By Verdayne Nunis in Toronto
Microsoft’s Worldwide Partner Conference doesn’t just mark the start of a new financial year for Microsoft. It’s also the time of the year when the world’s largest IT ecosystem re-groups to chart its course for growth, new partnerships and building innovative solutions in the coming year. Attended by over 16,000 partners globally, about 1,400 were from Asia Pacific. At the top of everyone’s agenda was the need to transform and address the digital transformation opportunity.
In the keynote to partners in Asia Pacific, Valerie Beaulieu, General Manager of Microsoft’s Small & Medium Partners Solutions Group in APAC said: “Digital transformation is inevitable for companies in Asia. The high penetration of mobile devices combined with increasing accessibility to mobile networks makes it impossible for companies to ignore the need for more scalable ways to get to these customers. Asia is truly mobile first in most countries driven by a fairly young population in emerging markets and low cost connectivity via mobile devices.
“Microsoft does more than 90% of its business through the partner ecosystem. This is a global trillion-dollar opportunity for us and our partners and we believe that with the cloud, there are no geographical boundaries to how our partner ecosystem can do business.”
“The cloud market in Asia Pacific is growing about 20% year on year and customers are asking for help and they want it fast. It is our mission to help as many partners as possible to successfully make that transition so that they can empower their customers to achieve more.”
A recent IDC report showed that while companies in Asia (500 or more employees) are accelerating their digital transformation initiatives, at least 45% are still in the nascent stage and another 33% have limited digital strategies in place. While this lags organizations in US and Europe, this presents tremendous opportunity for Microsoft’s partners in Asia.
Adoption of cloud services among small medium businesses in Asia Pacific is also set to grow exponentially. IDC forecasts that 33% of Asia enterprises will pursue a cloud first strategy, with overall IT budgets dedicated to cloud services increasing to 26% by 2016 and 70% of enterprises in Southeast Asia will adopt a hybrid cloud strategy.
The possibilities are far-reaching for our partners who are also adopting a cloud-first approach today.
Increasingly, we are seeing our partners in the region grow their footprints out of Asia to take advantage of the trillion-dollar opportunity. Astoria Solutions from Singapore, has seized opportunities in markets with rich growth footprints in the oil and gas sectors, and plans to expand to markets like Abu Dhabi and US. Similarly, Learning Possibilities, a partner headquartered in UK, has expanded their cloud service offerings to Asia, where they’ve rolled out their Learning Management System built on Office 365, LP+365.
Enabling the Ecosystem of the Future
With over 38,300 partners registered in the Microsoft Partner Network in Asia Pacific, and hundreds of thousands more transacting through Microsoft’s distribution channels, it is imperative for these companies to transform their business models to the cloud, to mobile solutions and to creating their own IP. In fact, a Microsoft-commissioned IDC research unveiled at WPC this year shows that partners who have grown their cloud business to more than 50% of their overall revenue generated at least US$5.87 for every US$1 of Microsoft solution sold. According to another IDC study in Asia cloud partners in Asia Pacific make 1.8x more revenue and 1.4x more gross margin than their non-cloud oriented partners.
“In the last three years, Microsoft has been investing in new partner models and programs to accelerate their transformation to the cloud and we believe they can do this profitably,’ said Beaulieu.
Cloud Companies Are More Highly Valued
The more aggressive and entrepreneurial members of the partner ecosystem have adapted and gone after higher margin opportunities of managed services which generate 45-55% gross margin on average or with packaged IP which often exceeds 65% margins. These are partners who are setting themselves up to be rewarded.
“The M&A space is quite active. Partners who have gravitated towards the cloud have recurring revenues, and are realizing healthy growth and have much higher valuations by the market. This can have a dramatic increase in the overall shareholder value. Our observations are that valuations can increase in access of 5 times for partners with Cloud IP and this is driven aby three things – Recurring Revenue, Specialization (being known for something) and Intellectual Property,” said Beaulieu.
