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Channel Changers

Channel change is no trivial matter to Microsoft.

The company now fields tens of thousands of certified and authorized partners around the world, and by its own estimate administers more than 50 different channel programs.

That's about to change, albeit in an evolutionary way, company executives say.

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Microsoft executives finally take the wraps off their grand channel plan. The Goal: One program for all.

A new effort, internally dubbed the Next Generation Partner Program, seeks to bring together the best of the Microsoft "classic" certified partner programs and authorized Microsoft Business Solutions (MBS) programs into a single entity. That entity will be flexible enough to envelop "high-touch" partners that do application development and hand-holding in business applications, as well as partners that may resell products and licenses but not touch code, Microsoft executives said. It will also cover hardware OEMs, ISVs and consultancies.

"The goal is a single program" to accommodate the many differences, said Richard Flynn, director of partner programs at Microsoft.

At the core of the new program will be three partner levels,a new Registered Member designation along with the existing Certified Partner and Gold Certified partner brands.

Partner designation will be determined by a new point system, with points awarded based on criteria including certifications in 11 competency areas, the amount of Microsoft revenue driven, end-user references and customer satisfaction. The annual requirements will be 120 "Value Points" for Gold Certified and 50 points for Certified partners. Partners in the new Registered Member category don't have to earn points but are eligible to receive some support from Microsoft, Flynn said.

All of this is a huge task. Arguably, no other vendor fields the array of products,or partners,that Microsoft does. The products range from infrastructure software all the way up the application stack. And the company's current 28,000 Certified partners are just the tip of the iceberg,Microsoft claims to have a whopping 775,000 partners of all types worldwide. Phew.

The program changes, to be unveiled this week at the Microsoft Momentum partner conference in New Orleans, are part "of a 10-year vision as significant as Microsoft's launch of its Solution Provider program 10 years ago," said Allison Watson, vice president of worldwide partner sales and marketing at Microsoft.

Fully aware of the angst channel-program changes often cause, Microsoft executives stressed that current partners will be grandfathered into the new programs this year at their current levels. They could even achieve a higher status if they make the right moves to gain more points. Over the next year, "they can go up, they can't go down," Flynn said.

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Partners will be able to enter their information online at the end of the year when they re-enroll. The online system they will see will look much like the current one, Watson said, adding that Microsoft will map their current areas of specialization to the new point system. There are now seven specializations within the Certified program, most of which map fairly cleanly to the new competencies, one of which is now Microsoft Business Solutions (MBS) skills (see chart at right).

Microsoft is also creating technology tools to further its new channel efforts and be a more responsive partner, said CEO Steve Ballmer. The goal is to improve processes so problems are resolved more quickly, and to enable the company to gather "more instrumented feedback on products" to help improve quality, he said.

"On the customer-facing side, the tool we've built is the complaint management system, which is starting to really fire for us," Ballmer said, adding that the tool will be extended to more partners over the next 12 months. "Whether you're an R&D guy or sales [or] marketing support guy, there are tools that we've been building to help us improve our processes and deliver."

In another shift, global systems integrators such as Hewlett-Packard Services will now be able to register their information once for their entire organization. In the past, each regional office had to perform that task.

Other changes, still under discussion, are "aspirational," or longer term, Watson said. One of those is to foster more partnering among partners in accounts, she said.

It hasn't been an easy road. MBS partners got a taste of channel shifts in July when they learned that they no longer would be able to sell Microsoft CRM exclusively. The next release of that product, due late this year, will be sold through the broad Microsoft channel and through all volume licensing plans. Many MBS partners viewed that as a betrayal, although some agree with Microsoft's contention that the move will ultimately lead to a bigger pie for everyone.

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Kevin Wueste, general manager of broad partner strategy; Don Nelson, general manager of managed partners; Doug Burgum, senior vice president of the Microsoft Business Solutions business group; Allison Watson, vice president of worldwide partner sales and marketing; Orlando Ayala, senior vice president of the Small and Midmarket Solutions and Partner Group.

Don Nelson, general manager of Microsoft's managed partners, who spearheaded much of this change, said the uproar that ensued was "entirely 100 percent expected." However, he said that under the new plan, partners will receive benefits on par with or better than those they had in the past. The issue: Partners that sourced and sold the products used to receive payment from customers immediately. Now, buying through distribution, their payout is deferred, typically for 90 days, and their cash flow is crunched.

