Azure

Potential Project ServicesAverage Total Project Services Revenue RangeCloud Readiness AssessmentSolution Analysis, Scope, & DesignExchange & Mailbox MigrationSimple File Server MigrationCustom Application DevelopmentSystems IntegrationData Architecture DesignData Center MigrationData Warehousing DeploymentData Cube ConstructionRemediationBackup & Storage DeploymentDisaster Recovery DeploymentWorkflow Creation in SharePointDatabase Infrastructure DevelopmentProof of ConceptUser Experience ConsultingVirtualization Migration & DeploymentDesktop VirtualizationYammerTrainingSolution Configuration/CustomizationSolution Support & TrainingSurface Hub DeviceCloud Migration Planning Deployment ServicesHealth ChecksApp VirtualizationCommunications Envision WorkshopNetwork readiness assessmentBandwidth PlanningBusiness Use Case WorkshopCommunications Architecture DesignAdoption ServicesUser Enablement

$5,000 - $15,000

$2,500 - $25,000

Virtua

lizat

ion

Data C

ente

r

Tran

sform

ation

Stor

age,

Backu

p,

& Recov

ery

Office Client DeploymentDevice Procurement and DeploymentDeployment ValidationNetwork RemediationVoice Planning - Dial plans, number portingOn Premise PSTN Connectivity planningCloud Connector Edition Planning and DeploymentBusiness Process Transformation

Potential Managed ServicesAverage Total Managed Services Revenue RanProactive Backups & Anti-Virus MonitoringUpdate & Patch ManagementReactive Help Desk Support (Office, Lync, Intune, CRM Online)User Rights & Account ManagementDomain ManagementSingle Sign-On ManagementNew Accounts Added & RemovedManaged Access to Email GroupsPerformance and Application TroubleshootingDesktop & Device Management & SupportReports & View AdjustmentsHybrid Environment Support (Basic Infrastructure)Software Asset Management (licensing management & optimization)Security Management & Identity ProtectionOffice Client ConnectivityMobile Device Connectivity & ManagementMicrosoft support (interface between MSFT & customer)Web defense (restricting url’s, phishing malware, spam)VoIP MaintenanceRegulatory Compliance via O365 InfrastructureCritical Response SupportVirtual Machine Management & Upgrading

PowerShell Script AutomationData Center Performance Monitoring & OptimizationVirtual Database AdministrationWorkload Performance MonitoringNetwork Monitoring (including disk size & comms monitoring)Azure Consumption Monitoring & OptimizationDisaster Recovery Monitoring & TestingHosted Line Of Business ApplicationsVirtualization Support & Efficiency Optimization

$2,500 - $15,000

$2,500 - $15,000

Application Lifecycle Management & Support (design, development, testing, production, errors corrections, updates, new versions)

3rd. Party Application ManagementActive Directory Federation & ManagementApplication Support/Help DeskSocial Listening and Sentiment AnalysisSupport ServicesOnline Training and Self Paced learningReporting and AnalyticsWeb-Based Management Tool ConsolidationPerformance Monitoring and ReportingTroubleshootingConfiguration ManagementReports and Dashboard MaintenanceAnti-Virus MonitoringHelp Desk SupportIdentity as a Service

Potential Intellectual PropertyAverage Total Intellectual Property Revenue RTurnkey BI PortalsAutomated Consumption Monitoring & ReportingCustomer Self-Serve PortalsAutomated Data Migration & IntegrationAutomated Load BalancingAutomated Monitoring, Alerting, & LoggingSharePoint-Based Vertical WorkflowsMiddleware for Hybrid SynchronizationVertical Solution Subscriptionse-Commerce functionalityIndustry-specific Mobile AppsIndustry-specific WorkflowsFunction-specific Workflows (e.g. HR, Procurement)Automated Backups & Disaster RecoveryAutomated O365 Telemetry (Availability & Performance)Automated Disaster Recovery TestingOffice Connectivity & Other Plug-Ins & Add-onsExternal Portals for End Customer InformationPre-Configured DashboardsOnline Training & Self-paced LearningVertical specific functionalityMobility Solutions

