Industry Execs: Microsoft-Yahoo Is Sign Of Software Services Times

Top technology industry executives Friday characterized Microsoft (NSDQ:MSFT)'s blockbuster $44.6 billion bid for Yahoo (NSDQ:YHOO) as a sign that software services are only going to be a bigger part of the solution provider universe going forward. Microsoft acquiring Yahoo can only be good for the channel and will help the software giant break into the software-as-a-service (SaaS) market, said Bob Dutkowsky, CEO of Tech Data, the world's second largest technology distributor. "It just makes Microsoft an even better partner for us," said Dutkowsky. "Microsoft has a broad array of products that are software-oriented and add value at the consumer level, at the SMB level and at the enterprise level. By adding Yahoo its kind of like one plus one equals three." Bringing in Yahoo will help Microsoft accelerate its move into the SaaS world, he said, noting Yahoo will bring Microsoft a fresh perspective on the market. "Yahoo will bring a different product mentality, and that's what's going to be necessary to break into this next sea change in IT -- software as a service," Dutkowsky said. "I think [Microsoft's] goal was to jumpstart their evolution into more of a SaaS business." While he wouldn't speculate on whether Yahoo would take the $44.6 billion billion deal, he said Microsoft's hefty offer begs to be taken seriously. "My guess is Microsoft put an aggressive bid on the table so that Yahoo would say, 'My god they're serious about this. They want our brand. They want our capability. They want our view of the market. They want what we have. They're not coming in with a low offer they're coming in with an aggressive offer to get us to pay attention'," he said. Either way, the melding of Microsoft and Yahoo will only be good for Tech Data and the channel. "At the end of the day I think the combined companies create a bigger opportunity for Tech Data," he said. "We watch companies in our industry merge and consolidate every day -- it's a core competency of ours to deal with partners who change. If it happens its only goodness for Tech Data." SonicWall President and CEO Matt Medeiros said a potential Microsoft Yahoo deal is just another sign that software services and managed services is how customers want to buy technology solutions. He said in SonicWall's last quarterly report over 52 percent of the security software maker's sales came from recurring services. "That is a very strong indicator that the channel understands how best to serve their end customers and more importantly how strong their economics and profitability if they sell security as a service through the subscription based model," said Medeiros. One key advantage SonicWall has as the SaaS model takes hold is its already strong position with managed service providers, said Medeiros. The majority of SonicWall VARs have been selling managed services to small and medium businesses for many years, he said. "SonicWall still leads in managed service providers in our program," he said. "Their business models are completely supportive of this whole subscription services model." Michael Schwab, vice president of purchasing for D&H Distributing, a Harrisburg, Pa. computer products distributor, said he sees Microsoft's recent Open Value Subscription (OVS) model as the first step towards a SaaS model. Slated to launch in March, the Open Value Subscription Program will allow partners and customers in the U.S. and Canada to "subscribe" to the Microsoft software they want to utilize in their businesses in a "lease-like" fashion "It's basically renting the software," said Schwab. "It gives the gives the reseller and end user a very affordable way to get into this (SaaS) business and acquire Microsoft technology on a month to month, year to year basis." "We think for our customer set this Open Value Subscription is as big a software initiative as there is right now," he said. "This has already been proven out in other areas of the technology world. This go to market strategy reasonates very well with our customer base. This is a big opportunity." Dan Schwab, vice president of marketing for D&H, said solution providers will continue to play a major role as software as a service becomes a bigger part of the market. "This will be a portion of the market and the channel will play a role just like it always has anytime there is a change in the technology landscape," he said. "The channel has proven time and time again its ability to adapt and survive."