Microsoft partners balk at new licensing scheme, dent growth
(2022/04/27)
- Reference: 1651044610
- News link: https://www.theregister.co.uk/2022/04/27/microsoft_q3_2022/
- Source link:
Microsoft's partners appear to have pushed back against Redmond's "new commerce experience" licensing scheme, as the software giant noted a slower-than-expected transition to the arrangement in its Q3 2022 earnings.
The company today [1]announced typically robust results: Q3 revenue reached $49.4 billion, an 18 per cent year on year jump. Cloud revenue jumped 26 per cent to reach $19.1 billion, with Azure and other cloud services growing 46 per cent.
Dynamics grew 22 per cent. Office's commercial incarnation increased revenue by 12 points, one ahead of Office's consumer services. LinkedIn grew by 34 per cent. Windows surfed the PC boom to record 11 per cent growth from sales to computer-makers, while commercial Windows products added 14 per cent to Q3 2021's revenue haul.
[2]
The company remains wildly profitable. Net income was $16.7 billion – an eight per cent improvement.
[3]
[4]
All the numbers above would have been even better had it not been for exchange rate shifts – and if partners had been more enthusiastic about Microsoft's newish licensing arrangements.
The licensing scheme was announced in September 2020, when Microsoft [5]pitched "a simplified approach and greater flexibility in how you purchase software licenses in a way that's easy to understand, that directly improves licensing asset management, and with predictable costs."
[6]
The scheme de-emphasized sales of perpetual licenses in favor of a "new commerce experience" that focuses on fixed-term subscriptions to cloudy products and makes paying month-to-month more expensive.
But the scheme has worried some members of Microsoft's partner community, who [7]fear it could leave them on the hook for some customer purchases.
Channel-centric analyst firm Canalys has rated the new scheme as more beneficial to Microsoft than its partners or customers. The analysts also noted that the change includes significant price rises, and [8]opined it "has drawn significant ire from partners around the world."
[9]Microsoft brings Cloud PCs and local desktops together in Windows 365
[10]Judge dismisses Microsoft's challenges: ValueLicensing case to proceed in Britain
[11]European antitrust watchdogs sniff around Microsoft cloud licensing deals
Those partners appear to have expressed their ire by not using the new scheme – even though it became Microsoft's default offering early in 2022.
"Our on-premises transactional licensing revenue across both the Office and Server businesses was more negatively impacted than expected due to the transition from our open licensing program to our cloud solution provider program," CFO Amy Hood reported on Microsoft's Q3 earnings call.
[12]
"It's just taking us a little longer to onboard all of this community to make sure that they can transact the way they want to in the program," Hook added. "So I do think it's going to take us longer than we thought. We're going to continue to see that impact in Q4."
Microsoft CEO Satya Nadella weighed in with his opinion: "This change is super good for both the partners, the customers, and Microsoft long term. So there's execution ahead but we want to do this because it benefits everybody."
For now, some clearly struggle to see the benefits, and that's hurting Microsoft's bottom line – to sufficient extent to rate a mention during quarterly results. But by the same token it was just a mention alongside otherwise rapid growth, and the extent of the impact was not quantified. ®
Get our [13]Tech Resources
[1] https://www.microsoft.com/en-us/investor/earnings/fy-2022-q3/press-release-webcast
[2] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2YmkUTg@0Sby5YT3JxtruPgAAANU&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[3] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44YmkUTg@0Sby5YT3JxtruPgAAANU&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[4] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33YmkUTg@0Sby5YT3JxtruPgAAANU&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[5] https://www.microsoft.com/en-us/licensing/news/microsoft-open-license-program-changes
[6] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44YmkUTg@0Sby5YT3JxtruPgAAANU&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[7] https://www.theregister.com/2022/03/17/microsoft_reseller_concerns/
[8] https://www.candefero.com/content/preview.php?id=18149
[9] https://www.theregister.com/2022/04/06/microsoft_365_cloud/
[10] https://www.theregister.com/2022/04/20/valuelicensing_microsoft_court/
[11] https://www.theregister.com/2022/04/04/euro_commission_and_microsoft/
[12] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33YmkUTg@0Sby5YT3JxtruPgAAANU&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[13] https://whitepapers.theregister.com/
The company today [1]announced typically robust results: Q3 revenue reached $49.4 billion, an 18 per cent year on year jump. Cloud revenue jumped 26 per cent to reach $19.1 billion, with Azure and other cloud services growing 46 per cent.