$2,500 - $10,000

$2,500 - $10,000

Azure

$2,500 - $10,000

$5,000 - $15,000

$2,500 - $25,000

$2,500 - $15,000

$2,500 - $7,500

$10,000 - $75,000

$2,500 - $10,000

Stor

age,

Backu

p,

& Recov

ery

Power

BI

Ident

ity/A

cces

s

Manag

emen

t

(EMS) Azu

re R

emot

e

App Colle

ct Dat

a &

Monito

r Ass

ets

(IoT)

Big Dat

a &

Pred

ictive

Analyt

ics

Ente

rpris

e Web

&

Mobile

Apps

Websit

e Hos

ting

$2,500 - $10,000

$2,500 - $7,500

$2,500 - $5,000

$2,500 - $5,000

$2,500 - $25,000

$2,500 - $15,000

$2,500 - $15,000

$2,500 - $7,500

$2,500 - $7,500

$2,500 - $5,000

$2,500 - $5,000

$2,500 - $15,000

$2,500 - $7,500

$2,500 - $10,000

Azure Cross Platform Office 365

$2,500 - $7,500

$25,000 - $100,000

$5,000 - $15,000

$2,500 - $15,000

$10,000 - $25,000

$25,000 - $75,000

Websit

e Hos

ting

Hostin

gED

U

Window

s &

Device

sClo

ud Voic

e

Deploy

ment &

Manag

emen

t

(SMB) Clo

ud Voic

e

Deploy

ment &

Manag

emen

t

(CA)

Cloud

Voice

Deploy

ment &

Manag

emen

t

(Ent

)

$2,500 - $10,000

$20,000 - $50,000

$2,500 - $7,500

$2,500 - $7,500

$15,000 - $50,000

$45,000 - $75,000

$2,500 - $5,000

$20,000 - $50,000

$2,500 - $7,500

$2,500 - $7,500

$2,000 - $5,000

$5,000 - $15,000

Office 365 Microsoft Dynamics

$75,000 - $200,000

$2,500 - $15,000

$2,500 - $15,000

$200,000-$1.5M

Cloud

Voic

e

Deploy

ment &

Manag

emen

t

(Ent

) CRM O

nline

-

Sales

Aut

omat

ion

CRM O

nline

-

Serv

ices

Autom

ation

Dynam

ics A

X

$75,000 - $150,000

$2,000 - $5,000

$2,000 - $5,000

$2,000 - $5,000

$15,000 - $50,000

$2,000 - $5,000

$2,000 - $5,000

$75,000-$200,000

Model Variable

Average Deal Size (Overall Users)

Average Deal Size (CRM Online Users)

Upfront Project Services Fees

Ongoing Project Services Fees

Average Device Sale

Azure Consumption (per year)

Own IP License Fee

Managed Services Fees

Azure Margin & IncentivesOffice 365 Margin & IncentivesCRM Online Margin & IncentivesGross Margin (Devices)

Gross Margin (Project Services)

Gross Margin (Managed Services)

Anticipated IP Margin

Project Services Resource Cost

Managed Services Resource Cost

Mailbox Migration Fees

Mailbox Migration Costs

CRM Online Retail Price to Customer

O365 Retail Price to Customer

Recurring Margin Multiplier

Non-Recurring Margin Multiplier

Customer Adds

Customer Acquisition & Retention Costs

Other Fixed Investments

Office 365 Attach Rate

CRM Online Attach Rate

Managed Services Attach Rate

IP Attach Rate

Azure Attach Rate

Customer Acquisition Resource Cost

Variable Definition

The average size of each new deal, in terms of overall users.

The average size of each new deal, in terms of CRM online users.

The average amount you expect to charge the customer in upfront implementation fees for every new deal you do.

The average amount you expect to charge the customer every year for any ongoing project work (excluding managed services).

The average amount you expect to sell in terms of devices for every new user added.

The average amount you expect to expect to drive in terms of Azure consumption, per year, for every new deal you do.

The average amount you expect to charge the customer (per user per month) for any of your own IP that you attach, bundle, or embed with O365 or CRM online.The average amount you expect to charge the customer for any managed services you provide.

