Microsoft Partners In Uproar Over Cloud Sales Commission Cuts


Yet another issue partners are dealing with is Microsoft's Dec. 31 shuttering of its Solutions Incentive Program (SIP), in which they could earn up to 30 percent extra margin on registered deals for certain Microsoft products.

Though the shutdown wasn't unexpected, the SIP program was a huge revenue driver for some Microsoft partners. Some that had hired full departments of employees to process SIP rebates are now laying off those staff members, sources told CRN.

"There are no more registrations to get rebates on. With the SIP program gone, we're not getting the payments we used to," said one partner.

While change is constant in the IT business -- and especially in the cloud -- partners said they'd like to see Microsoft doing more to help partners navigate the challenges.

"Microsoft has historically tried to avoid channel conflict, but the shift to cloud and services was always going to create some issues -- smaller pie, thinner margins, different sales and value streams. It could get messy before it's done," one partner told CRN.

Who's Driving The Channel Program Cuts?

The Office 365 partner fee cuts are coming straight from upper management at Microsoft, and not from the Worldwide Partner Group, which typically communicates channel program changes, sources told CRN.

"People that should have heard about this had no idea beforehand," one partner told CRN. "If this is going to turn out badly, why aren't [Microsoft channel chief] Phil Sorgen and Josh Waldo [senior director of cloud partner strategy] getting out in front of this?"

Multiple sources told CRN they suspect Turner, who despite his enthusiastic WPC keynotes is not known for having the channel's best interests at heart, is the driving force behind the partner fee cuts. Which would make sense since the Microsoft channel is part of Turner's large scope of duties at the software giant.

Inside Microsoft, Turner has slashed expenses to such an extent that Microsoft's field reps don't have enough budget to travel with partners to close deals, one partner told CRN. Instead, Microsoft field reps are directed to use Lync to engage with clients remotely.

"When I go to lunch with Microsoft people, I'm the one who pays," said the source, who requested anonymity.

Microsoft's channel cost-cutting could have something to do with revenue declines in other parts of its business, such as Windows desktop, which has been hit hard by the lukewarm market reception to Windows 8, as well as the popularity of iPads and Android tablets.

"Because margins are so high on Windows, it accounts for a large chunk of Microsoft's profitability, and every dollar lost on Windows translates into about 70 cents of profit lost," Pica Communications' DeGroot told CRN. "To keep Wall Street happy, Microsoft has to shave costs elsewhere. Every dollar saved by cost reductions adds a dollar to profits, assuming it has no impact on sales or total revenue."

Sources told CRN the partner fee cuts could also stem from Microsoft's decision to beef up its senior sales staff by putting regional LAR managers into field sales positions. "They're trying to put more feet in the street," one partner said by way of explanation.

Microsoft likes to say it's all-in with the cloud, but it's unclear whether it'll be able to meet its goals without help from a broader portion of its partner base than it has right now.

One thing's for certain: Office 365 fee cuts, and the reduction of incentives for LARs, aren't the kind of moves that inspire confidence in the Microsoft channel.

PUBLISHED JAN. 10, 2013