Microsoft Inspire 2017: Already Making Partner Progress With Cloud-Native Products And Services

By Patrick Moorhead - July 12, 2017
This week Microsoft held its premier annual partner event, called Inspire, in Washington D.C. Inspire is an opportunity for the company to demonstrate its current business trajectory, make its case to partners to grow business with them and is frequently the launch place for new Microsoft products and services. Partners have more enterprise vendor choices for digital transformation, some small and some very large like Google and I went into the event listening particularly close for cloud-related partner news, metrics, and value propositions, and I believe Microsoft delivered. Here’s my recap and opinion on the biggest announcements coming out of the conference. Partner-first, not just partner-led  The keynote from Day 1 began with a video of American mountain climber Melissa Arnot, and how Microsoft technology such as Skype and OneDrive allow her to communicate with her organization, the Juniper Fund, while climbing. This was designed to show hip and cool people with hip and cool jobs relying on Microsoft’s cloud-native products and services. In other words, it’s not just traditional enterprises but small startups using Microsoft. This is actually important as Microsoft’s competitors would love to staple Microsoft as the “old and stale” solution provider. Not so fast. Microsoft’s Strategic Alliances Director Priya Gore then took the stage, introducing Corporate VP Ron Huddleston.  Huddleston emphasized Microsoft’s commitment to being not only a “partner-led,” but “partner-first,” going on to say that “Microsoft is a team to build, go to market, and sell with you.” He mentioned that Microsoft is investing $250 million dollars to connect partners with customers. Another announcement was that starting this year, Microsoft will be paying reps on Azure-consumed revenue. In addition, Microsoft is creating an entire new sales incentive to co-sell with Azure ISVs—paying its sales reps 10% of the value of the partner solution when it is co-sold. We’ll get to more on this later, but Inspire so far has really sold me on this renewed commitment to its partners—I’ve been particularly impressed with work Microsoft has been doing with its big-name partners in the cloud realm.  This announcement was huge, giving its hundred and thousands of partners the ability for more people to make more money off Azure. I don’t think either AWS or Google GCP are too concerned about Azure cloud technology, but they should be thinking about Microsoft’s commercial channel prowess.
Nadella talks strategy and partner scale
CEO Satya Nadella took the stage next, saying a few words about the conference. He praised Microsoft’s partners and the differences they are making around the world, mentioning that people from 140 countries were in attendance. Another impressive number he threw out was that all of Microsoft’s partners employ a total of 17 million people—which he went on to say was especially important because these jobs are in the “digital realm”. This was a message to partners that turned up the contrast ratio between Microsoft and AWS and GCP whose numbers are quite a bit smaller. Nadella also reiterated Microsoft’s mission which is all about empowering people to be more productive, which again, turns up the contrast ratio on Google and Nadella talked some about the advent of the intelligent cloud and intelligent edge, and how soon everything is going to be multi-device, and AI will be intrinsic in every application built. He spoke of four main goals of digital transformation: the empowerment of employees, the engagement of customers, the optimization of operations, and the transformation of products. This isn’t a strategy change, it was a strategy message re-delivery from this year’s BUILD conference.  Repetition is good as it was a different audience. According to Nadella, this (digital transformation) can be accomplished by modernizing the workplace, and on that note, he announced Microsoft 365: a new solution that combines Office 365, Windows 10, and Enterprise Mobility and Security. Microsoft 365  Microsoft unveiled two iterations of Microsoft 365 at the conference—Microsoft 365 Enterprise, and Microsoft 365 Business. Microsoft says 365 Enterprise provides customers with “the latest and most advanced technology for empowering employees”, through the inclusion of Office 365 Enterprise, Windows 10 Enterprise, and Enterprise Mobility + Security. The Business edition includes Office 365 Business Premium and other security and management features, and is geared small-to-medium sized businesses. It is being billed as an all-inclusive productivity and security solution, with a focus on streamlining IT management. I see Microsoft 365 as a simplicity, security, productivity and cross-company data leverage play for businesses all-in on Microsoft and an incentive for those who aren’t there to get there. By enablement, I mean that by leveraging all the data across the business, the enterprise or SMB can fully unlock the potential with AI. To show the value of all-inclusive and interconnected, Nadella brought Sonia Dara, Senior Product Marketing Manager, to the stage to give some demonstrations of Microsoft 365 features. She led off with a demo of Outlook’s AI capabilities—sorting through emails for the user to determine which are most important, and putting them into a “focused” folder. She also showed how it can pick out the relevant information within an email and show it at the top—for example, flight information from a confirmation email. She went on to show briefly how AI is enhancing spelling and grammar check within Word, and to more quickly extract insights from Excel. Dara also demonstrated Microsoft’s intelligent whiteboard app. Everything demonstrated looked useful and great, but that’s not surprising—workplace productivity and collaboration is Microsoft’s bread and butter and I always expect the company to be on the frontlines of the latest technology in this realm, particularly over the last two years since Satya took the helm. In my mind, the real story here at Inspire is what this new, all-inclusive approach means for Microsoft’s partners. Microsoft says that Microsoft 365 will provide opportunities for its partners to increase deal size, grow revenue, and differentiate their offerings. One study cited by Microsoft found that Microsoft 365 Enterprise grows partner revenue by over 50%, compared to the traditional approach of deploying Office 365 as a standalone. That’s significant to say the least. Onto the topic of business applications Nadella then pivoted to the topic of business applications, such as sales, HR, customer support, and field operations. He emphasized that the one need that every business has is the need for more business process automation, and the need to connect these processes end-to-end. Nadella outlined his vision for Microsoft to connect Microsoft 365, LinkedIn, and Dynamics 365 together to achieve the levels of automation and connection needed for the modern business. This is more than marketing, Nadella is right. There’s a ton of data locked in little silos that can’t be leveraged to do things with in an AI world.
