Exchange 2010. “In my opinion, Exchange 2010 has some great features and it may relatively do better than both Win 7 and R2. There are plenty of companies running Exchange 2000 and 2003 who are ripe for upgrades,” believes Ramani.
In anticipation of Exchange Server 2010, Microsoft has been building its channel capacity. “Over the last one year we have vastly improved our regional coverage. We have exceeded the set target of trained Exchange skill-sets in the market. So from a sales readiness point of view we are all geared for the Exchange 2010 roll out. As we approach the launch date we plan aggressive marketing for demand generation,” opines Manchanda.
On cloud nine
Cloud computing has been termed a paradigm-changing concept. In a report released in early 2008, Gartner predicted that the global Software as a Service (SaaS) market would be in excess of $19.1 billion by 2011. It also predicted that 25 percent of all new business software sold globally by 2011 will be delivered as SaaS. According to Springboard Research, India is expected to be the fastest growth market for SaaS. From under $55 million in 2007, SaaS revenues from India are expected to grow at a CAGR of 76 percent to reach $260 million by 2011.
With such bullish predictions about cloud computing and the SaaS delivery model, it’s but natural that the largest software player has huge stake riding on this fast emerging software delivery model.
BPOS and Azure mark Microsoft’s entry into cloud computing. Azure could act as a major turning point in taking the cloud computing paradigm from the hype to the realization phase. Considering the vast network of ISVs and software developers which Microsoft commands, the success of Azure will mean large number of applications going on the cloud. This could lend great momentum to creating the cloud computing ecosystem.
However for Microsoft sales partner the biggest game changer would be BPOS, which includes SaaS versions of Exchange, SharePoint, Office Communications Server and Office LiveMeeting. According to Microsoft, the trial run for BPOS has evoked a positive response. “Since July 17, when we launched customer trials, 1,400 customers of various sizes have signed up for the trials. This is a clear indication of the cloud computing opportunity in India,” says Sanjay Manchanda, Director, Business Division, Microsoft India.
The company recently concluded an eight-city channel enablement program during which it trained select partners to sell BPOS. Microsoft has also announced the commission that partners will receive for selling BPOS. “We will give 12 percent commission on every new sale of BPOS seats, and 6 percent for the following years on renewal,” informs Manchanda.
Ramani, who signed up as a Microsoft Online Services partner, is bullish about selling BPOS. “I consider SaaS to be the biggest game-changer for solutions providers, especially those focused on the SME segment. We have been one of the first few partners to run BPOS trials with customers—and they like the product.”
Leon’s Meher too is running trials for BPOS with four of his customers. “Being a new concept, it will take time to click with customers. However, there is no doubt that the SaaS model will find good adoption among SMEs who can’t afford to have a special team to manage their IT. SaaS converts IT spends from capex to opex, and gives predictability to SME’s IT expenditure. Being a managed services provider, Online Services tie in very well with our remote infrastructure management offerings, and create an additional stream of revenue.”
Nevertheless, the same partners highlight several challenges in rolling out the products. “The biggest challenge is that of pricing,” notes Ramani. “The entire BPOS suite is priced at $15, while Exchange Live as a standalone offering is priced at $10 per node per month. This is much higher than Google Apps, which is offering mailboxes at almost 50 percent discount. Microsoft needs to have a special pricing for India because many customers are still only 50 percent compliant on licensing. When these factors are taken into account, the BPOS subscription works out to be high.”
Manchanda counters the high-price argument. “The mailbox from Google is a plain vanilla service, whereas Exchange is a full-fledged messaging platform so there can’t be any comparisons. However, we are listening to our partners and will surely consider their feedback.”
Meher points to another potential issue. “The invoice for BPOS will be raised from Singapore and has to be paid in dollars. Customers may have an issue with this as there are stringent RBI guidelines on outward remittances. Additionally, the money has to be paid online, which can also be a matter of concern.”
Manchanda says that they are aware of the regulatory issue, and are looking for ways to facilitate local billing for certain customers who may have an issue with the amount of outward remittance allowed.
Another major concern is the partner engagement model for BPOS which has been criticized because Microsoft will directly bill customers and manage the entire service delivery. Naturally, partners are afraid that they will lose control over their customers. “Partners would prefer to bill their customers directly rather than have Microsoft bill their customers. This is the model Google follows, and it allows partners to add their own value-added services and decide pricing,” states Ramani.
Manchanda allays partners’ fears: “Our cloud strategy revolves around the Software Plus, with the software client located on customer premise and managed application available in the cloud. Partners will control customers since there will be on-premise component to manage.”
Channel complaints
With the stakes so high, Microsoft has no alternative but to rely on the partner ecosystem. The company has drawn up battle-lines on multiple fronts, and therefore needs an army of partners to take on multiple competitors—for instance, VMware on the virtualization front, and GoogleApps in the cloud.
Little wonder then that Microsoft has announced the overhauling of its partner program. The Microsoft Partner Program will now be called the Microsoft Partner Network (MPN). The company has said that it plans to get rid of the current Gold and Certified partner designations next year, and will instead rank partners according to their specific competencies. Microsoft is in the process of developing 32 competencies for channel partners, in some cases merging existing competencies, and in others, creating new ones. "The change from program to network reflects the changing business models and customer needs. Also it means that we want partners to leverage the power of the network and collaborate,” says Rajeev Mittal.
While the new MPN is a work in progress, and may take several months to shape up, one key change that could impact partners is that Gold Certified Partners will be required to take Microsoft’s Customer Satisfaction Index. Hitherto, participation in customer satisfaction surveys wasn’t a requirement for partners, although it was encouraged.
The company has already announced its plans to double its market coverage by adding three new distributors—Compuage, Rashi and Neoteric—and 40 sub-distributors.
While partners have appreciated the expansion of distribution, they allege that Microsoft is not focusing on resolving their real issues. States TechGyan’s Ramani, “Many partners are privately not too happy with how Microsoft is doing business with them. The partner account managers are focused more on transactions and less on relationship-building, and this is something that Microsoft needs to resolve—how to reconcile short-term targets with long-term objectives.”
The biggest let-down for even the staunchest of Microsoft partners has been its complete apathy toward the issue of service tax on software which has significantly impacted the software reselling business. “For over a year, the entire software community has been impacted by the tax issue. We have suffered heavily both in revenues and margins, but Microsoft hasn’t extended any support,” complains Sandeep Salman, Vice President, Consulting and Services, of Delhi-based Future Soft Solutions.
Concludes Ramani, “Competition is increasing, business models are changing, and formidable players like Google are coming up with new concepts. Microsoft will have to cope with all these, and in this partner support will be key.”