Partners Will Drive Double-Digit Growth For Microsoft In 2003

Despite a weak market and low customer demand for IT solutions, Microsoft executives are predicting that the company will grow its business by double-digits in its 2003 fiscal year, thanks to the help of business partners selling solutions based on Microsoft technology.

But to do that successfully, Microsoft knows it has a long way to go in improving its relationship with business partners, who have taken the company to task for a number of issues in the last 12 months.

That was the message given Sunday morning by Orlando Ayala, group vice president of worldwide sales and marketing, during the company's Fusion 2002 partner conference in Los Angeles.

"We have nothing guaranteed as a company, that is the reality," said Ayala during his keynote. "Times are changing dramatically and we believe that we have to set out in a direction that can truly take us not just for the next two years but for the next 25 years."

Ayala cited a recent memo that was sent out to employees by CEO Steve Ballmer listing the core values of the company moving forward. Aside from technology expertise and platform leadership, Microsoft's goals also include people-specific things like broader connections to partners and customers, infrastructure and services to enable people to do new, innovative things, as well as a global, inclusive approach.

It's that effort to build a stronger connection to partners that has troubled Microsoft executives of late. "Somehow, I think we lost that connection, so we need to step back [and figure out how to get it back," said Ayala. The strategy moving forward is to put customers' and partners' needs at the center of every initiative the company takes.

He credited the business partner channel with helping the company grow its business by about 13 percent in the third quarter of 2002, during a time when the PC market was shrinking drastically. "The only reason we were able to pull this off in the end was the focus of our people working with you."

But Ayala recognized some of the recent hardships Microsoft partners have faced, including security issues around Microsoft products, the increased conflict and competition from Microsoft Consulting Services and the licensing woes that came to light in the last year. For the latter two, he gave what amounted to a mea culpa for poor communication and said the company is working to correct issues.

Speaking about security issues, Ayala diverted the discussion away from Microsoft and to the larger technology sector as a whole, noting that with the explosion in web services, security has become an issue for every single technology provider. "It's not only about Microsoft fixing the code of its products, but it's also how we take a leadership approach to make a framework in which web services will be created in a different way."

For its fiscal year 2003, which started July 1, the company is making its biggest bets in four areas: the enterprise space, selling solutions for information workers, .Net and developers, as well as SMB.

The enterprise space will be driven by Microsoft and its partners who know how to use services to turn products into overall solutions. Meanwhile, Microsoft's SMB strategy is all about "getting back in the game with the channel," said Ayala, mentioning a number of strategies around marketing, partner infrastructure and investments, and the strength of products like Small Business Server, the Great Plains and Navision acquisitions, Office 11 and Windows Pro.

When speaking about .Net, Ayala said 2003 will become the year for Microsoft and its partners to shine by bringing real solutions based on .Net to market and creating an ecosystem of strong partners. "We are betting the company on this."

Other .Net strategies include increasing developer satisfaction with the technology and programs, increased field investments, and efforts to increase mind share in areas like academia and government.

Ayala also spoke about how Microsoft, in a move to put more accountability into its hierarchy, formed a strategy around seven business units -- business solutions, Windows, information workers, MSN, home and entertainment, CE and mobility and servers and tools. Part of the accountability includes the creation of Microsoft's new general manager scorecard, which rates vice presidents and managers on new metrics like empowering individuals, growth, partner success, satisfaction scores, in addition to revenue goals. "We put accountability all the way back to where the products get produced," he said.

On partner investments, Ayala reiterated Microsoft's decision to spend $500 million over the next two years on new programs, including new partner field resources, more integrated go-to-market campaigns, new readiness and training initiatives and increased support.

After his keynote, Ayala was joined onstage for an executive QandA session by Allison Watson, vice president of worldwide partner sales and marketing, and Michael Sinnek, vice president of worldwide services. The three executives fielded a number of questions from partners about issues ranging from improving field communications to penetrating the SMB market and Microsoft's need to do a better job embracing ISVs.