UPDATED 09:19 EDT / AUGUST 08 2014

Are Microsoft’s layoffs signs of trouble for channel partners?

microsoft-layoffs-scaledWhen Microsoft announced plans to lay off approximately 18,000 employees last month, it sent a chill through  its vast network of nearly 400,000 channel partners. While many of  the employees who will lose their jobs are from Microsoft’s newly acquired Nokia division, some partners see the cuts as a sign that Microsoft’s new business priorities are nudging them out of the picture.

Microsoft CEO Satya Nadella has stressed that Microsoft is moving toward a “mobile-first, cloud-first” vision, one that is dramatically different from the “Windows-first” philosophy that Bill Gates and Steve Ballmer championed in the past. That shift, coupled with the layoffs, has some channel partners concerns, according to Charles Weaver, CEO of the International Association of Cloud & Managed Services Providers (MSPAlliance).

“Our 25,000 members aren’t factoring into Microsoft’s strategy now,” remarked Weaver. “I haven’t read anything that’s  made the public aware of the partner strategy. [Microsoft is] talking about cloud, mobility and other things, but not about what brought Microsoft into dominance in the 90s: their channel partners pushing their software, and enabling and delivering to businesses.”

Weaver suggested that much of Microsoft’s success in the PC market is owed to channel partners who helped spread Microsoft business management applications and server solutions to businesses around the world. Now that Microsoft has refocused its efforts around mobile and cloud, what role will its channel partners take? Is there big change ahead, or will things continue as they always have?

Channel partner Ian Matteson believes Microsoft’s shift in strategy is actually right on time. “MicroStrategy hasn’t experienced a negative partner channel impact as a result of Microsoft’s strategic direction,” said the VP and GM of MicroStrategy, Inc.’s cloud operations. “In fact, Microsoft’s strategy and direction on cloud- and mobile-first echoes that of MicroStrategy’s.”

Companies like MicroStrategy are seeking to stay competitive in a market that demands cloud services and mobility across most industries. But even Microsoft’s cloud services, including Office 365 and Dynamics CRM Online, still rely on channel partners for sales.

Microsoft still raked in $19 billion from sales of its Windows operating system last year, as well as $24 billion from applications software. It also experienced growth in its Devices and Consumer division of 42 percent to $10 billion.

Some Microsoft-watchers, like Charles King, principal analyst at Pund-IT, Inc., might argue that change is inevitable, and Microsoft’s current changes are just part of the normal struggle to grow and adapt to the market.

“The old saying that ‘change is the only constant’ is especially true in the tech industry where what might first appear to be an intriguing minor product or trend can eventually significantly disrupt or even dismantle tried-and-true businesses,” said King.

“Microsoft has been struggling not too successfully to cope with such disruption for several years now, and the replacement of Steve Ballmer by Satya Nadella at least partly signaled that the company’s board and major shareholders believed that a more serious, systemic shake-up was in order.”

Likening Microsoft to a horse and its partners to the wagon riders hitched to it, King added, “It may seem that the moves are being made capriciously but ofttimes it simply indicates a difference of opinion between the critter and its dependent passengers.”

Only time will tell whether the coming changes within Microsoft signal big trouble for partners or if Microsoft will find a way to keep them in the game. They will have no choice but to adapt.

photo credit: zcopley via Flickr cc

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