Microsoft Rethinks Customer Segmentation

The software giant's top sales executives are challenging both partners and Microsoft's own sales teams to think more deeply beyond employee numbers or seats deployed when considering customer prospects. This theme surfaced time and time again during keynote addresses Sunday at the Microsoft Worldwide Partner Conference here in Toronto.

"Current elements of segmentation are quite insufficient," said Orlando Ayala, senior vice president of the Small and Midmarket Solutions and Partner Group and COO of Microsoft Business Solutions. A better indicator of what technology a customer might need is server penetration, he said.

Ayala received a dose of this reality firsthand when he volunteered to help outfit his brother Oscar's small business, a hobby shop, with Microsoft-built technologies including Small Business Server. (For more on his experiences, click here. )

The problems that Oscar Ayala faced as a business owner " managing payments and cash flow, maintaining appropriate inventory levels, supply chain management, handling the end-of-day settlement process, and maintaining a viable e-commerce presence " were more particular to his classification as a retail store than any artificial census numbers tied to counting seats, his brother related.

For additional evidence, Orlando Ayala points to another poignant example, that of a real estate firm that employed very few number of staffers but yet ha deployed nine servers and supported an annual IT budget of $400,000.

As Microsoft eyes a sales goal of $11 billion for the SMB marketplace, the Redmond, Wash., company is encouraging both its partners and its own sales team to become "cultural anthropologists" who can provide insight into more practical sales scenarios as the market evolves and help partners create repeatable solutions for solving them.

"It's all about evidence," Orlando Ayala said. Steven Guggenheimer, vice president of small business for Microsoft, said beyond the per-seat dynamic there are a number of ways for partners to assess and categorize prospects in the small business world. Among questions that solution providers should ask during early customer work are: What is the prospect using currently? What is the owner's overall view about technology? And what are the company's growth plans?

Likewise, Microsoft is mobilizing its enterprise team and partners to consider how deployment or infrastructure integration strategies differ by industry, and it is forcing its sales and services teams to come up with unified account plans for the roughly 4,600 customers it touches with a direct relationship.

"More and more we are taking a position depending on the vertical market," said Simon Witts, corporate vice president of the Enterprise and Partner Group at Microsoft during the Sunday morning keynote session. In general, the industry faces a scenario in which many enterprises are overlicensed and underdeployed, meaning that customers are failing to derive the true value of their infrastructure or applications, Witts said. "It's a real competitive threat for the entire industry," he said.

Another issue is lagging upgrades.

Gerry Elliot, Microsoft's corporate vice president for U.S. Enterprise and Worldwide Industry Solutions, estimated that only 15 percent of the company's enterprise customers have migrated to Office 2003, while only 40 percent are using Windows XP. Conversely, approximately 40 percent of the installed base has migrated off Windows NT 4.0 and earlier versions onto Windows Server 2003, Elliott said.

During fiscal year 2005, which started July 1, Microsoft's enterprise team hopes to drive up to 8,200 deployments in tandem with partners, compared to 6,500 in the previous fiscal year. In exchange, Elliott said solution providers and other channel members must be prepared to finetune their customer focus and provide evidence that their services can be better differentiated from those of their competitors.

"Together, we need to understand the customers' business," she said.