partnering with microsoft in the cloud (isv)

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Partneringwith

MicrosoftintheCloud

IndependentSoftwareVendors(ISVs)


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CloudOpportunityGuideforIndependentSoftwareVendors 2https://partner.microsoft.com/global/productssolutions/productssoftwareplusservices

The CloudOpportunity

Why Customers AreMoving to the Cloud

Why ISVs ShouldMove to the Cloud

Cloud Opportunitiesfor ISVs

How to Build aCloud Practice

Cloud ResourcesTable ofContentsTable ofContents

TableofContents

TheCloudOpportunity Executive SummaryDenition of the Cloud

3

4

WhyCustomersAreMovingtotheCloud Why Customers Are Moving to the Cloud5

WhyISVsShouldMovetotheCloud Drive Down CostsExpand Reach

Increase VelocityGrow Revenue

6

6

7

7

CloudOpportunitiesforISVs Augment and Cross-sell Cloud ExtensionsDevelop New Cloud Applications

Migrate Existing Applications to the Cloud

8

9

10

HowtoBuildaCloudPractice MarketingSales

OperationsFinance

11

14

15

15

CloudResources Get StartedMore Resources

14

15

PartneringwithMicrosoftintheCloudIndependentSoftwareVendors(ISVs)
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Cloud ResourcesTable ofContents


TheCloud

Opportunity

This guide is designed to provide independent software vendors (ISVs) with an overview of cloud services and the wide range ofcloud opportunities available to them, including examples of how to monetize these opportunities and successfully establish a cloudpractice.

ISVs are partners that build new applications or extensions to existing applications and sell them to customers directly or throughother channels such as distributors. In the cloud, this can mean developing applications on the Windows Azure technology platform ordeveloping additional functionality on top of other cloud technologies such as Microsoft Dynamics CRM Online.

Over the next few years, the demand for cloud services is expected to grow continuously and rapidly. Some market research suggeststhat within four years, one quarter of total enterprise IT workloads will be made up entirely or partly of cloud technologies. The

convergence of a number of customer demandsincluding expectations of pervasive network access, tighter IT budgets, and theemergence of platforms for developing and delivering cloud applicationsresults in enormous opportunity for ISVs who developapplications for the cloud.

The cloud IT transformation also necessitates some changes in the way that ISVs package, sell, resource, nance, and manage theirbusinesses. This guide includes action plans as well as resources that will help ISVs launch and enhance their cloud services practice. Itincludes the following topics:

Why ISVs should invest in the cloud

The broad range of cloud solutions ISVs can offer

What ISVs can do now to capitalize on the cloud opportunity

Where to nd more information about building cloud services

Executive Summary



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Empower Users

Develop Apps Rapidly

Reduce Management

Application

Software

& Data

IT Services

Software as a Service (SaaS)

Platform as a Service (PaaS)

Infrastructure as a Service (IaaS)

Best productivity experience

across PC phone, and browser

Means Provides... Examples...

The Cloud on Your Terms








TheCloudOpportunity

The public cloud generally refers to publically shared resources that are accessible over the Internet. The National Institute ofTechnology Standards (NIST) denes cloud computing as having ve essential characteristics. First, it offers on-demand self-servicethat is provisioned as needed. Second it has broad network access, meaning that its capabilities are available over the network andaccessed through standard mechanisms. Third, resources are pooled to serve multiple customers without users knowing exactly wheretheir computing power is coming from. Fourth, it offers rapid elasticity, meaning that computing power can be quickly scaled up ordown as demand increases or diminishes. Finally, its a measured service that allows organizations to monitor and control their resourceusage. The term private cloud describes environments that emulate cloud computing on private networks behind a rewall or onpremises at a company site.

Three of the primary ways that cloud services are offered are Software as a Service (SaaS), Platform as a Service (PaaS), andInfrastructure as a Service (IaaS), as pictured in Figure 1. They can be dened as follows:

Delivers applications and their associated data on demand. Thisis the primary eld of opportunityfor ISVs. SaaS applications arehosted in the cloud and accessed via the Internet. According toGartner, SaaS is forecast to have a 17.7-percent compound annualgrowth rate (CAGR) through 2013 in the aggregate enterprise applicationmarkets, nearly ve times the projected CAGR of 3.6 percent forthe total application market.1 This includes high-demandworkloads such as web conferencing, collaboration, contentmanagement, messaging and productivity, customer relationshipmanagement (CRM), and enterprise resource planning (ERP).