The expected margin to you from any Azure consumption you drive.The expected margin to you from any Office 365 utilization you drive.The expected margin to you from any CRM online utilization you drive.The expected gross margin you expect to earn on any devices you sell.The expected gross margin you will achieve any project services you deliver to the customer (this should be based on your historical project services gross margin, unless you anticipate it to change).The expected gross margin you will achieve any managed services you deliver to the customer (this should be based on your historical managed services gross margin, unless you anticipate it to change, and will often be different from your project services gross margin).The expected gross margin you will achieve any of your own IP that you deliver to the customer (this should be based on your historical IP gross margin, if available).The average fully loaded annual cost to you of a project services delivery resource (salary, benefits, and bonuses).

The average fully loaded annual cost to you of a managed services delivery resource (salary, benefits, and bonuses).

The amount will you charge the customer to migrate mailboxes, in addition to the upfront project fees mentioned above, if anything.The amount it will cost you to migrate mailboxes, in addition to the upfront project fees mentioned above, if not already reflected in the project services gross margin above.

The retail price to the customer of CRM online in your local market, per user per month.The retail price to the customer of O365, in your local market, per user per month.From a valuation perspective, the amount a potential buyer would consider an appropriate multiplier for recurring margin in your local market (based on research, 5 is a conservative assumption, but change this assumption if you feel it is not representative of buyers in your local market).

From a valuation perspective, the amount a potential buyer would consider an appropriate multiplier for non-recurring margin in your local market (based on research, 1.5 is a conservative assumption, but change this assumption if you feel it is not representative of buyers in your local market).

The amount of new customers you will add in each of years 1 through 4 (note that these are additive, not cumulative)

Given your customer add assumptions for each year, the amount you will spend on sales and marketing costs in each of years 1 through 4.

Given your Cloud offering and existing resource pool, the amount you will need to invest in training, R&D, demand generation and other infrastructure in each of years 1 through 4.

The percentage of new customers and users added that you expect to subscribe to Office 365.

The percentage of new customers and users added that you expect to subscribe to CRM Online.

The percentage of new customers and users added that you expect to subscribe to your managed service offering, mentioned above.

The percentage of new customers and users added that you expect to license your own IP, mentioned above.

The percentage of new customers and users added that you expect to drive Azure consumption, mentioned above.

The average fully loaded annual cost to you for sales and marketing resources that result in customer acquisition (salary, benefits, and bonuses).

Typical Range

Typically 10% - 20%Typically 10% - 20%Typically 10% - 20%

Will vary widely depending on the customer segment targeted. Could be anywhere from as few as 10 users or less, to several thousand.Will vary widely depending on the customer segment targeted. Could be anywhere from as few as 10 users or less, to several thousand. However, there will almost always be fewer CRM users than overall users.Will vary widely depending on local market circumstances, as well as size, scope, and complexity of implementation. Simple migrations to O365 can be as low as $5k, while complex migrations to Azure can be as high as $500k.

Will vary widely depending on the nature of the initial project, and whether a phased approach is taken. Research has shown that anywhere from 10% to 100% of initial project fees may be charged on an ongoing basis. Note that this is not the same as managed services fees, which are contracted rather than project-based.Will vary widely depending on your overall business focus, and whether you have a managed service to support devices, or have outsourced such a service. However, this is usually in the $2k - $10k range, if devices are sold at all.

Will vary widely depending on the size of the customer and what is being supported on Azure. Could be anywhere from a few thousand dollars per year (or less), to several hundred thousand.Will vary widely depending on the nature of the IP you develop, the market you operate in, and the IP’s utility to the customer. Could be as low as a few dollars a month, to several hundred.Will vary widely depending on the market you operate in, and the composition of your managed service offering. Could be as low as $10-$15 per user per month, to several thousand dollars per customer per year.

Will vary depending on mix of devices sold, and what is negotiated with the supplier. Typically ranges anywhere from 5% to 15%.Will vary depending on local market circumstances, and management effectiveness in managing utilization. Typically ranges anywhere from 10% to 40%.Will vary depending on local market circumstances, and management effectiveness in managing utilization. Typically ranges anywhere from 10% to 50%.

