Microsoft (NASDAQ: MSFT) appears to be erasing the line between Office 365 and Office 2013. Sure, Office 365 is a cloud suite (Exchange Online, SharePoint Online, Lync Online) and Office 2013 is a desktop productivity suite (Word, Excel, PowerPoint). But over time those definitions will no longer matter, and the line between Microsoft’s cloud and on-premises software will disappear.

For channel partners, navigating Microsoft’s latest Office promotions can be challenging. Back in July, Microsoft announced the “New Office and barely mentioned that it was Office version 2013 — which is expected to debut this fall. Instead, the company evangelized how the new Office would be available as a subscription service that’s always up to date.

Translation: Forget about major Office desktop upgrades arriving every few years. Instead, Office will simply gain more and more features via an ongoing cloud service update.

Yes, The Line Is Gone

But am I sure the line between Office 365 and Office 2013 will be erased? Absolutely yes. Just look at Microsoft’s plans in the consumer and small business market. Microsoft has announced, word for word, these cloud-driven suites:

· Office 365 Home Premium designed for families and consumers. This service also includes an additional 20 GB of SkyDrive storage and 60 minutes of Skype world minutes per month

· Office 365 Small Business designed for small businesses. This service also includes business-grade email, shared calendars, website tools and HD web conferencing.

· Office 365 ProPlus designed for enterprise customers who want advanced business capabilities and the flexibility to deploy and manage in the cloud.

Each of those offerings, Microsoft has said, will include the new 2013 editions of the Office applications — Word, Excel, PowerPoint, OneNote, Outlook, Publisher and Access.

Partner Spin

What does all that mean for channel partners? I’ve often stated that some Microsoft VARs are far too focused on Microsoft’s tight margins for SaaS partners. Instead, VARs should focus on consulting, migration and project management revenues for Office 365. Over time, the monthly recurring revenues will build — but it’s gravy, not your meat and potatoes revenue.

Bottom line: You can’t fight Exchange server’s shift into the cloud. And soon, you won’t be able to fight Office 2013 (and beyond) subscription services. Instead of fighting those market realities, figure out where the profit opportunity is — or move onto new markets.