Nicki Bowers, Managing Director of KLOUD, an Australian-based, born in the cloud partner can attest to that. In January this year, KLOUD was acquired by Telstra to enhance its consulting capabilities through its professional and managed services.
“Three years ago, we started our company to focus just on serving customers who were keen to move to the cloud. We spent time understanding their needs and the varying levels of maturity in cloud adoption, and designed our services to meet them. Today, we have a range of customers from medium sized of a few thousand seats to very large with hundreds of thousands of seats. Our business has been designed to work with these customers for the long haul,” said Bowers.
She added: “Transformation is not a one-off event. The constant innovation and delivery of new cloud services from Microsoft mean that we need to be constantly innovating and adding value to our customers’ business.”
Cloud Solution Providers – a Catalyst for Ecosystem Transformation
In July 2015, Microsoft introduced the Cloud Solution Provider (CSP) program to accelerate the growth of the cloud partner ecosystem by enabling partners to own the end-to-end customer relationship. Their role is to recruit and provide support services to companies who are making that transition from a traditional IT service model to a cloud-based service model. Today, there are over 100 CSPs in Asia Pacific, serving about 2,000 IT resellers in the region. At WPC, Microsoft expanded the breadth of offerings for CSPs, to not just resell Office 365, Azure and Dynamics CRM Online, but to also include Dynamics AX 7 (ERP), Windows Enterprise Subscription and Surface as a Service.
“Whenever there’s disruption, things always get worse before it gets better,” said Patara Yongvanich, General Manager, Rhipe South East Asia. “Southeast Asia has a population of over 600 million. There is a growing middle class and SMBs are adopting the cloud faster than in any other market. Many resellers are keen to take advantage of this opportunity but they are concerned about how to protect their bread and butter. As a CSP partner, our mission is to help them through that transition with business transformation expertise, customer and marketing support services.”
As a CSP, Rhipe understands transformation. Originally known as Insight, an system integrator based in Australia, they decided to transform their business for the cloud back in 2013. The company rebranded and remodeled their business Since the CSP program started one year ago, they have gone one step further to help other partners transform their businesses to the cloud. In late 2015, Rhipe expanded their services to South East Asia, including Malaysia, Philippines Singapore and most recently, Indonesia.
Continued Yongvanich: “Their learning curve will be steep, but they will benefit tremendously from our own experience.”
From Selling Software to Applications and Services on Demand
For SaaSPlaza, one of the leading Microsoft Dynamics partner perating in Australia and Southeast Asia, the cloud presented itself as an opportunity for the company to bring their business application expertise to Microsoft’s Azure’s rich cloud capabilities.
“Microsoft Azure is not just a hosting platform. I don’t believe any other cloud company provides this level of built-in capabilities in the market today. Microsoft is delivering innovation at a fast pace with new releases such as Azure Machine Learning, predictive analytics and more. It was clear that we can do more for our customers by moving our business applications to the cloud and it was a no-brainer for us to go with Azure,” shared Herb Prooy, Managing Director of SaaSPlaza, Asia Pacific.
“In addition, Azure has allowed our business to scale even faster and as a result, we are able to expand our capabilities to Australia, New Zealand and all of South East Asia. Our customer base has grown to over 200 in just three years and we see significant update of cloud services in emerging markets. With Azure, we can scale our digital transformation services like never before.”
Most recently, the company secured a significant win with Singapore-based regional furniture manufacturer and retailer, Lorenzo. SaaSPlaza worked jointly with Lorenzo’s team on the business case for the cloud and has partnered with them on their digital transformation journey, to integrate their retail, production and administrative operations in Singapore, Malaysia, Taiwan, China, Myanmar and Vietnam. This was a great example of how the cloud has enabled their business and that of their customers to scale more efficiently and with speed.
“In this new world of digital, speed to transformation is everything. Companies need to work at a strategic level with their technology partners to realise the gains from these changes,” said Prooy.
