Microsoft invests $2 billion annually in channel incentives, making it one of the most generous vendors in enterprise technology. But in January, many partners were up in arms after learning that Microsoft would be changing its Office 365 incentives in a way that would reduce their payments.
While Microsoft gave partners advance warning of the incentive changes on its partner portal, and through word-of-mouth, some partners felt blindsided by the changes.
This was one of the first big challenges for Phil Sorgen as corporate vice president of Microsoft's Worldwide Partner Group, a role he took over from Jon Roskill last August. And it's an experience he's planning to draw on in his efforts to improve Microsoft's communications with partners.
"We used vehicles we felt would reach the partner community. We learned that we need a megaphone larger than that when we announce changes," Sorgen told CRN in an interview in late February. "We have to consistently announce [channel program changes] as far out as we possibly can. Because if a single partner didn’t know, then there's a gap."
The January changes affected Microsoft's Advisor Enterprise Agreement Deploy program, in which partners advise customers to buy Office 365 and other cloud service subscriptions as part of EA volume licensing contracts, and get a one-time payment based on the full-year value of each customer seat at the time of deployment.
Advisor EA Deploy is an incentive that's paid to partners that may not actually transact the sale, but it can still be very lucrative. Which is why some were upset at learning their incentive payments would be dropping 40 percent to 50 percent.
Contrary to popular opinion in the channel, Microsoft did not change its incentive structure, according to Sorgen. Instead, Microsoft adjusted its "rate card," which is aligned to the SKU mix and average price points of products that partners are selling.
Sorgen said Advisor EA Deploy, and other channel incentives, are part of Microsoft's efforts to invest in cloud and make it a profitable business for partners.
"The most successful cloud partners are making significant money going beyond their project services, introducing repeatable [intellectual property], finding that the way they did business before may not be identical to how they do business in the future," Sorgen said. "Those are things we're trying to drive with our channel."
NEXT: Sorgen Says Transparency Is Key