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1 PARTNER CASE STUDY CDW: Profile of a Microsoft Online Services Partner Sponsored by: Microsoft Darren Bibby December 2010 IN THIS PARTNER CASE STUDY Global Headquarters: 5 Speen Street Framingham, MA USA P F This case study looks at Microsoft Gold Partner CDW and its move to build an Online Services practice centered on Microsoft Office 365. CDW is a US$8 billion plus provider of hardware, software, and services to businesses and organizations throughout the United States and Canada. Often thought of as an order-taking product fulfillment team, CDW has evolved over the years to become a leading provider of complete technology solutions to its business, education, government, and healthcare customers (see Figure 1). As its primary customer base of small and medium-sized organizations has been squeezed for both cash and resources in the current economic climate, the move to online services as a more cost-effective technology solution is key to CDW's future growth. This Partner Case Study begins with an overview of the "cloud shift" that has swept the IT industry and then takes a look inside CDW's own Online Services practice. FIGURE 1 CDW Company Profile Business Focus: Headquarters: Employees: 6,150 Source: IDC and CDW, 2010 THE CLOUD SHIFT Leading provider of technology solutions for business, education, government, and healthcare Vernon Hills, IL, USA Quote: "The people who understood the paradigm shift early enough are the ones who can benefit and thrive and get ahead of everybody else." IT is a business that lives with a higher level of change than most, with new products and periodic release cycles creating opportunities along the way. Despite this constant change, most of the time, the changes are small. But occasionally, external factors create drivers within the customer that lead to a questioning of the fundamental tenets of the existing model. Most would agree that the biggest shifts have been mainframe, client/server, and now cloud computing.

2 Due to the introduction and hype of cloud computing, many customers are asking: Is IT a core service or a utility service for our business? Are deep IT skills required? Is direct ownership of the assets necessary? In a distributed business environment, is the location of services relevant? Is lowest predictable cost or flexibility at a premium the right driver? Are there alternative payment options that we should consider? This industry shift has resulted in IT suppliers' existing "offers" becoming disconnected from the needs being identified by customers. This has created opportunities for new high-growth software vendors to enter the market with new and disruptive propositions. Complex solutions are being commoditized, high-cost applications are becoming affordable, and new classes of business problems can now be solved. This gap still exists but is being narrowed as IT suppliers are becoming more savvy about it. There are many examples of cloud software offerings that either have bridged or are close to bridging this gap. Microsoft's Cloud Services Response Two of the largest software franchises in the world are Microsoft Windows and Microsoft Office. 1 Therefore, if any company has a reason to feel threatened by the cloud shift, then it should be Microsoft. Despite this, Microsoft has made clear statements of intent about cloud and supported them with significant investments. Microsoft, of course, has been involved in cloud and online services for a very long time, with accomplishments such as Hotmail (1997), Windows Messenger (1999), service provider licensing (2001), Xbox Live (2002), and Microsoft Online Services (Business Productivity Online Services [BPOS], CRM Online, and Azure, ). In fact, Microsoft recently announced that 90% of Microsoft resources will be focused on cloud computing by Microsoft Office 365 Office 365, formerly known as Microsoft Business Productivity Online Services, is the name for Microsoft's business-focused cloud service offering that currently includes: Microsoft Exchange Online, including Forefront for Exchange (hosted plus security) Microsoft SharePoint Online (collaborative portals, intranets, Web sites) 1 Microsoft FY2010 revenue for Windows and Windows Live = $18.49B, Microsoft Business Division = $18.64B (Microsoft FY10 Q4 Earnings Report) 2 # IDC

3 Microsoft Lync Online (Web meeting, chat, and related services, formerly known as Office Communications Server or OCS) Microsoft Office Professional Plus (both client and Web-based office productivity applications such as Word, Excel, and PowerPoint) As noted earlier, significant research and development efforts are under way and new services will be added to Microsoft Online Services during FY2011 (e.g., Windows Intune, Microsoft Project Online, and wider availability of Microsoft CRM Online). Customer Drivers Customer demand for Office 365 is growing due to several key needs that the Online Services product addresses, including the following: Office 365 reduces costs and allows operational versus capital budget spending. Office 365 reduces administrative and management complexity and the associated direct costs. Office 365's pooled and focused resources in global datacenters improve availability, reliability, and stability. The Microsoft products that underpin Office 365, such as Microsoft Exchange and SharePoint, are well known and liked. Office 365 enables new scenarios such as supporting multiple locations and firms with many mobile workers. Microsoft Online Services Partner Strategy Microsoft's partners are critical to Microsoft's cloud strategy, as they have been traditionally across the business. Key partners such as CDW are emerging as innovative cloud leaders, building new sales and deployment models to ensure customer satisfaction and success with online services. CDW Organization Overview The history of CDW began in 1982 when 28-year-old Michael Krasny wrote a $3 classified ad to sell his used IBM computer. In 1984, capitalizing on the idea, Krasny formed CDW, one of the first companies to market and sell computers directly to consumers and business customers. Headquartered in Vernon Hills, Illinois, CDW now has 26 locations in the United States and Canada; over 6,000 employees; and over US$8 billion in annual revenue IDC #

