Major Microsoft Sales Force Expansion, Reorganization Set To Begin July 1

The creation of 450 new positions and redeployment of another 115 employees nationwide into a reorganized U.S. sales division focused on vertical solutions will officially launch July 1, the start of Microsoft's next fiscal year.

To that end, Microsoft has also expanded the number of vertical organizations, adding automotive manufacturing, high-tech manufacturing, oil and gas, media and entertainment and professional services to the existing roster of five vertical groups. Other vertical organizations include financial services, state and local government, federal government, education and retail organizations.

The head-count growth and refined vertical focus is intended to enable Microsoft to more deeply penetrate the enterprise market and offer a sophisticated solutions focus in existing and new market segments, said Kevin Johnson, Microsoft's senior vice president of Microsoft Americas.

In a prepared statement, Johnson emphasized that the head-count growth won't mean trouble for Microsoft's 810,000-strong partner base worldwide, though some are skeptical about that promise.

In recent interviews with CRN, Microsoft CEO Steve Ballmer and Orlando Ayala, group vice president of worldwide sales, marketing and services at Microsoft, said the company will put its money where its mouth is to protect partner interests in 2003. "We have moved to pay executive bonuses against customer and partner satisfaction," Ayala told CRN. "For the fiscal year starting July 1, there will be metrics to reward all employees, from the highest-level executives on down, for nurturing tight partner relationships, executives said.

While the plan is still under development, the target is to have at least 50 percent of an employee's bonus based on customer and partner satisfaction, Ayala said. However, neither executive discussed the impact of Microsoft's reorganized sales and services divisions on partners at that time.

Microsoft recently briefed partners on its sales-force realignment and new vertical organizations. Solution providers say they were told that Microsoft will adhere to the new rules of engagement and named accounts model announced late last year to prevent skirmishes or conflicts with partners. They also note that Microsoft revealed plans that will likely boost their own business--an effort to compensate sales representatives for driving business through partners.

"We have been told that with exception of the top global accounts, where MCS will aggressively go after business, that Microsoft reps will be incented to bring partners in," said Ken Winell, president of Econium, a Microsoft Certified partner. "This is a first for Microsoft, tying field sales bonuses to partnering. Instead of worrying about Enterprise Agreements, the reps will be compensated on opportunities and solutions."

Microsoft's Johnson said the complexity of delivering .Net solutions to customers requires a stronger sales force and the motive is to push penetration of .Net, not increase Microsoft's services revenue.

"We don't want customers to be left behind by the .Net revolution. That means we have to be completely focused on demonstrating to customers how .Net solutions can make the pivotal difference in their particular businesses," Johnson said in a statement this week." We want to deliver greater value to customers and work more closely with partners, in both the large enterprise and small- and medium-sized business spaces. That's the driver behind our sales force expansion and restructuring."

The plan calls for increased specialization of the U.S. sales force and expansion of resources in a manner that "enables a strong engagement with partners and a more solution-focused approach with customers," Microsoft said in a prepared statement.

It also noted that Microsoft will make significant staffing investments and will change the organizational structure of its sales force to a model that aligns teams with deep industry expertise, teams with specific technology and solutions expertise, and teams with a focus on the needs of small and midsize businesses.

For example, the new technical specialists in the sales group will be organized to focus on technologies in three areas: server solutions, developer solutions and knowledge worker solutions. In addition, Microsoft's consulting services will partner with these Microsoft sales specialists to enable application development of Microsoft .Net solutions, infrastructure architecture and deployment, support and systems management solutions, and technology strategy.

While this sounds worrisome to solution providers and partners, Microsoft's executives said they are committed to exploiting the talents of the channel as the company competes more aggressively in the enterprise space with a broad new product lineup.

Microsoft's new executive compensation plan, for example, which rewards its sales force for driving partner business, is a good sign for many in the channel. However, some are worried which partners will benefit most. "The question a lot of the smaller partners have is how to compete for this type of opportunity with players like HP/Avanade and other [systems integrator companies," Econium's Winell said.

One source noted, for instance, that Microsoft is forging deeper, fewer relationships with big systems integrators like Accenture and Unisys and will unveil a plan to give the sales force additional incentives to move enterprise business through the channel.

Microsoft is expanding its focus in vertical markets by enhancing teams made up of sales, services and support, partner engagement, and marketing functions. Some note that the vertical focus is in part being engineered by Gerri Elliott, a former IBM Global Services executive who works closely with Microsoft's worldwide vice president of services, Mike Sinneck, another IGS vet.

"Customers want to know that Microsoft understands the unique drivers of their business," said Elliott, Microsoft's corporate vice president of the Industry Solutions Group, in a prepared statement. "Our goal is to get closer to customers' business challenges and opportunities and provide solutions that address their unique market dynamics. We are working in tight alignment with our partners to provide real solutions to help customers respond to the changing business landscape."

According to a Microsoft spokeswoman, Elliott preceded Sinneck to Microsoft by joining the software giant last September. Sinneck joined Microsoft in January 2002.

According to a memo obtained by CRN in early June, Microsoft's Services group is also being reorganized under Sinneck and Johnson. That plan calls for a new regional model across the four regions (West, Central, East and South) to replace the 35 Microsoft practices and support organizations in the field today.

Another source, who declined to be named, however, said the news of the U.S. sales force and Microsoft services reorganizations is far more ominous for partners than Microsoft wants to admit.

"The intent is clearly to move toward a more IBM-like model and bolster Microsoft's ability to deliver more services itself, which is not surprising given the recent influx of IBMers to Microsoft," said the source. "As a longtime Microsoft partner guy, it's painful to watch Microsoft damage partners. Whether it's by design or by incompetence, Microsoft is killing its channel.

"Microsoft just got done trying to repair damage done by expanding MCS during an IT services recession, but it looks like [it's going to screw partners again," the source said. "Only this time, there is no partner champion like [Sam Jadallah or [Ian Rogoff to fight for the MCSPs. It's going to get pretty ugly."

In a recent series of interviews with CRN, Microsoft said it had appointed Allison Watson to replace outgoing channel chief Rosa Garcia as worldwide partner chief and Margo Day to handle U.S. channel operations.

Both appointments were received well by the partner community, many of whom noted that the two Microsoft executives have strong ties in the partner community and a solid handle on solution provider issues. Microsoft is also in the midst of finding a replacement for Charles Stevens, the vice president of the Enterprise and Partner Group. One of the finalists include an outsider close to the solution provider channel, sources said, noting, however, that Microsoft is also reorganizing the Enterprise and Partner Group division. A Microsoft spokeswoman confirmed the planned appointment of Stevens' replacement and said the Enterprise and Partner Group plans are still "fluid."

Others say the plan doesn't sound like doomsday for them, but they're taking a wait-and-see attitude. "It's down to the local districts and how the general managers want to push partnering," said another solution provider briefed on Microsoft's plans. "Some districts seems to be very sincere, but the proof is joint increased business."