Dynamics grew 22 per cent. Office's commercial incarnation increased revenue by 12 points, one ahead of Office's consumer services. LinkedIn grew by 34 per cent. Windows surfed the PC boom to record 11 per cent growth from sales to computer-makers, while commercial Windows products added 14 per cent to Q3 2021's revenue haul.
[2]
The company remains wildly profitable. Net income was $16.7 billion – an eight per cent improvement.
[3]
[4]
All the numbers above would have been even better had it not been for exchange rate shifts – and if partners had been more enthusiastic about Microsoft's newish licensing arrangements.
The licensing scheme was announced in September 2020, when Microsoft [5]pitched "a simplified approach and greater flexibility in how you purchase software licenses in a way that's easy to understand, that directly improves licensing asset management, and with predictable costs."
[6]
The scheme de-emphasized sales of perpetual licenses in favor of a "new commerce experience" that focuses on fixed-term subscriptions to cloudy products and makes paying month-to-month more expensive.
But the scheme has worried some members of Microsoft's partner community, who [7]fear it could leave them on the hook for some customer purchases.
Channel-centric analyst firm Canalys has rated the new scheme as more beneficial to Microsoft than its partners or customers. The analysts also noted that the change includes significant price rises, and [8]opined it "has drawn significant ire from partners around the world."
[9]Microsoft brings Cloud PCs and local desktops together in Windows 365
[10]Judge dismisses Microsoft's challenges: ValueLicensing case to proceed in Britain
[11]European antitrust watchdogs sniff around Microsoft cloud licensing deals
Those partners appear to have expressed their ire by not using the new scheme – even though it became Microsoft's default offering early in 2022.
"Our on-premises transactional licensing revenue across both the Office and Server businesses was more negatively impacted than expected due to the transition from our open licensing program to our cloud solution provider program," CFO Amy Hood reported on Microsoft's Q3 earnings call.
[12]
"It's just taking us a little longer to onboard all of this community to make sure that they can transact the way they want to in the program," Hook added. "So I do think it's going to take us longer than we thought. We're going to continue to see that impact in Q4."
Microsoft CEO Satya Nadella weighed in with his opinion: "This change is super good for both the partners, the customers, and Microsoft long term. So there's execution ahead but we want to do this because it benefits everybody."
For now, some clearly struggle to see the benefits, and that's hurting Microsoft's bottom line – to sufficient extent to rate a mention during quarterly results. But by the same token it was just a mention alongside otherwise rapid growth, and the extent of the impact was not quantified. ®
Get our [13]Tech Resources
[1] https://www.microsoft.com/en-us/investor/earnings/fy-2022-q3/press-release-webcast
[2] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2YmkUTg@0Sby5YT3JxtruPgAAANU&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[3] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44YmkUTg@0Sby5YT3JxtruPgAAANU&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[4] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33YmkUTg@0Sby5YT3JxtruPgAAANU&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[5] https://www.microsoft.com/en-us/licensing/news/microsoft-open-license-program-changes
[6] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44YmkUTg@0Sby5YT3JxtruPgAAANU&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[7] https://www.theregister.com/2022/03/17/microsoft_reseller_concerns/
[8] https://www.candefero.com/content/preview.php?id=18149
[9] https://www.theregister.com/2022/04/06/microsoft_365_cloud/
[10] https://www.theregister.com/2022/04/20/valuelicensing_microsoft_court/
[11] https://www.theregister.com/2022/04/04/euro_commission_and_microsoft/
[12] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33YmkUTg@0Sby5YT3JxtruPgAAANU&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[13] https://whitepapers.theregister.com/
Ransom
Anonymous Coward
The annoying phrases are the ones like: "This change is super good for both the partners, the customers, and Microsoft long term" While at the same time seeing the $16billion profits.
This is not "Super plus good" for the resellers. On the M365 level it is a 20% price hike per month OR pay a year up front. I cannot take a risk for a company to pay me monthly and then default on a contract.
It is the stitching up of the reseller is the most unbelievable part. If a client walked out in the middle of an annual package, why is it the Reseller who then has to pay that bill? Why do Microsoft want to penalise us resellers when our clients go bankrupt?
Let me see now
Do I want to pay a one of cost of $1,000 per license and then have a small support cost every year of, say, $20 per license or would I rather pay a much smaller $80 per month for the rest of my life?
If you can force the bean counters to do some real accounting then a perpetual license is a no-brainer as if revenue gets tight you can stop the annual support and just stay on the version you have got used to using rather than pay an escalating support cost which means the software is continually updating and you never know where the button has moved to. Worst case, if revenues get tight you lose the software and possibly your data too if it was sat in the cloud