Q: (from Leianni)
When discussing Office 365 SBP with my peers, we frequently return to the same objections:
- subscription hard to sell
- low margin for partners
- no incremental sale
- channel killer
Help me understand Microsoft’s position.
I find myself frequently answering these questions. I just came back from SMB Nation in Las Vegas where I can’t count the number of times I discussed several of these objections with concerned partners.
Subscription is hard to sell: Small Business Premium has a lower “cost of entry” than any of the retail business SKUs and a SIGNIFICANTLY improved feature set (5 installs per person, choice of PC and/or MAC, Office on Demand, integrated messaging, document sharing, and real-time communication)
Low margin for partners: We have to be competitive with products like Google Apps at the price/product level; and we are still more expensive because we have WAY better features. But the industry has changed (again). At one time there was huge margin on hardware; when that disappeared, there was huge margin on software; we’ve moved into the services age where hardware and software are commodities and the margin is made on services. You should leverage Office 365 as a means to sell your management, customization, and integration services.
No incremental sale: I’m not sure exactly what is meant by this, but a subscription sale means you re-engage with the customer on the same product EVERY YEAR. In the past you sold a desktop with an OS and a productivity suite and you didn’t revisit that sale for three to five years. Now you talk to the customer every year to renew their SBP license just like you would any other annuity volume license product. This means you have the opportunity to discover and sell new services every year as well.
Channel killer: Yes, we do have a direct model (just like Google) but we don’t WANT the direct sale. We see our churn (customers buying Office 365 and then moving off of Office 365) reduce when a partner is involved. Partners help Office 365 to be “sticky”; partners help customers understand how to integrate the technology into their business process. We can’t force the partner into the relationship, but we STRONGLY recommend engaging a partner; to the point that any deal over 25 seats gets a personal call from our Project Tiger Team to find out if we can help the customer engage their partner of choice.