June 2009 Archives

Last Friday marked the start of Microsoft's (NasdaqGS:MSFT) Windows 7 push toward release.  And there was a lot of fanfare.  Microsoft's Brad Brooks, Corporate VP for Windows Consumer Marketing, did an energized interview on Microsoft's blog mentioning the extensive amount of customer engagement that has gone into the development of Windows 7. 

"I'm still humbled by the amount of customers that have participated in this process. We have literally had millions of customers downloading, using and giving feedback on our beta and RC product, more than any other version of an operating system that we've done in the history of Microsoft.  We have also got a lot of enthusiastic customers that have been following every day all the news coming from Windows 7."

Roger Kay, principal analyst at Endpoint Technologies thinks the Windows 7 launch is much better coordinated than Vista's and offers some vital new features for enterprises, including Direct Access, migration tools, virtualization support, drive and device encryption, application control, and BranchCache.

Of course, the offer is available at the Microsoft Store.

In the Bay area, Fry's had a half-page color ad in a local paper that couldn't be missed.  The "Buy Vista Now Get an Upgrade Free*" promotion offered a technology guarantee for desktops/notebooks purchased now with Vista installed.  Additionally customers can pre-order Windows 7 between June 26 and July 11 on Fry's Web site with prices starting at $49.99.  But remember to read the fine print: shipping and handling charges apply to boxed software.  For the pre-order upgrade, additional hardware may be required.  

The promotion was also available through Dell, but not immediately visible. It's placement makes Dell looks less focused if not enthusiastic. 

But BestBuy's online offer was, no joke, the best.  It was easy to find and offered free shipping with a store pick-up option to come in the future.  The site also had numerous reviews from beta test participants.  All were positive and some had helpful information on good features and/or missing features.

So, Microsoft has learned from the mistakes of Vista, and this release is expected to be a major improvement.  The consumer channel is primed, but is Microsoft's larger channel base ready to push Windows 7?  The promotion isn't currently available through CDW or Softchoice. 

And some partners have reservations:

• The pricing is better than Vista's, but still some think it's too high.

"The pricing looks a bit high, considering the current economy and public consensus about Vista" said Daniel Duffy, CEO of Valley Network Solutions, a Microsoft Gold partner in Fresno, California. 

• Some partners think the upgrade cycle is out of sync with corporate practice.

Travis Fisher, executive vice president at Inacom Information Systems, a Salisbury, Md.-based solution provider,  observed Microsoft is pushing a three-year refresh cycle, when solution providers may advise a five-year cycle. "Unless there's a killer feature that companies must have, what's the point?" he said.

Yet, other Microsoft partners believe XP mode in Windows 7 is compelling enough to convince companies to upgrade. 

With all the hype and speculation, we'll all be watching how Windows 7 does, and how the partners respond at July's partner conference. 

Hewlett-Packard (NYSE:HPQ) and Alcatel-Lucent (NYSE:ALU) have announced a 10-year business agreement and alliance to jointly market products. The goal is to offer one-stop shopping as IT and telecommunications converge.  For some, the announcement isn't news. 

However, there are some twists that make it different from past agreements.  HP gets to manage Alcatel-Lucent's IT infrastructure, which could be a juicy outsource deal for HP. Alcatel-Lucent gets to reduce costs by transferring 1000 employees to HP.  So, both companies have more skin in the game.

The agreement has strong potential and could present a significant threat to Cisco (NasdaqGS:CSCO).  Avi Cohen of Avian Securities has indicated "This is another effort from HP to establish footprint within Cisco's customer base, such as the carriers, and aggressively pursue a new market opportunity for the carriers".

While access to carrier business is a clear benefit for HP, Alcatel-Lucent has the chance to increase its enterprise business.  Although financial details aren't available, the two companies have speculated the partnership could generate several billion dollars in revenue over the next decade.

As the alliance ramps up, customers can anticipate increased efficiencies, and channel partners from both companies can expect growth in new markets.  Yet Cisco is formidable, and it remains to be seen how the alliance will play out.