Delivers a computing platform as a service. PaaS offeringsprovide for the development and deployment of applicationswithout the cost and complexity of buying and managing theunderlying hardware and software.

Delivers computer infrastructuretypically a virtualized environmentas a service. IaaS allows organizations to buy IT as a fully outsourcedservice, on a utility or pay-as-you-go basis.

Figure 1: The three types of cloud offerings

Denition of the Cloud

SoftwareasaService(SaaS)

PlatformasaService(PaaS)

InfrastructureasaService(IaaS)

DefningtheCloud



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WhyCustomersAreMovingtotheCloud

Companies today need to get the most out of the money they spend on IT. They need to support complex business processes whileensuring efcient IT service delivery to their users. They often are looking for a way to cost-effectively centralize and extend the reachof applications and data to connect people across multiple business functions and geographic areas. By looking to cloud services fortheir businesses, customers can make use of applications that t their businesses and grow as they do, that address the specicity oftheir needs, and that help control and reduce their internal IT costs.

Security concerns traditionally have been a major hurdle in buyers acceptance of cloud services, but today well-established securitystandards have made it easier for providers to meet or exceed the levels of service and security that corporate consumers are receivingfrom their internal IT.

Added to this, customers are now able to choose from a greater breadth and depth of cloud services offerings than ever before.This availability of choice makes it easier for customers to evaluate and select from alternatives across a wide range of applicationcategories. Customers want choice and easy access.

Research shows that companies are allocating an increasing percentage of their IT budgets to cloud services to help them meet thesedemands. AMI estimates that cloud IT spending will grow from $70 billion to $136 billion, or 12 percent of total IT spending, by 2015,as shown in Figure 2.2

Why Customers Are Moving to the Cloud

Figure 2: Migration estimates for cloud computing

MigrationtotheCloudProportion of WWIT/Telecom

Spend Migration Into The Cloud

8.3%

2010

8.9%

2011

9.6%

2012

10.4%

2013

11.3%

2014

12.2%

2015



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Why ISVs SHouldMove to the Cloud

WhyISVsShouldMovetotheCloud

The cloud opens up many opportunities for ISVs to extend market reach and grow revenue by reachingnew customers, new market segments, and new geographies around the world. At the same time, cloudcomputing offers ways for ISVs to reduce costs and increase time to market. For ISVs, the move to thecloud creates increased opportunity in several important ways.

Why ISVs Should Move to the Cloud

DriveDownCosts The emergence of public cloud platforms for developing and delivering cloud-based offerings removes criticalbarriers for vendors that want to develop and deploy cloud-based solutions. Prior to the existence of platforms suchas the Windows Azure technology platform, ISVs were hampered by having to create and manage their own hosting

solutions, leading to costly capital outlays and much slower time to market. The cloud allows ISVs to reduce theirinvestment in infrastructure, which means increased ability to invest in development and research. The cloud alsolowers development costs and makes them more predictable. When ISVs move to the cloud, they no longer need tosupport multiple versions of middleware and operating system congurations. By writing the software for a singleinfrastructure they are able to increase efciencies and save on costs. All customers use the same software and requirethe same training. This means that company resources and assets can be shared far and wide and usually remotelyinstead of having to meet the on-premises requirements of each individual customer. The cloud also puts ISVs in controlof the speed and reliability of applications, which in turn can lead to an overall better customer experience. And witha shared infrastructure and code, as business grows, the development, maintenance, and operational costs are spreadacross an ever-increasing number of customers, allowing ISVs and their customers to enjoy the economies of scale.

ExpandReach With cloud computing, ISVs have opportunities to reach new clients as well as expand their business with their currentclients. The cloud allows ISVs to have a global presence, giving customers around the world access to their products.For example, ISVs can add new cloud-based functionality to their existing solutions, providing for greater mobility, moreease of use, and new features. Or they can extend existing solutions to new markets, given the greater geographicalscope of the web. They also have an opportunity to serve new markets, with lower price points due to reduceddevelopment costs.



7/17CloudOpportunityGuideforIndependentSoftwareVendors 7https://partner.microsoft.com/global/productssolutions/productssoftwareplusservices






Why ISVs SHouldMove to the Cloud

WhyISVsShouldMovetotheCloud(continued)

IncreaseVelocity The increase in the speed with which ISVs can bring their products to market and reach customers is another benet ofbeing in the cloud. Cloud computing provides greater capacity, faster time to market, and shorter sales cycles, as well asgreater agility and exibility. Organizations have more exibility to roll out and support new business models and adaptbusiness processes to meet market demands.

