Exchange Partner Engagement and Readiness: Global to Breadth
SMB Management Business Strategy in Meeting Goals and Decisions Agree on high level Management strategy and business model for the SMB segment Balanced investment over time in software vs services Agree on Value Prop for SCE V1 Close on packaging and pricing model for CMM Open discussion on V1 in the UMM Non-Goals Value prop for hosted management service (SC Live) Microsoft Confidential 2 Long Term SMB Management Value Chain Trends/MS Direction SMB Customer VAR/VAP Channel System Center Live Value Chain Relevance to Discussion Partners: Broad ISVs, OEMs Move from update & asset to a broad hosted services portfolio and platform Convergence of ISV/OEM maintenance with management services System Center Live Management hosted platform and broad range of services Majority leveraging SCL to provide RMM services Evolve to first line support with convergence of ISV/OEM maintenance and management
Move to hosted services with minimal on premise component Aggregation functionality integrated into OS, SBS, Centro Customer buys broad range of MS , ISV/OEM mgmt services Microsoft Confidential Move to managed services, migrate from self hosting to reselling SCL MS drives secure, well managed infrastructure with mix of OS, segment solutions and hosted services MS provides hosted platform with convergence of ISV/OEM maintenance and management What is our balance between software & services over time? How do we enable partners to leverage our infrastructure longer term? What is our balance between SW to VAP vs hosted services? How do we price and package SCE V1? How do we tier on premise offerings over time (SCE, SBS, Centro) and compliment with hosted services? 3 Market and Trends Overview SMB WW Management Software & Services Spend 2005 Penetration 2005 Spend CAGR - $433B 8% - $610.9B 50-60%
(4) * WEMD Key Takeaways Sources: (2) (3) (4) (5) (6) (1) (2) 10-15% - (6) 2009 Penetration 2009 Spend Great revenue potential for IT management in SMB, which encompasses monitoring, system configuration, security, & backup/restore There is healthy growth in software and services, with a trend toward RMM notably in U.S. through 2009. (4) SB more interested in outsourcing support as typically no full-time IT presence. Current management software avg. ownership under 50% in SMB for two reasons: Repackaged Enterprise solutions are too complex and expensive Tools built for SMB are point solutions which are not comprehensive Tools Spend: Median = $5,050; Mean = $13,529 (1) AMI SMB Global Forecast Model, 2005 (Note: applications management services, help desk management services and operations services.) Midmarket Mgmt Tools: Vendors and Spend 3/9/05 2004-05 U.S. Small and Medium Business Channel Partners Market Overview and Topline Assessment, AMI Partners. Predicts 2006: Small and Midsize Businesses Are Faced With Important IT Investment Decisions, Garnter, Nov 2005 *Note: Based on U.S. trends and forecasts IDC WW Software Forecaster, March 23, 2006 SCE public beta survey, April 2006 (623 respondents). Microsoft Confidential 4 SMB Management Competitive Landscape Software 1. 2. Integrated: Some competitors trending to comprehensive, integrated management suites Tend to be more complex, not designed specifically for CMM and priced out of CMM Examples: Altiriss Total Management Suite & Symantecs LiveState CMS Point Solutions: Share leaders in MM management tools tend to be point solutions. Solutions are not comprehensive or integrated management tools, but are priced well for CMM. Examples: Symantec is leader in AV/AS (54%) and Backup (57%), Numara TrackIT for Asset Management (29%) and IPswitch Whats Up Professional for Monitoring (11%). Services Pure Hosted Services: AV/AS, patching, backup, soft dist., asset tracking & help desk SMB tiered services offerings starting with the basic Desktop management services up to hosted IT.