Dell last week announced that certain Microsoft software products, including Excel, Word and Outlook, now can be sold on the Dell Download store. Although Microsoft offers online purchases of downloads through its own storefront, The Microsoft Store, Dell will underprice Redmond. Currently, for example, Dell's Download Store is offering Office Home and Student 2007 for $84.99, while the Microsoft store is selling it for $149.95 (with a 60-day free trial offer).

Dell is the first reseller to be given this authorization, and it is timely, since Dell just suffered through a difficult quarter, dropping to the No. 2 position in the computer market behind HP. 

With direct marketing resellers like CDW gaining popularity, it’s a wise move on Microsoft’s part too.  With software downloads, Microsoft can ensure that the software being sold is legitimate. Given that software piracy is a big, expensive problem, there’s strong motivation for moving to this fulfillment model. Last year alone, overall losses due to software piracy in the U.S. are estimated at $9.1B.This is lost revenue which manufacturers and VARs need to recapture, especially in these hard times.

In addition, both Microsoft and Dell will see reduced costs for selling, shipping, and cost of goods.  But that’s not all; customers and the environment also benefit. Customers get the benefit of quick delivery, reduced shipping costs and no physical media to manage.  We all benefit from less waste.  And long term, it could signal a transformation in the software channel.   

Since this looks like a win-win, will Microsoft allow others to use download fulfillment?  Some solution providers are skeptical: "Microsoft is concerned about piracy, and opening up direct software sales to the channel would create a large burden of proof in terms of ensuring the software that's sold is legitimate," said Michael Cocanower, president of Phoenix-based Microsoft solution provider ITSynergy.  

Other industry experts expect it’s a natural step to authorize additional partners such as CDW and Softchoice.  One would certainly anticipate strategic partners like HP will be authorized.  That would provide efficiencies and leverage HP needs as it battles Cisco.  Microsoft is expected to give more details at the partner conference in July.

IBM chief executive Sam Palmisano addressed the company's 100,000 partners in a rare webcast last week. Having cancelled this year's partner summit due to the recession, the webcast provided an opportunity to update partners while communicating IBM's direction.

IBM is also encouraging and facilitating collaboration, evidenced by The PartnerWorld Communities social networking system.  The site will help partners find each other and work business opportunities.   It has a variety of tools including blogs, wikis and other tools to create profiles, share sales leads and exchange expertise.

While Cisco, HP and others are fighting over the datacenter, it’s interesting this IBM webcast was focused elsewhere. There was plenty of emphasis on the “Smarter Planet” initiative which  recognizes the proliferation of technology outside the datacenter into appliances, consumer electronics, smart grids and traffic control systems. IBM has already recruited 150 partners for its Dynamic Infrastructure Initiative Specialty program.

 IBM, like HP and Microsoft, wants its partners to provide complete solutions and the IBM global financing guidelines are set up to facilitate that. As John Callies, IBM global financing GM, said, "It's the right thing to do to help our partners provide the value-add on IBM products.”  

In addition, $2 billion in financing is available for projects eligible under the American Recovery and Reinvestment Act. Like Frasier Crane, IBM is listening and is following through.

There’s been much said about Cisco’s intensified competition and its play for partner loyalty. Reflecting on Cisco’s partner summit, John Chambers emphasized the event is high priority as he guides Cisco through its transition from a direct company to a partner–led direct touch company.

While Cisco works to get closer to its partners and build trust, it’s interesting to note Microsoft is working on getting closer to its customers. It will be rebranding the partner program “Microsoft Partner Network” to market partner value, and no doubt sell customers on partner quality. 

While the new program will tout the value of partner’s designation (Registered, Certified, Gold), it will distinguish those with the best technical credentials and attempt to help them in realizing return on their investments.  Microsoft needs its VARs to deliver more complete solutions and is encouraging them to leverage not only their expertise but the partner ecosystem via its new program. More details will be available at the Microsoft Partner conference in July.

