Vista, Office delays leave Microsoft partners worried

For the 7,000 or so Microsoft partners descending on Boston for this week's Worldwide Partner Conference, delays in the release of Windows Vista and Office 2007 could leave them feeling like a store unable to stock its shelves with goods.

And some of those partners -- ranging from resellers that do custom installations and upgrades to independent software vendors that create third-party add-ons to Microsoft software -- are wondering what to do now. "Every [value-added reseller] wants to hear how we're going to bridge the gap and continue to make money," said Ric Opal, vice president of Peters & Associates, a 50-employee Microsoft systems integrator.

Opal, who plans to attend the conference, which runs from Tuesday through Thursday at the Boston Convention and Exhibition Center, said his small to midsize enterprise customers tend to hold off on major Microsoft software upgrades for several years after their release in order to assess reliability and impact.

Microsoft's oft-delayed Vista, which at one point was due out in late 2003, as well as delays in the release of Office, aren't helping his cause.

"Sure, there are always early adopters. But right now, a lot of [Windows] NT 4 has been updated, a lot of NetWare has been updated," Opal said. "There is still ample opportunity, but it's less than there was a year ago."

An independent study conducted by Yankee Group Research Inc. last October of 700 companies with fewer than 1,000 employees showed that about half were already running some version of Windows 2003 Server on the back end. Just 15 percent were still running Windows NT 4.0 Server, and less than 5 percent were still running Novell's NetWare.

Microsoft views the same statistics and sees the glass as half-full. "If the whole world were already on Windows Server 2003, or on SharePoint, or Dynamics, then that would be a great question," said Ryan Gavin, director of platform strategy for Microsoft. "Maybe the early adopter fruit is gone. But the opportunities are still great."

The Worldwide Partner Conference is Microsoft's once-a-year opportunity to rally its troops. Gavin saluted them, saying that Microsoft's continued lead over Linux in the small to midsize business market is due to the superiority of Microsoft's partners over Linux resellers and system integrators. (Just about 10 percent of the Yankee Group's respondents were using Linux from Red Hat or Novell on their servers, with that percentage not expected to grow much this year.)

"All the channel support available for Linux today is purely on technical integration," said Gavin. "Customers don't value you for getting the kitchen sink to work. They want to see their kitchen remodeled." This year, Microsoft is expected to unveil a new partner initiative called the People-Ready Channel that it hopes will energize its partners at a time of great uncertainty for them. That effort is slated to start with CEO Steve Ballmer's keynote address Tuesday morning.

Partners such as Kris Barker, CEO of Express Metrix, a Seattle-based provider of Microsoft asset management software and services, are feeling edgy about their future if Microsoft is forced to embrace the software-as-a-service (SaaS) model. That model could threaten the current method of selling software, a system that has benefited many Microsoft partners.

"I am watching SaaS fairly closely," Barker said.

Though Gavin didn't provide specifics, he was unequivocal that Microsoft will continue to feed its army of partners.

"It's not 'software as a service', but 'software plus a service'," Gavin said. "Our partners are our field sales force. Almost all of our revenue comes from them. So as much as partners are a part of our past, they will be a part of our future."

Regarding licensing, an area where Microsoft has run into trouble with its Windows Genuine Advantage (WGA) antipiracy program, partners say it is a non-issue for them and their business customers, who tend to buy the same volume licenses as Fortune 500 corporations, just on a smaller scale.

"We've gotten zero negative feedback from our customers," said Keith Ackerman, marketing manager for Software One, a New Berlin, Wis., reseller that specializes in Microsoft software licensing.

Microsoft was recently forced to back away from making WGA mandatory. WGA, which installs software that scans users' computers to see if they have pirated copies of Windows, came under fire after numerous reports that it was mistakenly targeting legitimate copies of Windows XP and effectively making them inoperable.

Joshua Erdman, president of Digital Foundation, said that WGA's mistakes disproportionately occur among PCs owned by gamers and other techies. They tend to install upgrades such as new processors, memory or hard drives, which throws WGA's ID technology off.

In contrast, most companies are either large enough to buy volume licenses from Microsoft, which are less affected by WGA, or don't do such hardware upgrades, Erdman said.

"For businesses, a PC is just a tool. They rarely upgrade their machines," Erdman said.