GrowRevenue ISVs have a number of opportunities in the cloud to grow revenue, just as the cloud opens doors to new customers. ISVs can:

Develop scalable applications that grow with their customers needs. Making scalable applications recognizesthat one size does not t all. The cloud enables ISVs to develop applications as customer needs change ratherthan build applications based on estimates of future capacity and demand.

Migrate existing tools and applications to the cloud. For example, ISVs with traditional on-premises applicationshave moved their solutions to the Windows Azure platform, enabling them to increase their customer basewithout signicant recoding.

Augment existing applications with cloud features and provide the back end to mobile interfaces on WindowsAzure. Add-on solutions such as online alerts and mobile extensions can be productized and marketed separatelyfor additional revenue opportunities. These additional tools and features can enhance on-premises softwaresolutions. For example, an ISV that develops and sells on-premises supply chain solutions can use the cloud tocreate improved online collaboration features. ISVs can also build on existing cloud-based technologies. Forexample, using the cloud, an ISV could develop additional functionality for Microsoft Dynamics CRM Online.



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CloudOpportunitiesforISVs

The cloud offers ISVs many ways to develop their businesses and reach new customers. These include thefollowing opportunities.

Cloud Opportunities for ISVs

Often companies have deployed or developed software for their employees to use or for customers that resides internally on anetwork. By moving to the cloud and developing add-ons to existing software, companies have found that they can better servetheir employees beyond company walls.

With Microsoft cloud solutions, ISV partners can use the development and integration skills they have already developed to expandtheir offerings. For example, they can develop customized tools such as alerts for Microsoft Dynamics CRM Online. Or, using the

tools and services of the Windows Azure platform, they can augment existing applications, or blend on-premises IT assets with cloudcomputing capabilities to help their customers become more agile with scale-up, scale-down exibility.

A global technology company wanted to help its employees print from

anywhere, even outside the companys walls, using their smartphones. To

provide this functionality, it built a cloud-based printing service that allows

mobile workers to print to any available public printer from their mobile

devices. Outcome: Greater reach with existing customers, increased opportunity

with new customers, new offerings with reduced development cost.

AugmentandCross-sellCloudExtensions

A global news company with an API for presenting news was looking for

a way to make the news more readily available without investing in new

infrastructure. The company decided to deploy the solution via the cloud to

allow external customers to access their news feeds. Outcome: Streamlined

deployment and planning, enhanced reliability, fast time-to-market, new

opportunities for growth.



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A statistical forecasting company in Europe has exponentially increased

its ability to provide forecaststo up to 100 million statistical forecasts

per hourby developing their apps specifically for the cloud. Moving to

the cloud has allowed this company to focus on business and development

rather than infrastructure. Outcome: Rapid development, reduced IT

maintenance costs, improved service offerings for customers, greater

competitive advantage.

ISVs can translate their experience with developing on-premises applications to developing for the cloud. The exibility of the weband the ability to test code without major commitment allows for greater creativity in development. Among the many possibilitiesfor development, some examples include:

Monitoring and management tools.

Business intelligence applications that extend solutions into the cloud.

Content management and delivery tools.

Rich media training applications.

Digital marketing solutions.

Online data storage and retrieval applications.

CloudOpportunitiesforISVs(continued)

DevelopNewCloudApplications



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By migrating existing applications to the cloud, ISVs can provide affordable, highly scalable solutions for customers and in fact expandtheir customer base greatly.

Moving to the cloud also allows the ISV to provide lighter versions of their software, thus allowing more people to use it, especially becausedifcult deployments and maintenance are eliminated. This also means that customers can get the benets of the software without theexpense of having to make large investments in hardware, software, and stafng up front.

A start-up company that had developed a suite of products that augment

Microsoft Outlook decided to move to the cloud. They wanted to be able

to provide new technology for their clients who often didnt have internal

IT staff. By using the cloud this company can provide scalable, flexibleproducts specific to each clients needs. Outcome: Greater flexibility in

development, improved scalability, enhanced security and reliability.

CloudOpportunitiesforISVs(continued)

MigrateExistingApplicationstotheCloud


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How to Build a Cloud Practice

Transitioning to the cloud is more than a technology decision. Almost all facets of building and operating a successful cloudservices development business are different from those of a traditional software development company. Moving to the cloudrequires an approach that simultaneously balances and intertwines business and nancial factors and go-to-market and operationalconsiderations, as well as technology decisions and investments. This includes considering new marketing tactics, new salesand distribution models, new nancial considerations, and new operational strategies, as outlined in Figure 3. Moreover, the moveto the cloud allows ISVs to turn themselves into providers of subscription-based services delivered to customers around the world.

