$32 billion in revenue. That’s an incredible number that Satya Nadella and Amy Hood shared during the Q2 earnings call last week. Just as impressive is the commercial cloud revenue increase of 48 percent year-over-year to $9 billion. Did you know that 95 percent of Microsoft’s commercial revenue flows directly through our partner ecosystem? With more than 7,500 partners joining that ecosystem every month, partner growth and partner innovation are directly fueling our commercial cloud growth. One accelerant, the IP co-sell program, now has thousands of co-sell ready partners that generated an incredible $8 billion in contracted partner revenue since the program began in July 2017.
It’s exciting to see the success of our partners, and to know we are collaborating with businesses of all types and sizes wherever there is opportunity. We’re working together with partners old and new to help them build their own digital capability to compete and grow. We’ve doubled down on our partnership with Accenture and Avanade, creating the new Accenture Microsoft Business Group to help customers overcome disruption and lead transformation in their industries. We’re partnering in new ways with customers like Kroger to bring their new Retail as a Service solution built on Azure, to use in their stores – and to sell to other retailers.
Part of Microsoft’s digital transformation is moving beyond transactional reselling via partners, to a true partnership philosophy where we’re working together to develop and sell each other’s technology and solutions. Our partners are building on our technology, collaborating with partners across borders to build repeatable solutions, and creating new revenue opportunities that didn’t exist in the past. We focus as much on selling third-party solutions as our own, and the speed of the cloud enables all of us to accelerate value to our customers.
I want to share more with you about how hundreds of thousands of Microsoft partners are powering customer innovation, and how we are evolving our partnership strategy in order to drive tech intensity for customers around the world.
Partner success and momentum
With hundreds of thousands of partners across the world, our partner ecosystem is stronger than ever.
CSP: Through our Cloud Solution Provider (CSP) program, our fastest-growing licensing model, partners are embedding Microsoft technologies into their own solutions and delivering more differentiated, long-term value for customers. The number of partners transacting through CSP is up 52 percent, and they are serving more than 2 million customers.
Azure Expert MSP: The Azure Expert MSP program has grown to 43 partners that deliver consistent, repeatable, high-fidelity managed services on Azure and are driving more than $100,000 per month in Azure consumption. A big part of this volume is in migration services, as SQL Server 2008 phases out this summer, followed by Windows Server 2008 a year from now. The opportunity for partners can’t be understated. Our estimates put the opportunity around $50 billion for partners to help customers move their existing on-premises workloads to Azure and start capitalizing on the benefits of the cloud.
IP Co-Sell: Our industry-leading IP co-sell program that rewards Microsoft sellers for selling third-party solutions is a runaway success, generating $8 billion in contracted partner revenue since July. Our partners are reaping the benefits and seeing co-sell deals close nearly three times faster, projects that are nearly six times larger, and drive six times more Azure consumption.
Building the largest commercial marketplace
Gartner estimates the opportunity for business applications will be $133 billion this year, with independent software vendors (ISVs) driving more than half of that. So we are upping our commitment to ISVs by investing in Microsoft’s marketplaces, Azure Marketplace, and AppSource, to build the largest commercial marketplace in the industry. Our marketplace provides a frictionless selling and buying experience that brings parity to first and third-party solutions and meets the needs of both IP builders and software purchasers. Partners with solutions in our marketplace can sell directly to more than a billion customers and partners, and they benefit from lower deployment costs and flexible procurement models for software. Through the marketplace go-to-market services, we’ve seen partners achieve an average of 40 percent reduction in cost per lead, and a 2x lead conversion to sales rate compared to industry averages.
New capabilities are coming soon to AppSource and Azure Marketplace. One of the biggest developments is the ability for partners to offer their solutions to our partner ecosystem through the CSP program, with a single click. We’re also improving the user experience and interface with natural language and recommendations features. And by setting up private marketplaces, partners will be able to customize the terms for any specific customer—billing or metering their services on a per-user, per-app, per-month, or per-day basis to meet customer needs. And soon we’ll be offering curated portfolio IP & Services solutions that leverage Azure, Dynamics, Power BI, Power Apps, and Office.
AI for enterprise
IDC estimates that global spending on cognitive and artificial intelligence systems is expected to triple between 2018 to 2022, from $24 billion to $77.6 billion. And just like Microsoft transformed the way people work and live by making personal computing widely accessible in the 1980s and 1990s, we plan to do the same with artificial intelligence. Our aim is to make AI accessible to and valuable for everyone. We’ll do it by focusing on AI innovations that extend and empower human capabilities, while keeping people in control. Our partners are finding huge success and growth in the AI space. Through our AI Inner Circle Partner program, partners provide custom services and enhanced AI solutions to customers and have seen more than 200 percent growth in their AI practices year-over-year.
As we encourage partners to go all-in on AI, we need to make sure they have substantial resources and training. So, we’ve developed AI Practice Development Workshops, Advanced Education, trainings in the classroom, online, and at events. So far, since July, more than 29,000 people have been trained across Microsoft’s data and AI portfolios. Our popular AI Partner Development Playbook and library of online resources—collectively with more than 1 million downloads—have put answers at the fingertips of partners launching and expanding their AI services.
New HR skills playbook and tools
The latest in our series of Cloud Practice Development Playbooks, released today, is an outstanding human resources guide for partners and customers. We collected input from more than 700 partners to develop “Recruit, Hire, Onboard & Retain Talent.” It is a hands-on guide to walk partners through the HR process of recruiting, hiring, and onboarding employees. Alongside the playbook, we’re launching a new learning portal on MPN that simplifies partner training, and a new Partner Transformation Assessment Tool to help partners map resources and investments against solution areas and workloads.
Partner opportunities ahead
Microsoft’s mission is to empower every person and every organization on the planet to achieve more. And we know that partners make more possible. As a customer-first, partner-led company, we start with the needs of our customers and work with our partners to deliver the best outcomes for each organization. We look forward to continued evolution in the Microsoft-partner relationship this year—with more innovation in AI, more co-selling opportunities, and more ways to connect partners to customers and to other partners through Azure Marketplace and AppSource. I invite you to learn more about how Microsoft leaders from the Azure, Dynamics, and ISV teams are supporting our partners, and how partners can capitalize on the opportunities ahead.