He also downplayed the barriers of bandwidth in emerging markets. He said: “Users drive demand for bandwidth and as demand grows, so will bandwidth. Our emerging market customers already have access to applications on their mobile devices. I would even say that in these markets, it’s truly mobile first. We need to be smarter about how we deliver services in markets which are different from how we would do it in a mature market. Suffice to say, demand for cloud business applications is growing at a faster pace in Asia.”
Internet of Things – Opportunities for Differentiation
Internet of Things (IoT) is gaining momentum among enterprises in Asia. In December 2015, IDC predicted that IoT spending will reach nearly US$1.3 trillion in 2019, and this is led by widespread initiatives in the region. In 2015, Asia/Pacific spending on IoT contributed to 40% of the worldwide total. The analyst house highlights the growth is due to three key areas: accelerating IoT investments in developing markets, government investments in infrastructure development and local business modernization, and burgeoning new consumer class buying into goods and services with IoT components. It is no surprise that many of our partners are seeking to integrate IoT into their offerings.
As a system integrator servicing the oil and gas and marine industries, Astoria had humble beginnings in the oil and gas and shipping industries in Singapore. Having witnessed a fire drill with one of their customers who could not reconcile the missing 50 employees from its shipyard, CEO, Dominic Loke set out to find a solution that would be able to track every employee to safety. Loke developed a solution using RFID tags in helmets and an application for the customer to track whereabouts of every employee.
Two years ago, Astoria moved their application to Azure and continued to develop applications and services unique to the industry. Astoria has built more industry specialized applications with Azure IoT Suite, and are tracking multiple devices, from helmets and their wearers, containers to administrative work on handheld devices.
“IoT is not about the things. It’s about being able to gain insights from the data of those things. Microsoft’s Azure enables analytics and insights for customers of all sizes. While we have many large customers using our solutions, we have seen tremendous growth in our cloud business from the SMBs which serve these large customers in the industry.”
“Insights can be generated at multiple levels for device usage, reporting, and for benchmarking in the industry. Our SMB customers have never had this level of access to insights, and is enabling them to transform quickly, to drive better productivity and to work smart.
Since moving to Azure and growing their business in Singapore, Astoria has moved from a traditional System Integrator (SI) model to a cloud model profitably. They have now set their sights on scaling their business to the Middle East and US in the next 12 months.
At WPC, we also recognized several Asia Pacific partners for their stellar work in delivering differentiated value and innovation for customers. One of them was Microsoft Gold Partner MOQDigital, a finalist in the Internet of Things Awards category. MOQ focuses on smart integration of technology to deliver accelerated growth for their customers by assisting their customers to integrate data, applications and infrastructure components to deliver the most innovative of solutions for organizations that are going digital.
One of their most recognizable work is with leading construction firm Laing O’Rouke, where a hardhat with sensors enabled by Azure IoT Suite was developed to gather data from their employees working in tough environments. This solution enables Laing O’ Rouke to collect data and analyze trends via Power BI and Stream Analytics to provide real-time actionable insights to both the management and their employees. The system has been configured so that individual alerts in the form of sounds and vibrations can be delivered back to each wearer, and alerts can be sent to site supervisors warning them of potential dangers facing individuals or entire teams.
You can learn more about their solution here.
Celebrating the best in Asia at WPC 2016
Beaulieu added: “We have seen some great stories on how our partners in the region are transforming to meet business transformation needs of their customers in new ways. From CSPs, to moving their business to the cloud, to creating unique IP in specialized areas, our partners have only just begun to push the boundaries We will do whatever it takes to enable more partners to be included in the growth opportunity in the region and to truly make a difference for their customers.”
Microsoft Asia Pacific also celebrated its transformation champions for the year at WPC 2016. We are pleased to share the list of this year’s winners. CONGRATULATIONS TO YOU ALL!