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Originally published July 13, 2010 at 6:37 PM | Page modified July 14, 2010 at 8:02 AM

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Microsoft partners worry over cloud-computing role

As Microsoft continued a full-court press to get its partner companies to sell cloud-computing services, some of them were still scratching their heads over whether Microsoft's advances in cloud computing could end up biting into a chunk of their own businesses.

Seattle Times technology reporter

WASHINGTON — As Microsoft continued a full-court press to get its partner companies to sell cloud-computing services, some of them were still scratching their heads over whether Microsoft's advances in cloud computing could end up biting into a chunk of their own businesses.

Their questions came as Microsoft announced new products and sales-support programs at its Worldwide Partner Conference this week that are aimed at helping partners make the jump.

About 13,000 people representing companies that resell, build on and sell services based on Microsoft products are attending the conference at the Washington Convention Center.

Microsoft has said it's "all in" when it comes to cloud computing, the next technology frontier where people will access software and data stored on the Internet using devices such as the phone, tablet and computer, rather than just from software contained in a single computer or laptop. Facebook, Google Docs and iTunes are examples of cloud-computing applications.

The shift to selling cloud services would be dramatic for many of Microsoft's partners. Many make money selling, installing and managing Microsoft software.

For instance, they might help a corporate customer upgrade all its computers to Windows 7 and Office 2010 then manage the computers to make sure they have the latest updates and virus protection.

Some of the new products announced this week will make Microsoft the software manager, via the Internet, and some partners are concerned their services will no longer be needed.

"A lot of partners are struggling [with] exactly how we're going to manipulate and change the business model from being an infrastructure provider to being a trusted adviser," said Jamison West, chief executive of JWCS, a technology-services provider and Microsoft Gold Certified partner in Seattle.

Since Microsoft was founded, the company has depended on its partners to sell Microsoft software to corporate customers. Those partners, which number more than 640,000, include Web hosters, data-center providers, IT services companies and telecom companies.

Many aspects of Microsoft's cloud computing could end up in direct competition with them.

The company, for instance, is building massive data centers on different continents to host software and data for corporate customers. Those centers could compete with data-center providers.

Bob Muglia, Microsoft's Server and Tools president, said most data centers would continue to be run by other companies. "Five hundred billion dollars a year is spent on running data centers globally," he said. "There's no way we will ever approach that. The majority will be spent privately forever."

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Microsoft Online Services, a suite of communication software, could cut out IT-service companies that would install and manage Outlook and Exchange software.

And Monday, Microsoft said it would start selling InTune, a subscription service that lets a customer's technology managers take care of PC updates and security through the Web, in early 2011.

"We struggled with it" in an advisory board meeting with Microsoft managers Sunday, JWCS's West said of InTune. "We can't sell it to clients. We can't fit it into the business model."

West hopes Microsoft can find a way to change the model so partners can provide it to customers.

The company has so far showed signs of addressing what the cloud market wants. It launched Azure, a cloud platform hosted in Microsoft's data centers in February, but many large companies did not want to move its data off site.

So Microsoft announced a new product, the Azure appliance, a cloud service with hardware that companies can set up in-house and that Microsoft will manage remotely. Early partners such as Fujitsu and Dell Services have signed up to help sell the appliance.

One partner openly wondered in an interview broadcast Monday on the jumbo monitor at the Verizon Center about what role his company had to play with Azure, but he said he was also excited about opportunities the appliance could create.

Tuesday, the company threw out another carrot, a sales-incentive program for companies making the transition to selling cloud services. Partners can get 250 free licenses of cloud-computing services for their own use, sales-training classes and Microsoft phone support as they help customers test and install the services.

Microsoft is also offering partners a confidential three-year financial projection of profits, sales and margins to help them plan.

Jon Roskill, corporate vice president of the Microsoft partner group, called the cloud opportunity huge, worth "many, many billions of dollars."

He encouraged partners to change, quoting Winston Churchill in his keynote Tuesday: "To improve is to change. To be perfect is to have changed often."

Sharon Pian Chan: 206-464-2958 or schan@seattletimes.com

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