Microsoft partners with more than 50 percent of revenue in the cloud are earning $US5.87 for every $US1 in Microsoft cloud services sold.
Triggered by 88 per cent of customers prioritising digital transformation in the workplace, Redmond reports that public cloud is growing at six times the rate of IT spending, with the greater cloud market expected to hit the $US500 billion mark by 2020.
Key customer spending on Software-as-a-Service, Platform-as-a-Service, Infrastructure-as-a-Service - including accompanying managed services and project services - is driving demand, with cloud partners outperforming traditional resellers on growth, gross profit and recurring revenue.
“Digital transformation is the number one priority for businesses today,” Microsoft General Manager of Small, Medium Business and Partners Asia Pacific, Valerie Beaulieu, said.
Outlined during the opening sessions of 2016 Microsoft Worldwide Partner Conference, customer demand for cloud services is heightening, with over 85 percent of the Fortune 500 using the Microsoft Cloud today.
“Every business across every industry is changing,” said Beaulieu, when speaking to ARN on the ground in Toronto.
Backed up by new Microsoft Corporate Vice President, Worldwide Partner Group, Gavriella Schuster, Microsoft said partners realise almost 20 percent higher margins than those of the next closest competitor.
“Customer demand for our cloud services has exploded over the past year with over 85 percent of the Fortune 500 using the Microsoft Cloud today,” Schuster added.
According to an IDC study, cloud partners with more than 50 percent of revenue in the cloud are also growing twice as fast, realising 1.5 times more gross profit and experiencing 1.8 times more recurring revenue than partners with less than 50 percent of their revenue in the cloud.
“We’re all just barely tapping into the potential,” Schuster added.
As cloud adoption increases, Schuster said that going forward, partners require both a technology partner and a business partner to help them succeed, a “dual role” Microsoft is working to develop.
“While the vast majority of businesses realise they need to transform, less than half have a digital strategy in place,” added Beaulieu, bringing the conversation back to a local level.
“The vast majority of customers are aware of the need for change, they just don’t quite know what to change to stay competitive.”
For Beaulieu, this is where the channel comes into play, aiding customer transition through developing new IP and services as a wrap around offering.
“We’re opening up greenfield opportunity through the cloud,” Beaulieu explained.
Echoing the sentiments of the Microsoft CEO Satya Nadella, Beaulieu addressed the new breed of partner descending on Toronto, yet remained mindful of those not in attendance.
“Obviously we’re talking about business transformation but our ecosystem is not immune to these changes,” Beaulieu acknowledged. “When you look at the face of our channel regionally, it’s changed dramatically to even a year ago.
“Gone are the days of IT resellers merely transacting deals, it’s no longer a transaction story,more around the type of solution you can provide for the customer.”
Funnelling into the opening observations of Microsoft Director of Partner Development, Phil Goldie, in relation to the Australian market, this shift is “a million miles away from the notion of traditional reselling”.
Looking ahead, this message from Microsoft will only intensify, as the tech giant maps out a clear channel strategy for the future.
With the direction of travel clear, Beaulieu said traditional IT resellers can take solace in the financial gains of the cloud, evident through the trillions of dollars already reserved for digital transformation.
“Customers are ready to spend money on this,” she said.
Locked into the vendor’s growing momentum around its Cloud Solutions Provider (CSP) partner program, launched in Australia during 2015, Beaulieu said across the region, Microsoft current has over 100 CSP partners on its books, alongside over 3,000 CSP resellers.
“We’re seeing untapped potential in midsize and smaller customers,” she explained.
Coupled with the ‘more bang for your buck’ argument put forward by Microsoft, Beaulieu said partners are also increasing in valuation through a cloud-first mentality.
“The valuation of cloud companies is much higher than those operating on-premise, she added. “Depending on the company, we’re seeing valuations that are 5x higher than those transacting on-premise.
“Partners should think about profitability and the value of cloud on their own business.”
James Henderson is attending 2016 Microsoft Worldwide Partner Conference in Toronto as a guest of Microsoft.