Will vary depending on the development leverage gained from working with customers who fund the initial development, but can be as high as 70% to 90% in some cases.Will vary widely depending on the local economy, labor market circumstances, skillset needed, and degree of outsourcing. Could be anywhere from $20k to $150k per year.

Typically 4-7

Typically 1-3

Will vary widely depending on the local economy, labor market circumstances, skillset needed, and degree of outsourcing. Typically, however, these resources are less costly than project services resources.Will vary widely depending on the local economy, and the degree of automation used. Could be as little as nothing at all if embedded in project fees, to as much as $100 per mailbox migrated. Will vary widely depending on the cost of labor in the local economy, and the degree of automation used. Could be anywhere from nothing at all if embedded in project services gross margin, to $20-$40 per mailbox if 3rd. party automated tools are used.Will vary depending on local market pricing from Microsoft. Please refer to local Microsoft pricelist.Will vary depending on local market pricing from Microsoft, and the sku used. Please refer to local Microsoft pricelist.

Will vary depending on how aggressive a Partner is in pursuing in pursuing the Cloud opportunity, and the customer segment targeted. Could be anywhere from 5-10 per year, to several hundred.Will vary widely depending on market segment targeted, and pre-existing sales and marketing capabilities. As a rule of thumb and best practice, however, a Partner should conservatively assume a customer acquisition cost of 20%-25% of first year’s revenue.Will vary widely depending on whether a Partner “re-skills” an existing resource pool versus net new hiring, whether IP is developed and bundled into the Cloud offering, and what incremental marketing and sales infrastructure investments are needed to achieve the desired customer adds.

Will vary widely depending on the composition of the managed service, the customer segment targeted, and the degree to which it is “bundled” into the Cloud offering. Could be literally anywhere from 0%-90% or higher.

Will vary widely depending on the composition of the managed service, the customer segment targeted, and the degree to which it is “bundled” into the Cloud offering. Could be literally anywhere from 0%-90% or higher.

Will vary widely depending on the composition of the managed service, the customer segment targeted, and the degree to which it is “bundled” into the Cloud offering. Could be literally anywhere from 0%-90% or higher.

Will vary widely depending on the nature and utility of the IP, and the degree to which it is “bundled” into the Cloud offering. Could be literally anywhere from 0%-90% or higher.

Will vary widely depending on the customer segment targeted, and the nature of the Cloud offering. Could be literally anywhere from 0%-90% or higher.Will vary widely depending on the local economy, labor market circumstances, skillset needed, and degree of outsourcing. Typically, however, these resources are less costly than project services resources.

Combined Financial Model

50

15

Step 3 - Set Deal Structure

Upfront Project Services Fees $20,000Ongoing Project Services Fees $2,500

Average Device Sale $2,500Azure Consumption (per year) $4,000

Own IP License Fee $5.00 Step 14 - Set Office 365 Attach RateManaged Services Fees $65.00

Step 4 - Set Margin Structure Step 16 - Set Managed Services Attach Rate

Azure Margin & Incentives 20%Office 365 Margin & Incentives 20%

CRM Online Margin & Incentives 20% Step 18 - Set Azure Attach RateGross Margin (Devices) 10%

Gross Margin (Project Services) 35%Gross Margin (Managed Services) 45% Step 19 - Set Customer Acquisition Resource Costs

Anticipated IP Gross Margin 65%Sales & Marketing Personnel

Step 5 - Set Delivery Resource Costs

Project Services $75,000 P&L ImpactManaged Services $60,000

Step 6 - Set Office 365 Mailbox Migration FeesStep 7 - Set Office 365

Mailbox Migration Costs

Step 1 - Set Average Deal Size (Overall Users) Step 8 - Set CRM Online Price

to Customer

Step 2 - Set Average Deal Size (CRM Users) Step 11 - Annual Set

Customer Adds

Step 12 - Set Customer Acquisition & Retention Costs

(Sales & Marketing)

