Microsoft Testing New Top VAR Program

That's small potatoes for a $25 billion software giant. Even so, Microsoft is targeting the new Top VAR program as a way to increase its foothold in the growing SMB market.

The Top VAR program, which went into pilot testing six months ago, places 2,400 firms in Microsoft's sprawling 60,000 SMB reseller base at the top of the heap. This privilege gives them new telesales resources and training on .Net opportunities.

In mid-March, Microsoft plans to host a Top VAR 2002 Summit in Scottsdale, Ariz., for the executive managers of top distributors, direct-market resellers, systems builders and resellers that focus on the SMB market. Only a handful of the 2,400 Top VARs have been invited to the summit, sources said.

Microsoft executives said the Top VAR program is not an effort to name partners or to narrow down its sizable roster of SMB VARs nationwide to a short list, but to increase contact with the SMB channel.

"The telesales resource is for the upper echelons of the VAR base, but they're all important to us," said Bob Clough, vice president of broad channel sales and marketing at Microsoft. "The two-tiered distribution model has always been and will continue to be there, but the level of direct touch with VARs has not."

Top VAR partners includes top distributor Ingram Micro as well as direct-market resellers such as CDW Computer Centers and Insight. It is not intended for large-account resellers that do major volume-licensing deals.

While a handful of SMB resellers said they resent the fact that they didn't make the list of top VARs, most are not concerned that Microsoft is trimming the partner list.

"Clearly, they're trying to reach an underserved market," said Oli Thordarson, president of Alvaka Networks, a solution provider in Huntington Beach, Calif. "They know these channel players control this space. If [the program succeeds, depending on the [return on investment, I could see them expanding it to the other 60,000 VARs."

Michael Cocanower, president of ITSynergy, Phoenix, said the Top VAR program addresses an often-overlooked channel segment.

"One of the things that's been frustrating over the past year or so was that Microsoft had no defined strategy in the district sales teams to address the small-business segment of the market," Cocanower said. "If a reseller wanted to work in organizations with less than 50 PCs, they were left to their own devices. There was no local contact, and support from Redmond can be hard to find if you don't know the right people."

While analysts acknowledge Microsoft's increasing interest in the services business, they also view Top VAR as a way for Microsoft to pump more sales out of the SMB channel without alienating a slew of partners. Paul Degroot, chief analyst at newsletter Directions on Microsoft, said while $50,000 is a fairly low barrier to entry, it establishes a necessary minimum.

"I wouldn't interpret this as an effort to narrow the number of VARs, but as an effort to provide additional sales resources to people who already have a sales track record and who appear to be actively engaged in sales," he said.

"I really see this as just one more instance of Microsoft trying to offer some value-added programs to a certain tier of its channel community," said Dwight Davis, a Microsoft analyst at Summit Strategies.

The move is also an attempt to filter down programs to second-tier players, which account for a huge percentage of Microsoft's channel sales, Davis said.

"I can't believe Microsoft has any interest in cutting loose the 60,000 solution providers that don't make the top 2,000 list. Clearly, those 60,000 solution providers are selling a lot of Microsoft products en masse, and it's unrealistic to think that the 2,000 companies at the top of the pyramid could pick up all of that business themselves," Davis said.

Meanwhile, Microsoft's Clough said the vendor plans to put additional resources into the broader SMB channel to stimulate revenue growth, technical readiness for .Net and "programmatic" awareness. "We have a lot more on tap," he said. "The next round of incremental investments will fill out the picture."