With so much bad economic news in the national headlines, it’s encouraging to hear that business is still booming for our Microsoft partners in upstate New York.  I had the chance to spend last Thursday with nine of our partners, along with a number of Microsoft Dynamics customers, in Rochester and to talk about what’s happening in their businesses.

The partners told me they don’t see the wide swings in business that are frustrating other parts of the country.  They’re still growing with lots of business for all of them to share.  Even more interesting to me was their willingness to share so many ideas and issues during our 90-minute session, even though they compete with each other.  They realize they are part of a bigger community—the Microsoft ecosystem— and really were eager to talk about the factors influencing them all.

High on the list is the interest on the part of customers in starting to combine Web-hosted applications with the software they install on their servers and desktops—what Microsoft calls “software + services.”  I learned that one Rochester-based customer in the electronics industry has just purchased Microsoft Dynamics CRM both in its traditional on-premises, server-based form and as Web-hosted CRM Live, in an effort to test and compare the capabilities of the two formats.  The company’s CEO would like to eliminate servers entirely from his building, so he is checking out the Web-based version to compare its bandwidth, response rate and user experience.

Proof-of-concept programs like this one present a great opportunity for partners to begin collecting information and learning what customers think about new technology.  Partners should encourage these kinds of pilot programs and stay close to the customer to become an even more valuable resource in analyzing the results.

We’re a long way from knowing where the preponderance of business will lie.  Many CEOs want to keep control of their IT environment and have an IT staff manage their network locally, especially when concerned about proprietary software.  Others would prefer to host everything in “the cloud,” to lease the software so they always have the current version available, eliminate long-term agreements and, in effect, invest in the latest technology instead of headcounts and instead of building legacy systems that eventually become outdated.

So partners need to begin evaluating where their customers will be three to five years from now.  Do they have a continuing appetite for hosted applications?  Do they want to buy capacity by the gigabyte and store their data in the cloud?  They can “try on” this process today, with Web-based versions of Microsoft Exchange, Microsoft Dynamics CRM, SharePoint and Microsoft Office applications and see how their infrastructure responds.  Partners can guide them through this process and point up the pluses and minuses encountered along the way.

In the end, everyone is likely to benefit from the new business model for providing software + services.  The applications available on the Web will be offered through subscriptions or royalty programs, and partners will receive a share of that revenue, based on the work they do with their customers.  In fact, partners will be a huge component in this process, configuring and customizing computers and servers as businesses add Live services and even serving as the conduit between the customer and Microsoft to negotiate the arrangements.

Indeed a cloud is on the horizon, but it could rumble through our region raining major cost and time savings for customers as well as new business opportunities for Microsoft partners.

A cloud is pushing its way rapidly across the Northeast, expanding from its origins in the mountains of Washington and the valleys of California.  But the larger it grows, the brighter the horizon looks for businesses here.  “The cloud,” as it’s known in tech talk, is a collection of applications and other services that reside on servers of major software companies like Microsoft and of partners across America.  These applications are just like the licensed software business people are used to installing on their own in-house servers—Microsoft Exchange, CRM, SharePoint, Office—but they’re available from anywhere via the Web for a subscription fee.

Some businesses will always want software they can place directly on their own servers and computers so that they can customize it and control security with their own measures.  Others will like the way “the cloud” makes their password-protected files and applications available from anywhere on earth, as well as the savings from not needing to buy servers and from a smaller IT staff.   Still others will want a combination of software plus services to use with various applications and different facilities.  In some cases, software on their servers—such as Microsoft Dynamics business management programs—will pull a variety of services from the cloud automatically.  For example, through Microsoft Dynamics NAV, you could manage your warehouse and list excess inventory on eBay automatically.

In talking with partners and customers around the region, I’m finding a good deal of interest in these emerging alternatives for access to computing, along with a few myths. 

One myth is that “software is dead.”  The fact is that the purchase and implementation of software and servers continue to grow in our region and across the country.  With 8 million developers building software applications with Microsoft tools—and as yet only 0.5 percent of consumers substituting Web-based productivity suites for software like Office—the software we’ve all been used to, running on premises,  will remain the primary way businesses operate in the foreseeable future.