Step 13 - Set Other Fixed Investments (R&D, Training, Other Infrastructure, G&A)

New Customers with O365

$80$25.00

$40

$65.00Recurring Multiplier 5

Non-Recurring Multiplier 1.5

year 1 year 2 year 3 year 415 20 25 30

year 1 year 2 year 3 year 4

$499,456 $778,560 $821,989 $1,088,408

year 1 year 2 year 3 year 4

$75,000 $75,000 $75,000 $75,000

Step 14 - Set Office 365 Attach Rate Step 15 - Set CRM Online Attach Rate50% 50%

Step 16 - Set Managed Services Attach RateStep 17 - Set IP Attach Rate

15%50%

$5,630,996 P&L ImpactStep 18 - Set Azure Attach Rate

50% RevenueContribution Margin

Step 19 - Set Customer Acquisition Resource Costs

$65,000

Step 9 - Set Office 365 Price to Customer

Step 10 - Set Margin Multiplier Assumptions

Anticipated Valuation Impact

1 2 3 4$0

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

$6,000,000

$7,000,000

$8,000,000

Revenue Composition

Recurring Non-Recurring

The financial models and statements contained herein are provided to you for illustrative purposes only, and should not be considered or relied upon as the actual or potential income, sales, profits, or earnings which you will realize, in whole or in part, as a result of deployment of Microsoft products and technologies. Some of the assumptions and figures provided are based on partner interviews and a survey conducted by Market Decisions Corporation of over 1,250 partners between March – May of 2015, which you may find useful in assessing your own numbers. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS DOCUMENT.

Revenue1 2 3 4

Recurring $286,813 $911,917 $1,713,521 ### $5,603,875Non-Recurring ### $2,980,885 $3,766,406 ### $13,522,188

### $3,892,802 $5,479,927 ### $19,126,067

Margin1 2 3 4

Recurring $98,617 $313,552 $589,174 ### $1,926,828Non-Recurring $309,414 $424,310 $544,492 ### $1,947,266

$408,031 $737,862 $1,133,667 ### $3,874,098

Valuation1 2 3 4

Recurring $493,086 $1,567,760 $2,945,872 ###Non-Recurring $464,121 $636,465 $816,738 ###

$957,207 $2,204,225 $3,762,611 ###

Year1 2 3 4

New Customers with O365 8 18 30 45

P&L Impactyear 1 year 2 year 3 year 4

$2,497,281 $3,892,802 $5,479,927 $7,256,052-$166,425 -$115,698 $236,678 $431,126

1 2 3 4$0

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

$6,000,000

$7,000,000

$8,000,000

Revenue Composition

Recurring Non-Recurring

1 2 3 4$0

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

$6,000,000

Approximate Valuation Impact

Year

34.4%14.4%20.3%

Year 1 Year 2 Year 3 Year 4Re

venu

e

SoftwareAzure, Office 365, & CRM Online Subscriptions $124,719 5.0% $396,542 10.2% $745,115 13.6% $1,170,438 16.1%Own IP Subscriptions $3,656 0.1% $11,625 0.3% $21,844 0.4% $34,313 0.5%

total $128,375 5.1% $408,167 10.5% $766,958 14.0% $1,204,750 16.6%Services

Professional Services $305,469 12.2% $440,885 11.3% $591,406 10.8% $754,427 10.4%Managed Services or Help Desk $158,438 6.3% $503,750 12.9% $946,563 17.3% $1,486,875 20.5%O365-Related Migration Fees $30,000 1.2% $40,000 1.0% $50,000 0.9% $60,000 0.8%

total $493,906 19.8% $984,635 25.3% $1,587,969 29.0% $2,301,302 31.7%

Devices $1,875,000 75.1% $2,500,000 64.2% $3,125,000 57.0% $3,750,000 51.7%

COG

S

SoftwareAzure, Office 365, & CRM Online Subscriptions $99,775 4.0% $317,233 8.1% $596,092 10.9% $936,350 12.9%Own IP Subscriptions $1,280 0.1% $4,069 0.1% $7,645 0.1% $12,009 0.2%