Nadella went on to introduce Alysa Taylor, Microsoft’s GM of Business Applications, to the stage to talk introduce Microsoft Relationship Sales. Taylor said that by using Dynamics 365, sellers can monitor and interpret business relationships, and share resources such as proposals, marketing information, presentations, etc. Sellers can monitor these relationships on their smartphones, and can see what content was consumed at what time. Microsoft believes Relationship Sales will allow customers to grow their network and close more deals. It was a good vignette that showed the power of using all the new and old Microsoft properties.
Additional time was spent talking about using Dynamics 365 in the hiring process. Businesses can use Dynamics to match job profiles against different candidates, and interviewees can see where they are in the interview processes. In Taylor’s words, Dynamics 365 can be used to “discover, hire, and onboard the right employees at the right time.” Again, this is all about automating and streamlining everyday business operations—it may seem like a little thing, but all these little things add up to save businesses time and money. This was my favorite demo as it gave a glimmer into how this could work in a gig-economy with hired guns and temporary workers. I’d like to see them add things like sentiment and personality as that’s key on a team.
Another business application announcement from the conference was the launch of ISV Cloud Embed—a program that is designed to help Microsoft’s ISV partners modernize their current business applications and develop new ones using embeddable “building blocks” of services. These include Dynamics 365 Embedded, Microsoft Flow Embedded, PowerApps Embedded, and PowerBI Embedded. This is a strong platform move and is very important for Microsoft to make progress on if they want to be seen as player. Tie into ISV Cloud Embed and you’ve hooked your wagon to Microsoft.
What’s new with Azure 
Nadella returned to the stage to turn the conversation towards the AI-driven future, and Microsoft Azure. He spoke of the need for new levels of compute, in order to power the evolution of big data and analytics, towards cognitive services and AI. Nadella brought Julia White, VP of the Azure Team, on stage to demonstrate some of Azure’s AI capabilities. She showed an example of a car insurance customer service scenario, in which a bot agent uses Azure to help a customer select a policy. Azure biometric facial recognition capabilities allow the bot to tell whether a customer is upset or frustrated, allowing it to give appropriate responses and transfer them if necessary to a human customer service agent. The customer service agent can then use Dynamics 365 to go back and see the entire customer-bot conversation, and seamlessly pick up where it left off. White went on to say that while this example was specifically a car insurance example, it’s really applicable to any customer service scenario. This was one of the best Azure + AI demos I have seen from Microsoft. Also announced was that Azure Stack (an Azure extension that gives on-prem environments cloud computing capabilities) is now available to order through Microsoft’s big-name hardware partners—Dell EMC, HPE, and Lenovo. Microsoft is calling Azure Stack a “truly consistent” hybrid cloud platform capable of helping customers execute their cloud strategy quickly, and sensibly, without having to change the way they build applications.  Azure Stack is huge for Microsoft as it’s really a two-horse race right now for a branded private cloud, along with VMWare. Microsoft is going to great lengths to incentivize and grow the Azure ecosystem. Remember the Azure co-sell program I mentioned earlier? In the first 6 months it’s been on the market, Microsoft says it has closed more than $1 billion in annual contract value for Azure partners. In addition, it’s purportedly created $6 billion in pipeline opportunity, and resulted in 4,500 partner deals. I don’t have to tell you that these are big numbers, but I will anyway.
Another change Microsoft is making is the creation of a dedicated Channel Manager role, geared solely towards supporting Microsoft’s partners’ go-to-market efforts, expanding the reach of their partners’ solutions to new customers, and lastly, integrating with the co-sell program.
Wrapping up 
Microsoft is a leader in enterprise partnerships no doubt and everyone is watching to see if they can repeat with their cloud-native products and services. Well, we didn’t have to wait long for some of the stats which seem legit to me. At the conference we heard some really big numbers to that effect—Microsoft now boasts more than 64,000 cloud partners, which is more than AWS, Google, and combined. The ecosystem is also growing at a crazy rate—a third of those partners joined the Azure network this past year, and Microsoft says it is adding over 6,000 new partners monthly.  I’m very impressed by this. Many companies who were successful in classic enterprise have had a really difficult time creating successful cloud-native capabilities—clearly Microsoft has not fallen victim to the trend. Microsoft has been (and continues to be) very successful with Azure and Office 365, which in turn has given it the ability to compete in IoT and vertical enterprise apps. I’ll continue to watch with interest, but I think it’s safe to say that Microsoft’s place in the cloud is looking pretty secure at the moment. Consider me inspired.
Patrick Moorhead
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Patrick founded the firm based on his real-world world technology experiences with the understanding of what he wasn’t getting from analysts and consultants. Ten years later, Patrick is ranked #1 among technology industry analysts in terms of “power” (ARInsights)  in “press citations” (Apollo Research). Moorhead is a contributor at Forbes and frequently appears on CNBC. He is a broad-based analyst covering a wide variety of topics including the cloud, enterprise SaaS, collaboration, client computing, and semiconductors. He has 30 years of experience including 15 years of executive experience at high tech companies (NCR, AT&T, Compaq, now HP, and AMD) leading strategy, product management, product marketing, and corporate marketing, including three industry board appointments.