Microsoft Ramping Up Its Channel Presence

The software giant aims to fuel its double-digit sales growth with a channel investment blitz designed to tighten ties with existing partners and build relationships with new ones. At the Fusion 2002 partner conference earlier this month, Microsoft executives said that over the next two fiscal years, the company plans to invest more than $500 million in the channel and double its number of partner account managers in the field to about 400.

With 50,000 partners in North America, Microsoft has prospered in the slow IT spending environment. For its fiscal year 2002, ended June 30, the company reported sales of $28.4 billion, a 12 percent year-over-year gain, and earnings of $7.8 billion, up from $7.3 billion in fiscal 2001. In the second half of fiscal 2002, Microsoft posted an 11 percent increase in sales, to $14.5 billion, and earnings of nearly $4.3 billion, up from fiscal 2001 second-half sales of $13 billion and earnings of $3.1 billion.

Other major vendors, including Sun Microsystems and Oracle, reported sales and/or earnings declines for their fiscal 2002 second halves.

Allison Watson, vice president of Microsoft's Worldwide Partner Sales and Marketing Group, estimated that the vendor and its partners have more than 1 million potential selling opportunities with 5,500 major accounts, 16,000 corporate accounts and 347,000 midsize businesses. In the SMB space, Microsoft plans to expand its staff by 25 percent and partner aggressively with solution providers, company executives said.

"I credit Microsoft for being able to accommodate the depth, breadth and scale across all the horizontals in terms of partners," said Ken Winell, president and CEO of Econium, a Totowa, N.J.-based Web services provider.

"If you are a specialist in accounting, you can still be a Microsoft Gold certified partner and service the accounting industry," Winell said. "If you look at the other players like Sun and Oracle, they are almost elitist in their approach to partnering, where they have a select number of partners they bring in and the partner is always looking over their shoulder to see when Sun and Oracle professional services are going to show up and undercut them."

Earlier this year, however, both Sun and Oracle moved to bolster their commitments to solution providers. Sun outlined a new program focused on "team selling" with partners, with distributor GE Access acting as a go-between. Oracle, meanwhile, is raising its level of partner involvement in many of its biggest accounts. In the past, Oracle partners sold into companies with up to $200 million in annual revenue, but a new program is slated to raise that bar to $1 billion.

"What we like to see is a partner making some money driving value-added services for their business," said Ken Muse, vice president of North American channel sales at Oracle. "We want partners selling multiple times a year, not just one or two."

In 60 percent of all Oracle engagements, a solution provider is either doing the professional services work or assisting Oracle with those services, Muse added.