The go-to-market process for cloud services denes not only who the customers are but how they like to buy, where they buy, and whichchannels will be effective. ISVs that operate in the cloud have an opportunity to capitalize on new market dynamics, from customersegmentation to pricing.

Segmentation. With cloud services, understanding customer personas is fundamental, because they inuence everything from featuresand functionality to pricing and nancing. ISVs that operate in the cloud need to work to understand their target audience and differentcustomer segments. These activities including understanding:

Who the target audience is.

Their needs and pain points.

Their preferred ways to buy.

The experience they are looking for.

Who they buy cloud services from today.

How they think about the partner as a providerof such services.

With this information in hand, ISVs may want to developoffers that provided extended or enhanced customer supportand generate additional revenue. ISVs will also want to developsubscription renewal and upsell offers to help retain customersand build loyalty.

HowtoBuildaCloudPractice

NewSalesandDistributionModels Pay-as-you-go models

Subscription models

Multi-tenancy models

Third-party online marketplaces

NewOperationalStrategies Develop ordering, provisioning, and

billing systems

Minimize customer churn

Drive renewal rates

NewMarketingTactics Focus on new verticals or customer segments

Establish a trial engine

Develop high-velocity demand generation

tools SEO, e-mail campaigns, and telesales

NewFinancialConsiderations Develop baseline cash flow to support transition

Plan for recurring revenue

Move dollars from technical infrastructure

to marketing

Figure 3: Considerations for building a cloud practice for ISVs

HowtoBuildaSuccessfulCloudPractice

Marketing


P i i h Mi f i h Cl d


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HowtoBuildaCloudPractice(continued)

Pricing. Customers keep paying for cloud solutions because they derive value from them. If they stop realizing value, they will stoppaying for the solution. The most successful cloud providers think beyond the concept of pay as you go and focus on pay for value.

One way to manage these expectations is to develop tiers or classes of service that simplify choices and encourage upgrades. Anotherstrategy is to create bundles or suites of products. Increasing complexity by letting customers choose features and functions individuallycreates customer confusion and complicates billing. The goal is to provide a clear path that will enable customers to start out small andexpand as their needs and condence with the offering grow. This also enables ISVs to offer low-end introductory packages that areattractive to customers.

FREEMIUM Free basic level Premium upgrades

MONTHLY SUBSCRIPTION PER USER Pricing based onseats or named users

Basic package withpremium upgrades

PER TRANSACTION Discrete transaction units that can be easilymeasured and tracked

PER METER Pricing per unit of measure such as storage(per MB)

AD-BASED REVENUE Revenue from advertisers not users

One cloud-based ISV offers a variety of pricing bundles for its customers.

Depending on whether the customers are high volume, low volume, or

luxury, they are charged based on how they use the different aspects of the

products. As the customers needs change, their billing requirements change

as well. Outcome: Increased customer reach, greater customer base.

Pricing models for cloud services are evolving, and rangefrom free and ad-based models such as those employed byFacebook, to pricing based on volume, transaction, or user,

as shown in Figure 4. For example, an ISV may opt to providea basic level of service for free, with premium upgrades. Thisfreemium model reduces barriers that customers may havein trying out the software. Once theyve started to derivesome business value from it, customers are likely to considerupgrading to a paid version of the solution. Usage-based ortransaction-based models also closely map to value. Transactionpricing and paying per unit of measure may not be applicablefor every application, but sophisticated billing, provisioning, andmetering techniques enable cloud providers today to offer moreexible pricing models.

Figure 4: Pricing models for cloud-based services


P t i ith Mi ft i th Cl d


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Demand generationDemand generation in the context of cloud services is focused on achieving two critical and measurable marketing goals.

Acquiring customers. Here demand generation activities are focused on generating awareness or capturing existinginterest and ultimately turning that interest into orders. If demand generation activities are successful, they will resultin increased contracted monthly recurring revenue (CMRR). Also, optimizing marketing spend will ensure thatcustomer acquisition costs remain low.

Activating usage. Here demand generation and cultivation activities are focused on both increasing CMRR andreducing customer churn. Helping customers quickly realize value shortens the sales cycle, increases the opportunityto up-sell and cross-sell in complementary products and services, and builds customer loyalty.