In the meantime, VARs need help with cash flow and have made it known to their manufacturers.  Cisco responded last week, extending 90-day terms to more partners. On the other hand, Microsoft’s financing terms have become more restrictive.  Now Microsoft software and services must comprise at least 35% of the deal in order to qualify for financing.   By contrast, IBM requires 20% of the deal be IBM content to qualify for IBM financing.

Are these financing changes reflective of Microsoft’s own financial health? Or are they primarily designed to keep VARs focused on its solutions while preparing for the upcoming (Fall 2009) Windows 7 release? Perhaps a little of both.

Looks like things are heating up between Cisco, HP and Microsoft. Given the decline in the worldwide router market, is it any wonder Cisco is angling to tap new markets?  Now that Cisco has been added to the Dow, there’s even more pressure to sustain revenue levels, and Cisco executives have hinted the fight is about to escalate, with the company expanding into multiple “market adjacencies.”

Undoubtedly, Cisco has HP’s markets clearly in its sights as it made much of its new partner programs for data center virtualization and Unified Communications during last week’s partner summit. In a play to rile up the partners, Cisco execs have claimed the HP-Microsoft alliance cuts partners out of the solution sale. But the competition begs to differ. 

Adrian Jones,  HP's vice president and general manager of Americas Solution Partner organization, responded:  “HP and Microsoft are fully committed to working with our highly-skilled joint channel partners in the Frontline Partnership. There are more than 30,000 joint HP and Microsoft partners. 2,000 of them have a competency in Microsoft Unified Communications. A number of these partners are already working to leverage this new solution stack to deliver more value to their customers and grow their business. The unified communications and collaboration initiative between HP and Microsoft will deliver an even more compelling value proposition for our customers and partners.”

Unaffected, Cisco execs have questioned the quality of the HP-Microsoft networking solution, arguing that customers will have to undergo forklift upgrades. HP has collaborated with multiple players over time, but the current alliance with Microsoft appears solid, and the HP networking products (Procurve) are doing well.

Channel partners could be winners in this struggle as Cisco and HP rush to offer rich incentives designed to build loyalty and lock in partner mindshare.

Last week was big for Cisco VARs.  The announcement that Cisco is being added to the Dow (it made its debut Monday) validated Cisco’s financial stability. Then there were plenty of new offers at the Partner Summit in Boston.
 

During the summit Keith Goodwin, senior vice president of worldwide channels, touted a series of pro-VAR moves designed to “take the cost out of doing business with Cisco.”  There are several generous financial incentives.  Paying out $20 million for Core Accelerator rebates sounds especially tantalizing.  But most of all, partners need to know they’ll get credit for opportunities, and that Cisco will resolve bookings tension with the direct force. 

A number of VARs will be thrilled to hear Cisco is instituting “channel bookings neutrality” which allows those direct sales people timely bookings credit regardless of the partner involved.  In addition, to help ride out the tight credit markets,   Cisco is offering 90-day terms for more partners during the next six months.  It’s Cisco’s version of a VAR stimulus package.  

There also are programs to complement the newest portfolio extensions. In concert with Cisco’s push into data center virtualization, there’s a new data center channel solutions program for its data center channel partners. The program extends the value incentive program to all data center technologies. And there’s more-a new authorized partner program for the new C-series Rack-Mount servers. 

But partners, take note! The authorized partner program is not a specialization and does not count toward Cisco certification. So, it looks somewhat experimental at the moment.

 

Cisco recently launched a series of initiatives aimed at helping partners navigate the global downturn.  Cisco's stated goal is to prepare them for an upturn and strengthen their future business prospects.  The “Navigate to Accelerate” program has four parts:

• financial incentives designed to leverage increased demand for IT financing and leasing
• margin incentives for selling into the existing customer base
• special training for selling managed services, SaaS, and collaboration solutions
• incentives for engaging other partners who have complementary knowledge and product portfolios

The number and quality of incentives highlights Cisco’s eagerness to keep partners loyal and focused on the Cisco portfolio.  On a high level it looks like the offers can be lucrative for the existing partners with established business.  On the other hand, it does not appear aimed at recruiting new partners so much as leveraging complementary ones. More information is available here.