Microsoft (NASDAQ:MSFT) says 125,000 channel partners now participate in the company's Cloud Essentials partner program -- up from about 35,000 roughly nine months ago. At the same time, Office 365 has now hit the $1 billion annual revenue run rate. So can we connect the dots between Cloud Essentials channel partners and all that Office 365 revenue?

No and Yes. Microsoft has not publicly disclosed how much of its cloud revenues are influenced by channel partners. Nor has Microsoft indicated the level of activity for those Cloud Essentials partners. (For instance: How many have 100 or more customer seats in the cloud?)

But it's clear a growing number of VARs, MSPs, cloud services brokerages, aggregators and integrators are backing Microsoft's cloud strategy -- where Office 365 and Azure are gaining critical mass.

Microsoft Channel Chief Jon Roskill has publicly credited partners for backing Office 365. Now, he's putting the spotlight on key channel partners -- like Cloud Business in the UK. Roskill notes that Cloud Business is gaining momentum with Office 365, having migrated 125,000 people to Microsoft's cloud services. Other partners, like Ingram Micro's cloud business in Europe, confirm their own momentum with Office 365 in the channel.

Office 365 vs. Google Apps (Again)

In some ways, Roskill is stealing a page from the Google Enterprise blog -- which seems to put the spotlight on Gooble Apps channel partners at least several times each month. 

No doubt, the war between Office 365 and Google Apps continues to escallate. While Google has long empowered partners to manage end-customer billing, Microsoft only recently introduced such capabilities to partners. And in Microsoft's case, the end-customer billing capability (called Office 365 Open) is limited to partner engagements with 250 or fewer seats.

Earning Credit

Still, Roskill and the Microsoft channel team deserve credit. When Office 365 launched in June/July 2011, many partners worried that there would be little to no channel opportunity. Others worried Office 365 would suffer from the same scalability and reliability issues of its predecessor, called BPOS (Business Productivity Online Suite).

In reality, Office 365 has been a vast improvement over BPOS. And the market for Office 365 add-on management tools for VARs and MSPs seems to be thriving. Just ask 365 Command, which seems to be signing up VARs rapidly.