ISVs should also consider developing free trial offers that enable users to try an application before they buy. Free trials arenot necessarily appropriate for every offer, but in the cloud services world, customers most often want to start using anapplication and realizing value before they will commit to paying for it over a longer term.

An online publishing business based in the United Kingdom offers its initial

software for free. By offering customers the tools to build high-quality books

for free, the company is bargaining that a good percentage of customers will

want to take the extra step and have their books professionally printed. They

offer a wide range of print options, from low-budget books to more expensive

professional albums. Outcome: Expanded customer reach, more effective use

of marketing dollars.


One global company, a leader in its eld, realized much greater capacity for

up-selling to customers by moving its suite of products to the cloud. Solutions

are highly scalable for customers. Outcome: Reduced time to market, greater

reach, reduced latency.




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The cloud opens up new ways for ISVs to reach customers across a range of sales channels, such as:

Direct sales (eld sales organization).

Telesales.

Online sales. These can include vendor-driven sites such as Microsoft Pinpoint and the Microsoft DynamicsMarketplace, third-party online marketplaces such as those organized by distributors or by vertical through tradegroups, or via a partners own e-commerceenabled website.

Breadth partners. For example, ISVs might consider partnering with system integrators to reach new customer segments.

This range of distribution models provides new opportunity for ISVs. Account management is another important consideration.Maintaining an ongoing relationship with the customer provides more opportunity to increase revenues through upselling andcross-selling opportunities.

Sales

Establishing a successful cloud-based business means evaluating each part of your business and planning for change, fromestablishing a financial plan that integrates annuity revenue streams to defining solution offerings, establishing service-levelagreements (SLAs), and creating customer on-boarding processes. In every aspect of business, the goal is to reduce the cost of goods

sold (COGS) while creating repeatable practices that will support growth in revenue without an increase in costs.

Developing software for the multiple deployment scenarios made possible by the cloud may mean creating new applicationarchitectures that are different from those required for on-premises application development. ISVs will also need to evaluate theiroperation and support models.

Operations




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As cloud services shift the cycle of payments from one-time, up-front lump sums to recurring revenue streams, cash ows for cloudservices will likely differ from more traditional business models. Establishing a financial plan based on a specific cloud servicesstrategy is a foundational element of a cloud services business.

ISVs will also need to shift some of their investments from technical infrastructure to marketing. To increase the volume and velocityof sales, partners will need to invest in marketing engines, including the development of pay-per-click campaigns, search engineoptimization updates, data-mining tools, and marketing automation tools for lead routing.

Partner organizations in transition to building a cloud practice will also need to invest funds in training. ISVs that have notestablished a cloud development practice will need to identify and build the skills and capabilities necessary for supporting cloud

services. ISVs that already offer cloud-based technologies can augment existing skills to expand their product portfolio of cloudofferings.

By reconsidering every aspect of their business, ISVs that go to the cloud can capitalize on its opportunities. By employing new waysto manage, market, sell, and price their services, cloud ISVs will be well positioned to increase their market share as demand for cloudtechnologies continues to grow.


Finance




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Table ofContents

Cloud Resources

CloudResources

Find out more about how to move your business to the cloud by making use of Microsoft resources.

Get Started

LearnJoin the Microsoft

Cloud Program.

TryMake use of one of three free

offers available to partners:

Windows Azure Platform

Introductory Offer free trial

Microsoft Cloud Essentials

MSDN Subscription free to

qualifying partners, available

for purchase to others

DevelopandTest

The Microsoft Developer Network(MSDN) offers technical resources.

Subscribe here to access code samples,

SDKs and other downloadable tools.


Partnering with Microsoft in the Cloud
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Table ofContents

Cloud Resources

CloudResources

For more information visit the links below.

1 Gartner ID:G00171813 . "Market Trends: Software as a Service,

2 AMI-Partners (www.ami-partners.com) 2011

LearnmoreaboutMicrosoftcloudservices

Microsoft Cloud Power

Information about cloud opportunities for other partnerbusiness models

Readabouthowotherpartnershavebuiltsuccessfulcloudbusinesses

SignupforaMicrosoftcloudpartnerprogram

Partnering with Microsoft in the Cloud

Microsoft Cloud Essentials Pack

Developcloudskills

Windows Azure Platform Learning and Readiness

Windows Azure Platform Training Kit

Deployacloudtestenvironment

Establishacloudpractice

Windows Azure ISV Business Economics

Windows Azure Platform Trial

Drivesales

Partner Marketing Center

For more information go to the Cloud Solutions section

on the Microsoft Partner Network Portal

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