Examples: Everdream, Centerbeam, IBM Global Services Express Advantage HP Smart Desktop Service. Price range: $30-$50/seat/month 2. Software to Power Hosted Services: Proprietary IT management solution platforms Build and market remote monitoring and management platform solutions that partners leverage to build their own IT managed services business. Examples: LevelPlatforms Managed Workplace and N-ables N-central platform solutions. Price: LP - $2500 fee plus $25/site/month; N-central $40k plus $1,000/customer/year 3. OEM/ISV selling services as extension of maintenance: AV/AS, patching, backup, soft dist., asset tracking & help desk Offer services as an extension of hardware and/or software business May be direct or via partners and resellers. Examples: Dell Workspace Services, Symantec AV/AS, McAfee AV/AS and MSFT MU Source: Midmarket Mgmt Tools: Vendors and Spend 3/9/05 (* Note: These competitors are primarily MM with exception of Symantec AV/AS and Backup solutions) Pricing: Dell - $20/desktop/month; AV/AS - $40-$60/node w/$15 annual renewal 1. Microsoft Confidential 5 WEMD MM Strategy & SCE Bundling/Packaging Options Option-1: Services Primary Option-2: SW Primary Option-3: SW with Services Lead with SCL Use SCE only as services enabler Dont push MOM/SCE as VAP RMM Build on-premise business with SCE Push Ops Mgr/SCE to build RMM Software focus in FYO7 Increase Services focus in offering Incubate SCL FY08/09 Technology readiness High: asset management Low: comprehensive services High: on-premise management & Software ready for FY07 Provides time to grow services Market Potential SAAS biz model not matured Established market for mgmt tools Early indicators positive for RMM WEMD MM Management
Definition play Competitive position Worldwide (Growth in broadband fuels growth of hosted services) Early indicators show good potential Services portfolio is not competitive Not addressing SW competition head on (Symantec, Altiris) RMM platform Ability to monetize WSUS installed base SCE is a competitive differentiator SCE/Ops Mgr strong platform for VAP Channel Strong direct customer relationship Strong channel to leverage Model to engage channel unknown Higher VAP investment required Option-2: Option-1: SCE Stand alone + integration in Low investment required for VAP SCE Specific SBS/Centro Harvest mgmt tools market now Grow services revenue with market Strategy plays to current strengths and allows to build competency in services Leverage strong channel today Build channel as market SCE only via SBS/Centro evolves Pros Choice of offerings provides customer flexibility to increase MS Lower investment in customer awareness and Con s Higher investment in customer and channel readiness WEMD does not have existing MM channel Significantly increasing the cost for customers to penetration Near-term ability to address management challenges of Windows in MM SCE provides on-ramp to Centro SCE provides end-point for RMM in FYO7 Microsoft Confidential
channel readiness with concentration on one initiative for MM Lack of alternatives may move customers more quickly to Centro WEMD stays more focused on managed services address management challenges Provides competitors chance to sell their management products as standalone offerings Requirements of Centro will limit broader management adoption (64-bit, size, migrate/upgrade 6 SCE V1 Pricing and Packaging Considerations for CMM Conducted quant discrete choice analysis to determine optimal pricing, features, and SKU strategy for Systems Center Essentials (SCE). Need a low price for CMM entry Provide scalability and flexibility CMM has diverse server-to-client ratio across 60% % of U.S. Midmarket companies 50% Number of Servers Base Total (n=545) 0 servers <1% 40% 1-3 servers 16% 30% 4-15 servers 59% 16-49 servers 19% 50-99 servers 3% 100-249 servers 1% 250-499 servers <1% 20% 10% 0% 50-99 100-149 150-199 200-249 250-500 Number of PCs
500+ servers Dont know 2% Source: System Center Essentials Price Preference; AMI WW MM Insights Microsoft Confidential 7 SCE Packaging, Pricing and Licensing Options for CMM CMM (50-249) Standard Price based on $80/Server and $20/Client (2) Hard upper scale limit at 25/250 (CMM) SPLA for VAPs (Ops Mgr + SCE) Option 1 (SML and CML packs) OpsMgr Server plus OML and COML prices Partners have indicated reasonable & competitive SCE Level SML SPLA price calculated for VAP solution based on S e r v e r CML Pros SPLA pricing is ~ $25/mo/server and $5/mo/client. Total Affordable entry for CMM Flexible Base licensing pack for varied server to client ratio distribution in MM $190 Cons $400 5/50 $500 $500 Administrative/sales CML 10 packs overhead of selling CML and SML packs? $200 Option (SCE packs) SML 52packs $400 0 CMM and VAP/Managed Services Proposal SCE S
e SCE Bundle SML CML r Pros v One server and client pack to deal with e Incremental upgrades available with purchase of more packs r Cons $100 Stuck Base 5/50to client $400 withpack the server ratio of the SCE packs 0 $100 Add packs 5/50 $400 Option 3 (Fixed Price) Level 5/100 25/250 Server $500 Client Total $400 $2000 $2400 $2000 $5000 $7000 Option 1 Offer Standard SCE to CMM customer via base price Allow scale-up to 25/250 with additional license packs VAPs: OpsMgr 2007 to VAPs via SPLA Calculate SALs to align with OML and COML SPLA pricin OpsMgr 2007 VAP pack available only via SPLA Total $190 $190 0 0 0