Another misperception is, “Cloud computing is innovative and traditional software has too much functionality.”  Individual consumers may make that argument, but that functionality is there for businesses because they demand it for meeting objectives, such as security compliance and collaboration.

And a third myth is that, “With applications hosted in the cloud, I really won’t need a technology partner.”  The fact is that Microsoft partners will become even more important to our area’s businesses than they are today.  Within a few years, nearly all companies will be running with a combination of software plus services delivered via the Web, and they will rely on their partners for advice and expertise to determine the right balance of these options for each organizational function.  Partners also will play a crucial role in developing and implementing software that allows businesses to draw on Web services through their on-premises software.  Our area’s technology experts will be linking businesses and their branch offices with their computing power and data across many paths.

Now is the time to start working even more closely with your Microsoft partner to develop a plan for how you will deploy software plus services to provide you with the greatest cost savings, the maximum flexibility and access, and the most appropriate security. 

You don’t want to get caught out in the heat of the marketplace without a cloud to shelter you in this rugged business environment.

You might think it takes a lot to pull a chief information officer out of the data center and convince him or her to fly 2,500 miles to meet with a few hundred other CIOs who have abandoned their own server farms for the mountains and forests of Redmond, Washington.  But the fact is that, at last week’s CIO Summit on the Microsoft headquarters campus, CIOs from 19 companies here in the Northeast were thrilled to have an opportunity to network. 

I had a chance to talk with all of them, and when I asked what had been most important to them during their three days at the summit, they offered two answers: learning how Microsoft uses its own technology and the ability to network with peers.

They were comparing notes on how they position IT as an asset, rather than a cost center for the company.  They were interested in how investment in technology actually saves their companies time, money and manpower and improves efficiency in communications.  Most of them view IT as supplementing or replacing the IT workforce.

The CIOs came from a surprising array of industries: financial services, automotive distributors, organic foods, life sciences, law.  It was one of those rare gatherings where tremendously diverse business sectors all came together with a common interest: the role of technology.  The 19 from the Northeast were among 300 CIOs from across the United States who met with Microsoft corporate vice presidents and other officers to hear about technology for businesses, information workers, unified communications and the overall business value of IT.

The biggest challenge facing the CIOs was the lack of awareness among their colleagues outside the IT department regarding the power of technology.  Some of the participants represented young companies, and they were eager to meet with CIOs from the more established and technologically sophisticated corporations to find out what they did right and wrong in advancing their technology.  The CIOs from smaller organizations have a vision of being larger some day and wanted to ask their more advanced colleagues, “How did you get there?”

It was clear that the CIOs really enjoyed contemplating the vision of Microsoft as a company.  They were especially captivated by our tour of the home of the future, where RFID and other technology will change the way we live by personalizing our environment.

I learned a good deal from their questions and insights; so, in the spirit of networking, I would like to offer my advice to these CIOs who now have returned to their offices:

·         Above all, continue to network and develop the relationships you’ve made.  The power of relating to your peers will help you with the purchases and deployments you are considering.

·         Start thinking about how you want to organize your IT infrastructure in the future.  Will it continue to be based on software deployed on the premises, or should it be hosted “in the cloud” with Web services and applications.  It’s very likely that you’ll need both options to meet your future objectives.

·         Continue to empower your people with technology.  The way we work is changing.  Where, when and how people work now is very inconsistent.  Does your infrastructure give them the opportunity to work where they are most productive, while protecting the company and capturing all their information so that it resides in a secure database, rather than in the minds and files of individuals who may one day leave.

·         Think about the value of your technology partner, as well.  Work through that channel to learn about and deploy new technology that you might be ready to acquire.

I’m certain that many of the CIOs went back home and resumed their attempts to convince their CFOs and CEOs to invest in more technology.  I’m glad that, as a result of networking, they left the summit with information that equips them with even more examples of how and why technology is good for their businesses.