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Microsoft's Cloud Partners Paying Off

Stocks in this article: MSFT

NEW YORK ( TheStreet) -- A Microsoft (MSFT)-sponsored report from research firm IDC showed that partners of the Redmond, Washington-based tech giant with a deep exposure to the "cloud" are seeing a big payoff in their efforts. This reflects the growing number of businesses moving their technology infrastructures to the cloud.

The report, released on Monday at Microsoft's annual partner conference in Houston, said Microsoft's cloud-oriented partners, defined as those that generate more than 50% of their revenue from the cloud, have been growing at double the rate of non-cloud-oriented partners. These partners also bring in new customers twice as fast as their counterparts, generating 30% more revenue per employee.

"We're at the point in the industry's overall cloud transition where partners that don't move some of their business to the cloud likely won't survive," Darren Bibby, program vice president of IDC's Channels and Alliances Research practice said in the report.

The data Monday also said that 63% of customers surveyed for the report prefer to have a single cloud service provider meet their needs, and that 67% expect to purchase a wide variety of cloud services from a single vendor. Meanwhile 74% expect their cloud service provider to be able to move a cloud offering back on location if needed, highlighting that the most successful partners are the ones that are able to offer a "hybrid" approach to their services.

Jon Roskill, corporate vice president of the Worldwide Partner Group at Microsoft noted Microsoft's partners are in a "prime position" to benefit from the thousands of new customers that Microsoft is adding each week to its existing base of 250,000 customers in cloud platform Windows Azure. Office 365 should benefit as well, Microsoft's cloud-based office solution, which now sports a $1 billion run rate in annual sales.

The report report comes as Microsoft puts increasing emphasis on transitioning into the cloud. CEO Steve Ballmer has pledged to revive company sales with the help of the cloud in the wake of a global PC sales decline that continues to threaten the company's traditional business of pre-installed programs.

Activist investor ValueAct Holdings has also mentioned cloud computing as Microsoft's future, as the hedge fund pronounced its faith in the company's ability earlier this year. In April, ValueAct confirmed that it acquired a nearly $2 billion stake in Microsoft driven by the company's cloud ambitions.

"In three to five years, which is our time horizon, we'll stop talking about PC cycles and instead talk about Microsoft as the largest cloud-computing company in the world," ValueAct CEO Jeffrey Ubben said earlier this year.

ValueAct could not be reached for comment for this story.

Shares of Microsoft closed the day higher, gaining 0.35% to $34.33.

Written by Andrea Tse in New York

>To contact the writer of this article, click here: Andrea Tse.>.

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