Microsoft Cloud Sales Commission Cuts are Just One More Reason Why Google Apps Will Win

Last April BetterCloud’s CEO, David Politis, wrote an article titled Google Apps vs. Office 365: Why Google Will Win the Enterprise. The article detailed the reasons why David is confident Google will win: a generational shift, pricing, timing and differing business models.

A year ago, David argued that differing business models would greatly inhibit the distribution and adoption of Microsoft’s cloud products and recent changes to the company’s partner commission structure, as outlined by CRN, further prove this point.

While promoting cloud products has been a company goal for the last few years, a Microsoft executive notes that so far only a quarter of Microsoft’s 600,000 partners have joined the company’s cloud channel programs and it’s not difficult to see why adoption has lagged. When you take into consideration that on-premise and legacy Microsoft products have been channel partners’ bread and butter for years, you immediately understand why promoting cloud products – essentially cannibalizing existing business – is wholly undesirable to partners.

According to CRN, Microsoft is slated to cut commissions for channel partners starting on January 25. The cuts, which would specifically slash fees that channel partners receive from Microsoft’s Online Services Advisor Incentives program, contrast the company’s move to encourage partners to push cloud products, like Office 365, to existing customers.

Paul DeGroot, a Microsoft licensing expert, believes the cuts are just the first step in what is likely to be a steady erosion of partner sales commissions leading to the eventual replacement of the reseller sales channel with an online marketplace between customers and Microsoft.

With a move to the cloud inevitable for most if not all business, Microsoft’s failure to capitalize on the existing value its partners bring is an utter failure.

On the other hand, Google’s partner channel has been extremely successful. Cloud Sherpas, the largest Google Apps reseller, just posted a 2013 run rate of $150 million [in addition to Google Apps, the company provides professional services and consulting for both Salesforce.com and ServiceNow].

While Microsoft may be cutting partner commissions to funnel more funds to their direct approach, the move will likely push partners to actively sell both Google Apps and Office 365 – letting the customer decide who wins in the end.