total $101,055 4.0% $321,302 8.3% $603,737 11.0% $948,359 13.1%Services

Professional Services $198,555 8.0% $286,576 7.4% $384,414 7.0% $490,378 6.8%Managed Services or Help Desk $87,141 3.5% $277,063 7.1% $520,609 9.5% $817,781 11.3%O365-Related Migration Costs $15,000 0.6% $20,000 0.5% $25,000 0.5% $30,000 0.4%

total $300,695 12.0% $583,638 15.0% $930,023 17.0% $1,338,159 18.4%

COGS (Devices) $1,687,500 67.6% $2,250,000 57.8% $2,812,500 51.3% $3,375,000 46.5%

OPE

X

Operating ExpensesCustomer Acquisition Costs $499,456 20.0% $778,560 20.0% $821,989 15.0% $1,088,408 15.0%Other Fixed Investments $75,000 3.0% $75,000 1.9% $75,000 1.4% $75,000 1.0%

total operating expenses $574,456 23.0% $853,560 21.9% $896,989 16.4% $1,163,408 16.0%

Total Revenues $2,497,281 $3,892,802 $5,479,927 $7,256,052Total Expenses $2,663,706 $4,008,501 $5,243,249 $6,824,926

Contribution Margin ($) -$166,425 -$115,698 $236,678 $431,126

Contribution Margin (%) -6.7% -3.0% 4.3% 5.9%

Overall Gross Margin 16.3% 19.0% 20.7% 22.0%

% of revenue

% of revenue

% of revenue

% of revenue

1 2 3 4IP 113 263 450 675O365 375 875 1,500 2,250CRM Online 113 263 450 675Managed Services 375 875 1,500 2,250Azure 375 875 1,500 2,250

1

2

3

4

113

263

450

675

375

875

1,500

2,250

113

263

450

675

375

875

1,500

2,250

375

875

1,500

2,250

Total Users

Azure Managed Services CRM Online O365 IP

Year

1

2

3

4

113

263

450

675

375

875

1,500

2,250

113

263

450

675

375

875

1,500

2,250

375

875

1,500

2,250

Total Users

Azure Managed Services CRM Online O365 IP

Year

1

2

3

4

113

263

450

675

375

875

1,500

2,250

113

263

450

675

375

875

1,500

2,250

375

875

1,500

2,250

Total Users

Azure Managed Services CRM Online O365 IP

Year

Approximate Working Capital Required

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48

-$400,000

-$300,000

-$200,000

-$100,000

$0

$100,000

$200,000

$300,000

$400,000

$500,000

Cumulative Cash Flow

Month

ulative Cash Flow ### ### ### ### ### ### ###

$282,384

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48

-$400,000

-$300,000

-$200,000

-$100,000

$0

$100,000

$200,000

$300,000

$400,000

$500,000

Cumulative Cash Flow

Month

-$132,182 ### ### ### ### ### ### ###

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48

-$400,000

-$300,000

-$200,000

-$100,000

$0

$100,000

$200,000

$300,000

$400,000

$500,000

Cumulative Cash Flow

Month

### ### ### ### ### ### ### ### ### ###

### ### ### ### ### ### ### ### ### ###

### ### -$503 $25,989 $55,161 $87,014 ### ### ### ###

### ### ###

1 2 3 4Project Services 2.6 3.8 5.1 6.5Managed Services 1.5 4.6 8.7 13.6Sales & Marketing 7.7 12.0 12.6 16.7

Sales & Marketing FTE's1 2 3 4

1

2

3

4

2.6

3.8

5.1

6.5

1.5

4.6

8.7

13.6

7.7

12.0

12.6

16.7

Project Services Managed Services Sales & Marketing

FTE's Required

Year

1

2

3

4

2.6

3.8

5.1

6.5

1.5

4.6

8.7

13.6

7.7

12.0

12.6

16.7

Project Services Managed Services Sales & Marketing

FTE's Required

Year

1

2

3

4

2.6

3.8

5.1

6.5

1.5

4.6

8.7

13.6

7.7

12.0

12.6

16.7

Project Services Managed Services Sales & Marketing

FTE's Required

Year