Monday, July 12, 2010

WPC Day One

I am in Washington DC to attend the most important vendor event of the year - Microsoft's WPC. The attendance is touted at 14,000, and there certainly are a lot of folks here. Not bad considering the registration fee was $1795 for the four day event plus hotel and travel. For many, who come overseas for the week, this is a pricey event to attend. But it is worth every penny from my perspective. There is no other event one can attend where you can get access to as many people in one spot with a very well designed way to connect - called ironically WPC Connect. A decent web portal to create appointments and hundreds of tables that are assigned to enable people to connect the old fashioned way - communication between four eyes. In this day of social media, email, and cell phones - talking to one another face to face is sort of a treat. And the way I spend my week here is taking advantage of that very opportunity - making as many face to face, eyeball to eyeball, connections as I can fit in.

I have to admit I skip the keynote addresses - they are recorded and available online. Plus the bloggers, tweeters, and media do a great job letting me know what was said. I have gotten over the need to sit with 10,000 of my closest friends to watch demos and hear execs give a glimpse of the future. It is valuable information - I certainly don't ignore it - but from a time use perspective - I am going to use the time to be face to face with people.

Today's key messages can be defined in one word: CLOUD. Microsoft has been talking about the cloud for at least three or four years. It is coming, it is real, and I certainly don't believe we should stick our heads in the sand and pretend it doesn't exist. It does and it will impact how we do business. Ballmer is quoted as saying: "We’ve been shouting about cloud for about four years but 2010 is the year when the opportunity and transition to the cloud is absolutely clear." The message has been coming for some time. Had we moved four years ago we would be doing something differently for a living right now. I agree it is slowly progressing. But it is still a very immature technology in terms of how it fits in a VAR business model.

My major question is how a partner who still makes a significant amount of margin from implementation of solutions including hardware and software sales can make the transition. I am yet to see how we can take our 16M business - about half of the margin coming from selling hardware, and half from managed and project services - and generate that on 6% BPOS margins. Do you know how many $10 per user sales at 6% margin it takes to generate the replacement margin to keep our company in business? It is millions of users. Sure in three years we are all good. I can do the math and see that there is a point at which the cloud model actually becomes more profitable. But how do I make payroll for the three year transiton? Do I just stop doing payroll while we make the change? When I checked last with my staff if they love coming to work enough to come if I stop paying them - the answer was no.

Any time there is a disruptive technology it creates opportunity. That has been the case the dozens of times we have re-engineered our companies as VAR's over the past few decades. And it has been the history of our industry - we will again find a way to make the transition and stay relevant and in business. But it isn't going to be a shift from our current state to a new world of cloud overnight. There are lots of reasons that doesn't even work technologically, let alone financially. So the hype is a bit over the top. VAR's own the last mile of the customer relationship. VAR's will decide when the transition to cloud occurs in the SMB. The real need to move this along is to create transition models that enable VAR's to create business models that enable that transition. New technical skills, a need to become sales organizations, marketing and pipeline growth, and many other areas have to be addressed for us to make that change.

So thanks for continuing to push us along Microsoft. We are moving, not at your speed probably, but the more you help us figure out how to transition successfully, the faster we will embrace the model and make cloud the thing 2o1o is remembered for.

2 comments:

Stuart R. Crawford said...

Arlin, great recap...miss not being there this year with you all. You are right, the cloud is shouting at us as well. That is why I decided to make the move this year. I heard that message loud and clear. I know a number of our peers are still struggling but the clients are starting to understand the cost savings associated with the cloud. We can't afford to stick our heads in the sand much longer.

Cheers

Stuart Crawford
Calgary Social Media Consultant

aaron said...

Couldn't agree more with Arlin. Own the relationship with your clients by giving them outstanding service and outstanding solutions and the cloud is a longterm opportunity.

Arlin spoke on the transition to the cloud here:

http://varvid.tv/2010/aaron-booker-chats-with-arlin-sorensen-at-microsoft-wpc-2010/