Microsoft Certified partners have been bracing themselves for expected changes all year. While Microsoft has been including select partners in feedback sessions on the point system and new competencies, the hint of change made many nervous.

So why change at all? Orlando Ayala, senior vice president of Microsoft's Small and Midmarket Solutions & Partner Group, can think of about 40 million reasons. That's the number of companies he sees with 1,000 employees or less that he says are woefully "underserved" by technology.

Ayala said those companies represent a huge opportunity for Microsoft's nascent business solutions push. For this reason, getting the channel primed is "job one," he said. "We have to master this. I'm not going to hire 3 million people to sell to 40 million," he said.

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>> THE PROGRAM CHANGES ARE PART 'OF A 10-YEAR VISION AS SIGNIFICANT AS MICROSOFT'S LAUNCH OF ITS SOLUTION PROVIDER PROGRAM 10 YEARS AGO.'
-- ALLISON WATSON, VP OF WORLDWIDE PARTNER SALES AND MARKETING

For all of its channel strife,and the company has its share of complaining partners,Microsoft doesn't field tens of thousands of consultants and services professionals to compete with the partners it grew up with. IBM, with all of its channel-friendly talk, can't say the same, as it fields the enormous IBM Global Services (IGS) group. And rival Oracle has a more direct-sales focus.

"The best way to avoid channel conflict is not to sell direct," Nelson said dryly.

Microsoft is often accused,sometimes by its own partners,of having "IGS envy" in its attempts to crack enterprise accounts. But Ballmer spins it another way. "We certainly have a better service force than IBM does. They have 175,000 IGS guys, but that makes HP our friends, that makes Accenture our friends, that makes [Cap Gemini Ernst & Young] our friends, that makes the Intellinets of the world our friends," he said. "There are some deals where scale really matters, where we really have to work hard with our partners to compete,[for instance in] a huge outsourcing deal or huge app development deal. A few of our partners can scale up and do those,the Accentures and HPs,and that's why we work really hard to form close partnerships with those biggest of the big, so to speak," he said.

Another big partner constituency that will be affected by the changes are ISVs, an audience that has had a problematic relationship with Microsoft, given the company's own application strengths. Microsoft said it touches an estimated 65,000 to 75,000 ISVs, and identifies about 100 of those as Global ISVs.

This week, Microsoft is launching a new ISV effort, dubbed Channel Builder. Benefits will include a new Partner Connections tool that will let ISVs build their own profiles online to communicate to the partner network at large. The goal is to align ISVs with relevant Gold and Certified partners that might need their expertise, said Margaret Cobb, ISV group manager.

Microsoft will also host Business Builder classes to help ISVs gain the skills they need to survive. Help with business plans and finance management will also be available, Cobb said.

There will be a huge ISV development effort around Windows Server 2003, the upcoming Jupiter e-business lines and the Yukon database lines, said Mark Young, general manager of Microsoft's ISV Platform Strategy and Partner Group. Another effort will involve "Smart Client" ISVs, which will focus on Office Systems and mobility technology.

ISVs remain a huge focus for MBS as well, said Doug Burgum, senior vice president of the Microsoft Business Solutions business group. Microsoft is pitching its Microsoft Business Framework (MBF) as the foundation for what it hopes will be a slew of third-party business applications.

"We know if we provide a base set of applications around the world, there will be an enormous amount of opportunity for partners to do customization and ISVs to complete the solution-building components with next-generation tools," he told CRN.

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One solution provider said he is unsure about the points program, but he thinks the consolidation of various partner programs is a benefit.

"I was very happy to see OEMs [and] ISVs included in this program. The biggest problem that we have had with the Microsoft partner programs in the past has been the large diversity of programs," said Gary Dickinson, president of InterKnowlogy, Carlsbad, Calif. "This sent a confused message to the market and to the partners themselves. We are a Gold Partner, managed partner and an MBS ISV, so as a result we end up going to dozens of different Web sites and entry points in order to get the information that was important to our business planning and sales initiatives. One program, hopefully, will normalize some of the information that we receive or have access to and will make it easier to effectively digest."

HEATHER CLANCY and PAULA ROONEY contributed to this story.

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Published on October 6, 2003

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