Over the next few years, 90 percent of Microsoft's Research and Development (R&D) budget will involve cloud computing, up from about 70 percent today, according to Cindy Bates (pictured), Microsoft's VP of US Small and Medium Business & Distribution. Bates made that stunning statement today during the SMB Nation conference in Las Vegas. But that's not all she said. Bates also covered Microsoft's Office 365 cloud computing strategy. Here are seven key highlights from Bates' keynote.

Among the key statements:

1. SMB Flexibility: Microsoft's strategy is to deliver anytime, anyplace, any screen productivity to SMB channel partners and their customers. That strategy includes building close links between Windows Phone 7 and Microsoft's cloud applications.

2. Windows Phone 7: Bates previewed a Windows Phone 7 commercial, and she asserted. "It will be the best business phone out there." Hmmm... The VAR Guy will be watching to see if Microsoft meets that lofty goal.

3. The Cloud Is... "It's not a thing and it's not any one product," said Bates. Instead, Microsoft defines the cloud as:
"A cost effective Internet based model of delivering enterprise class IT capabiliuty and software solutions to businesses of all sizes."
4. Big Bucks: Microsoft spends 70% of its $9.5 billion in R&D on the cloud and that's moving to 90 percent, Bates stated. "We're dedicated to taking all of our products and innovating on the cloud," she added.

5. Cloud Apps: When Bates asked how many attendees sell BPOS (Business Productivity Online Suite), roughly 20 percent to 30 percent of the room raised their hands. Microsoft earlier this week announced plans for Office 365, a BPOS successor that's slated for launch in 2011.

6. CRM Meets the Cloud: Microsoft aggressively pitched Microsoft CRM Online. Bates says CRM is Microsoft's fastest-growing business application. Microsoft previewed some forthcoming CRM Online 2011 enhancements, including integration with Windows Phone 7.

The unspoken message: Microsoft will link its CRM cloud strategy the Windows Phone 7 mobile launch in a bid to compete more aggressively against Salesforce.com and NetSuite.

7. Office 365: "It's a new brand and the culmination of everything Microsoft has learned since the 1989 launch of Office. Office 365 will launch in Spring 2011, Bates predicted. "It will be the cloud on your terms." Bates described Office 365's three plans (Plan P1, Plan E and Plan K). More details on that later today.

Bates says Partners will profit in four ways:
  • 18 percent commission in first-year sales and 6 percent thereafter
  • Migration services
  • Business consulting and application development -- "There will be a much more robust opportunity for managed services.
  • Building out managed services.
Bates clearly communicate the opportunities, but the Office 365 strategy triggered some fear, uncertainty and doubt among MSPs attending the N-able Partner Summit in Scottsdale, Ariz., earlier this week. Gretchen O'Hara, Microsoft's cloud channel chief, took the time at the N-able event to answer attendee questions.

Can Partners Really Profit From Office 365?

That's the big question. The VAR Guy will be stopping by Microsoft's booth here at SMB Nation to get more perspectives from attendees and Microsoft.

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