Watson: Microsoft Channel Program On Track

Channel chief says Microsoft is still seeking ways to boost partner profitability

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Three years into its Next Generation Partner Program, Microsoft is claiming success in bolstering its partner ranks but still is seeking ways to raise partner profitability.

Allison Watson, vice president of Microsoft&'s worldwide partner and small-business group, said the Redmond, Wash., company continues to study ways to help partners wring more profit out of implementations and is coming up with a blueprint to aid in that battle.

Partners who invest in and achieve one of Microsoft's 13 competencies tend to be more profitable than those who don&'t, Watson told CRN in an interview Tuesday. Components of profitability range from deal size, margins, length of sales cycles and partner capacity, she said.

Microsoft and its partners certainly agree that profitability is a top concern. Unsurprisingly, they sometimes disagree about whether the software giant has done enough to help margins and cut partner costs.

"Profitability remains the No. 1 concern for me and for every Microsoft partner I talk with," said one East Coast Microsoft Gold solution provider, who requested anonymity.

A Midwestern Microsoft partner, who asked not to be named, went even further: "I would say Microsoft's insensitivity to partner profitability is the No. 1 issue."

But not all Microsoft partners feel that way. Bob Shear, president of Greystone Solutions, a Boston-based Microsoft Gold Certified partner, exploded after hearing those comments.

"That's the stupidest thing I've ever heard. Microsoft is not their momma. It's a vendor. It has a rich program in terms of license benefits and training benefits, and we cooperate with them on a bunch of customer touch things. But it's not their job to make partners money," Shear said. "It's great they're concerned about partner success, especially when there are other very large vendors competing with them who could care less about partners."

Bart Hammond, CEO of Interlink, who was on a press tour with Watson last week, may be an example of the new-look partners that Microsoft hopes to nurture.

Denver-based Interlink sports competencies in integrated e-business, advanced infrastructure, information worker productivity and Microsoft Business Solutions (MBS), and it doesn&'t resell software, although it does get an influencer fee on CRM sales. Hammond estimated that about 12 percent of his current business comes from a software-as-a-service model. Interlink's profit grew 3 percent last year, and Hammond said he expects the company to exceed its expectations for its bottom- and top-line for the first quarter.

For Microsoft partners like Interlink, software margins clearly are a moot point. Yet others in the Microsoft ecosystem said they&'re funding the transition from products to solutions and services with the proceeds from software sales. As a result, product margins remain important, they said.

Watson said Microsoft envisions a partner role in its evolving Windows Live and Office Live software-as-a-service initiative, although the company is not yet sure what that role will be. She also acknowledged that the new, consumer-focused OneCare security offering, the pricing of which was announced Tuesday, is not really a partner play.

The consumer-oriented software-as-a-service push is difficult to parse from a partner viewpoint, Watson noted. "We don't know what the [partner] play is and how you'd monetize it. Would you refer someone for a penny? It is a ball up in the air," she said.

Many partners disagree. These low-cost security initiatives for home users bleed over into small businesses--and even big businesses--and the small-business space remains a core market for the channel, solution providers said.

Watson also reaffirmed Microsoft's intent to keep its ERP products channel-restricted and out of broad distribution. Of all the MBS products, only CRM goes through volume licensing and broad distribution. The Dynamics product lines--Great Plains, Navision, Axapta and Solomon--will be sold and serviced through a subset of Microsoft partners, she said. Sales of those products typically involve longer sales cycles and higher margins.

Currently, Microsoft has about 6,000 Gold partners worldwide, up from 3,000 a year ago. In the United States, that number rose to 2,000 from 1,000 during that time span. Microsoft also now fields 27,000 certified partners globally, compared with 25,000 a year earlier. The number of U.S. certified partners now stands at 10,000, up from 9,700 last year.

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