Microsoft: Vertical Efforts Won't Push Partners Out of Enterprise

That was the sentiment shared during a panel at the Microsoft Worldwide Partner Conference in New Orleans on Saturday, where thousands of Microsoft's certified partners converged to hear top executives detail the company's enterprise, sales and services plans for the next year.

Kevin Johnson, group vice president of worldwide sales, marketing and services, said channel partners won't get cut out of the enterprise pie as the company beefs up its own vertical expertise.

"We know there's still work to be done," the vendor's top sales executive said. "Everyone has a lead partner account manager. They're out there to link [partners] to Microsoft's services team."

In August, Microsoft revealed a realignment of its enterprise business model based on vertical segments and appointed partner account managers to systems integrators and solution providers who maintain control of their own enterprise accounts.

Simon Witts, corporate vice president of the Microsoft enterprise and partner group, reassured conference attendees that the company's new sales compensation model is a built-in mechanism that will "force" the Microsoft sales force to keep partners included in enterprise deals.

"Partners have to be in account planning," Witts said, acknowledging that Microsoft is teaming more closely with partners that have vertical industry skills. ""This will change the dynamics of the relationship we can have with you, but the depth of our relationship will be the primary differentiator as we compete with IBM."

The realignment stands to benefit Microsoft's top 19 systems integrator allies, including Hewlett-Packard and Cap Gemini Ernst & Young, which have strong practices in vertical segments. In the United States, for instance, Microsoft is targeting seven vertical segments, including health care, retail, electronics, oil and gas, automotive, professional services, and media and entertainment.

Partners said they are not surprised by the increased vertical focus, given Microsoft's enterprise aspirations and the appointment of former IBM Global Services executive Gerri Elliott to head up the company's industry/vertical practice.

It remains unclear how the shift will affect smaller systems integrators and solution providers, who have nurtured and developed enterprise account but who must now work with Microsoft account managers.

One affected solution provider, who asked not to be named, said the situation is still tense and confusing because his company is required to report to various partner account managers even though it retains have account control. "Microsoft told us they're going vertical," he said. "Regionally, it would push the business downstream and take the cream of the crop."

After the keynote, one solution provider who plays in the enterprise market said the new sales alignment is a natural evolution of Microsoft's business model. "They have to go vertical," said Kelly Gilbert, enterprise account sales manager for a Grand Rapids, Mich., solution provider, which now has to report to three partner account managers.

To help work through issues, Microsoft executives said they have established a Worldwide Service Partner Executive Council of 20 partners that will meet two or three times per year.

Witts said Microsoft must enforce its new compensation policy to prevent skirmishes in the field. "The lead PAM [partner account manager] is the central point of engagement for partners with enterprise," he said. "We need to make the lead PAM model work."

Microsoft has made other concessions to please partners, including scrapping its effort to develop industry-specific solutions. "We backed off that approach, and we're working with ISVs," Witts said. "Partners have had a material effect and impact on our thinking."