Pros No SMLs, CMLs or Server price to deal with, just one price Several different scales to purchase Cons Server to client ratios wont work for all MM IT environments Lack of flexibility in adjusting server and client scale Microsoft Confidential Sources: (1) US Mid-Market Management Tools, Vendors and Spend (2) System Center Essentials Price Preference 8 Scaling SCE to the Upper Mid Market Pros Cons Potential confusion in the market requiring additional marketing effort When do I use SCE, when MOM and SMS? Signals our intent to the market before we have necessary features Revenue cannibalization unless we ensure pricing makes us revenue neutral Potential Packaging/Pricing Customer dissat if using for scenarios not designed for SCE Premium Edition Open Issues Strong competitive response from below when combined with SMS/MOM from above Great avenue for customer feedback on requirements to grow SCE up market Accelerator on our drive to longer term integrated solution Do we have the right feature set to be successful in this segment? Can we feature differentiate between Standard and Premium? Can we scale and do we risk customer dissat? Plan to Resolve Starts at 25/250 Scales to 50/500 higher? Base price matched to OpsMgr + SMS solution at this scale: ~ $25,000 Customers add on SMLs and CMLs priced equivalent to OpsMgr + SMS SML = (OpsMgr + SMS) CML = (OpsMgr + SMS) Prod Mgmt propose customer and market driven strategy for SCE in UMM Need engineering support to explore potential feature differentiation at SCEV1 Close on decision before SCE public beta Microsoft Confidential
9 Software & Services Market Entry & Roadmap CY06 CY07 H2 Management Software roadmap Software enabled services for RMM offering targeted to VAPs H1 H1 Service Desk v1 CY09 H2 MOM R2 H1 SCE R2 SCE in Centro/SBS Software enabled services RMM Based on SCE/MOM SCL services SCL Services V1 Asset Mgmt Services SCL website Wave 1 Market Entry with SCL asset management service RMM Based on SCE/MOM & SD SCL Services V3 Hosting for VAPs for MOM & SD Aggregation of alerts SMS catalog integration SCL Services V2 Crash hang data analysis Outside-in monitoring SCL Services Wave 2 SCE Launch and comprehensive RMM offering with complimentary SCL offerings SCE sold as stand-alone integrated
management solution for midsize businesses Software Services H2 SCE v1 MOM v3 CY08 Expanding services focus through mid-market software enabled services, Partner can build a RMM offering based on MOM V3 & SCE as endpoint either in Centro or as a standalone product Hosted asset management services marketed to get customers compliant. SCL website goes live with hosted asset management Microsoft Confidential services SCL offering expanded with Crash hang data analysis , outside-in monitoring in addition to Hosted asset management services Wave 3 End-to-end Managed Services offering with Microsoft hosted solution SCE integrated into Centro and SBS SCE R2 Enhanced Network Mon. & Mgmt Backup & Restore (DPM) OS distribution GP Management Asset Management AV/AS Support SCL and RMM offering converge; Microsoft hosts the NOC VAP resells services & manages customer SLA 10 Next Steps Ramp SCE and Managed Services GTM Efforts leading up to RTM Tech Ed, MGX, Tech Ready, WWPC, MM Strategy Day, IT Forum, Convergence Drive to alignment of on premise offerings in MM What are our Hero SKUs across SCE, Security, Centro Ensure consistent message and go to market strategy across Need to close on this before SCE public beta announce Create customer and market driven strategy for SCE in UMM Validate customer requirements against feature set/potential differentiation Establish competitive packaging and pricing model in line with SMS/MOM Close before SCE public beta
Microsoft Confidential 11 Appendix April 2006, Data Overview 2006 IT Spending In The SMB Sector Services Spending To Increase Modestly 2006, Forrester Research, Inc. Reproduction Prohibited What services are partners offering (planning to offer)? Remote desktop management is among the top areas partners plan to offer services. Network maintenance and support is among the top services currently offered. (2) 20% % of Channel Partners Planning to Offer Remote managemen t of desktops Outsourced IT HelpDesk 10% 9 Managed security services 10 4 1 7 3 2 Network maintenanc e & support 13 8 11 5 6 16 14 N=408 0% 15 12 17 100% 50% % of Channel Partners Currently Offering
1 Internet Access (inc. high speed) 5 Firewalls 9 Des & Dev. security systems 13 Remote Mgmt. of desktops PC maintenance & support 2 Web site design & dev. 6 Anti-virus products 10 Managed security services 14 3 Web site hosting & maint. 7 VPNs 11 IT-related training 15 Network maintenance & support 8 Data backup & recovery 12 NW & systems design & integr. 16 Outsourced IT support/IT help desk 17 IT consulting 4 Application hosting (ASP) Source: 2004-05 U.S. Small and Medium Business Channel Partners Market Overview and Topline Assessment, AMI Partners. Microsoft Confidential 14
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