4 CDW offers over 100,000 products from more than 1,000 IT vendors. To assist customers, CDW employs over 2,400 account managers dedicated to understanding customers' business and technology requirements. Supporting the account managers are technology specialists who are trained and certified on specific product areas to build technology solutions that best fit customer requirements. Looking at the CDW Web site, one can easily gain a first impression of a cost-effective and efficient place to purchase computer hardware. But CDW sells as much software as hardware and is rapidly growing its services business. The services strategy makes sense because CDW's focus is providing technology solutions, not just components, to its customers. CDW's business is built around providing great service to its customers. This includes making the processes cost-efficient and repeatable from the initial sales call to deployment. Streamlining these processes helps to keep prices low for customers while allowing CDW to invest in trained personnel to better meet customers' needs. Online Services Practice Highlights CDW prides itself on staying ahead of technology shifts that will benefit its customers. When the paradigm shift to online services began to emerge, CDW realized that it needed to invest early in its ability to deploy these new services so that it could get ahead of the competition. CDW started small but received much attention from Microsoft because of its early investments. It took advantage of specific training and other benefits offered by Microsoft to build the online business. Plus, Microsoft provided funding to offset a portion of the project cost for early-adopting BPOS customers. The economy was also a major driver in CDW's move to online services. Small and medium-sized businesses are the foundation of the economy, and they are finding it difficult, if not impossible to secure credit for large projects. They are being squeezed on all sides for every dollar of cash flow. Online services are a good alternative to the cash crunch because they are perceived to be less expensive than on-premise solutions. Thus, it makes economic sense for customers to investigate online services. In 2008, the Microsoft services team at CDW included four groups: Information Worker, Monitoring and Management, Server and Security, and Unified Communications. CDW started small by dedicating a single resource (a SharePoint specialist) from the Information Worker team to figuring out how to best sell and deploy these new online services. For example, with online services, the customer buyer may change from the CIO to the CFO as the cost for the technology moves from a capital expenditure (capex) to an operating expenditure (opex). The customer may be looking to free up IT resources and equipment from maintaining back-office support systems, which may be less expensive to manage as an online service. The existing IT resources and equipment can be redeployed toward revenue-producing activities for the customer. This is a shift in how on-premise technology solutions have traditionally been sold to the CIO and his or her team and requires that account managers better understand financial management as well as technology solutions. 4 # IDC

5 The services business also changes. Traditional on-premise implementation and migration processes can be time-consuming and expensive. While online service migration isn't free, it can be efficient and less expensive. This is where CDW's expertise in developing repeatable, streamlined transactions is important to the customer. While the perceived project size and timeline of an online migration are smaller and shorter, respectively, than those of a traditional on-premise implementation, the repeatable process used by CDW makes it efficient and profitable for both CDW and its customer. Today, online services are still a very small portion of the overall services business at CDW. However, the team has grown and Online Services is now a fifth pillar of CDW's overall Microsoft Services practice. CDW is expecting this business to grow dramatically as customers' awareness and comfort level with the new paradigm grow. Microsoft customer marketing campaigns, as well as news stories in mainstream media and customer success stories, are key to this growing awareness. Customer comfort levels with online services will continue to grow as privacy and security concerns are better understood and accepted. Also, customers may begin with the Office 365 suite and then start adding CRM Online, Intune, and other online platforms from Microsoft. CDW believes that beginning in , a majority of its customers will be demanding online services. By investing early, CDW will be ready to continue growing its business with the new online paradigm. Microsoft Online Services Customer Success Stories To provide prospective customers with an idea of what an Office 365 project looks like, we highlight a couple of CDW's recent customer success stories in Table 1. The companies are just two of several hundred CDW customers to move to online services. TABLE 1 Microsoft Online Services Customer Success Stories Customer description Problem Project description Customer 1 Customer 2 Healthcare subsidiary breaking off from parent company The new company wanted to eliminate its servers and move to a hosted model. CDW sold the company 300 seats of Office 365 (BPOS suite) and 600 seats of Deskless Worker. CDW provided migration and integration services to get the company up and running quickly. Customer seats Sales cycle 4 months 3 months Project length 1 month 2 weeks Source: IDC and CDW, 2010 Science and technology company The company wanted to move from another hosting provider to Microsoft Online Services. CDW sold the company 350 seats of Office 365 (the complete BPOS suite) as well as migration and integration services IDC #

6 CONCLUSION CDW's focus on understanding and meeting customer business requirements while providing cost-effective solutions is just what the market needs in this difficult economic environment. CDW has long been a go-to partner for many small and medium-sized organizations for their on-premise technology solutions. With the early investments being made in online services and proven customer successes, CDW is poised to continue being a leading provider in the new online paradigm. Copyright Notice External Publication of IDC Information and Data Any IDC information that is to be used in advertising, press releases, or promotional materials requires prior written approval from the appropriate IDC Vice President or Country Manager. A draft of the proposed document should accompany any such request. IDC reserves the right to deny approval of external usage for any reason. Copyright 2010 IDC. Reproduction without written permission is completely forbidden. 6 # IDC

Global Headquarters: 5 Speen Street Framingham, MA 01701 USA P.508.872.8200 F.508.935.4015 www.idc.com

Global Headquarters: 5 Speen Street Framingham, MA 01701 USA P.508.872.8200 F.508.935.4015 www.idc.com PARTNER CASE STUDY BEI: Profile of a Microsoft Online Services Practice Sponsored by: Microsoft Darren Bibby December 2010 IN THIS PARTNER CASE STUDY Global Headquarters: 5 Speen Street Framingham, MA

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