Microsoft’s new sales chief for enterprises and partners in the U.S. has admitted that for every dollar companies spend on its software, they have to spend $6 to get it running right.
In an interview with AllThingsD on Monday, U.S. Enterprise and Partner Group (EPG) vice president Ron Markezich said:
The other thing is that if you look at the total industry spend, most of it is on activities where there’s no value added. Every dollar you spend on software from Microsoft, you spend $6 trying to get it to do anything.
That’s a stunning admission, especially from the exec who is supposed to be evangelizing Microsoft to U.S. partners. Partners are responsible for more than 90% of Microsoft’s software sales, but they can’t make a lot of money from marking up Microsoft software.
So most of them rely on so-called value-added services like installation, helpdesk support, licence management, and systems integration.
Markezich was making the point that Microsoft’s online services may appear to cost more than an on-premises software licence. But over time, customers will save money they would otherwise have spent on installing and maintaining that software on premises.
Another way of putting it: with online services, Microsoft is taking a larger portion of customers’ overall IT spend.
Markezich has been a big driver of Microsoft’s online services strategy. As CIO, he oversaw a pilot program with Energizer back in 2005, and later helped lead the product group that created Microsoft Online, which includes hosted email, collaboration, and other services. Office 365, which entered beta-testing on Monday, is essentially the latest version of these online services.
Markezich started his new job earlier this month.