Laying Odds On the Channel

One highlight of the numerous channel program revisions unveiled last week to some 6,000 solution providers at the Microsoft Worldwide Partner Conference is a new Small Business Specialist designation, which could prove a balm for smaller Registered partners. The vendor also is adding new Custom Development and Mobility Solutions competencies to the still-evolving Next-Gen Partner Program and, as promised, it outlined Licensing and System Builder paths.

The moves detailed in Minneapolis are an attempt by Microsoft to show a winning combination of partners and technology, said Allison Watson, vice president of Microsoft's Worldwide Partner Sales and Marketing Group. "Partners-plus-platform is Microsoft's strength," she told CRN in an interview ahead of the event.

Small businesses are a particular focus of the revisions. To service that market, the company said it had opted for the Specialist designation rather than a full competency—and the required points—because it did not want to place undue burden on very small solution providers. When the new partner program rolled out in October 2003, Microsoft said participants needed to earn 120 points to qualify for Gold status, 50 points for Certified, and none for Registered. Points are earned by gaining certifications in various competencies, the amount of Microsoft revenue driven, customer references and customer satisfaction.

What makes the Small Business Specialist effort unique is its specific inclusion of Registered partners, since the company's gargantuan marketing resources are most often deployed on behalf of Microsoft's Gold and Certified partners. To participate, Microsoft partners must pass an online exam and one of two technical exams. Partners that fall into the Registered category must also subscribe to Microsoft Action Pack or Empower for ISVs in order to step up.

Program benefits associated with Small Business Specialist include presales tech support for select products, targeted online content, preferred placement in the Microsoft Resource Director and/or Partner Locator tools, and coordinated marketing campaigns. Moreover, partners can earn 25 points toward their status in the Microsoft Partner Program.

Drawing on the success of Small Business Server, an update of which is expected in fiscal 2006 started July 1, and the Office Small Business offerings, Microsoft, Redmond, Wash., is also prepping additional products tailored for small businesses. These include Microsoft CRM Small Business Edition, which is tightly aligned with Small Business Server; Microsoft Business Solutions Point of Sale 1.0, designed for one-store retail operations; and the Office Small Business Accounting product, around which it is forging partnerships to create a series of services, such as a link to ADP for payroll processing.

To illustrate the depth of the opportunity, Microsoft executives hold up research from AMI-Partners pointing to a 13 percent compound annual growth rate for IT spending within the small-business sector. "Larger businesses are asking more of small businesses in terms of interacting electronically," said Steve Guggenheimer, vice president of small-business operations for Microsoft's Worldwide Small and Midmarket Solutions and Partners unit. "People are becoming more electronically inclined, as well."

Small businesses could indeed add up to big profits, said Margo Day, vice president of Microsoft's U.S. Partner Group. "We think there are 3.2 million small businesses in the U.S. with five PCs or more," said Day. "Of those, 40 percent have no server; they rely on sneakernet or peer-to-peer. Small Business Server would be the right product for them, with its combination of mail and Windows Server 2003," she said. Day estimates this segment alone represents a billion-dollar opportunity. "Just adding a server plus some customization and consulting around SBS could add 50 percent to the top line. This could be very profitable for partners to focus on," she said.

Karen Brodie, president of Brodie Computes, a Microsoft Business Solutions partner in Guelph, Ontario, that mainly handles midmarket clients, said she is excited about the marketing tools associated with Small Business Specialist as well as the new small-business-tailored CRM offering. "There are real differences in the go-to-market approach that a partner needs to take with a small-business customer," Brodie said.

Greg Gatzke, principal with ZAG Technical Services, a Microsoft Gold partner in San Jose, Calif., said his company definitely plans to invest in the Small Business Specialist moniker. "I believe that it won't take much to achieve it, and some of the larger-sized of the small businesses will take note of the offering and use it as a measuring stick when they rate Microsoft partners," Gatzke said.

In advance of the annual conference, reaction to the 18-month-old program was running the gamut. In a CRN ChannelWeb online quick poll conducted the week before the event, only 15 percent of respondents said the Next-Gen Partner Program had eliminated the confusion of working with Microsoft or boosted their profitability. Some 40 percent said the program hadn't helped them, and 45 percent felt the program needed more time to develop.

Interviews with partners also revealed wide-ranging opinions.

Yacov Wrocherinsky, CEO of Infinity Info Systems, New York, said the company has done a good job refining competencies to suit various market segments and helping partners better define their optimal target markets.

Others validated its continued specialization push. Rob Speck, president and CEO of Aviva Consulting, a Phoenix partner, said it's critical that partners focus resources on where they can really build value. "Nobody can do it all," Speck said, adding that Aviva, with expertise in Office, SharePoint and InfoPath, often works with other Microsoft partners like Meridio, a Waltham, Mass.-based records management specialist.

Bob Shear, president of Greystone Consulting, a Boston Classic partner, gives the still-evolving program a high five in concept. "It is by far the best vendor program we've been involved with in the past 10 years," he said. The caveat is there were administrative "glitches" that had to be worked out, he said. For example, the enrollment tool for requalification had to be reworked when partners found the system too complex.

One thing that remains unchanged is worry about partner profitability—something Microsoft has tried to address by subsidizing training and education and otherwise bleeding out costs rather than bolstering margins.

Vendor-partner relationships are another key concern, and Microsoft said it is working to beef up its Partner Account Management program. In this regard, the company is getting some good reviews, although they vary by region. Several partners report improved satisfaction with their Partner Account Managers. Microsoft says it is pushing to improve the skill sets of PAMs—often the partner's lifeline to the vendor—and retain the best. There is now a four-level career ladder, and Microsoft's 1,400 PAMs will be assessed in January or February.

"We've introduced a career path for PAMs," said Don Nelson, general manager of the Worldwide Partner Group. "This is the first time a PAM can look at staying in that role for the long run and staying with the same partners over time."

BARBARA DARROW and HEATHER CLANCY contributed to this story.