Q&A: Microsoft's Roskill Outlines Office 365 Opportunities, Cloud Incentives For Partners

Microsoft's 2012 Worldwide Partner Conference, held earlier this month in Toronto, marked the second anniversary of Jon Roskill's appointment as head of the software giant's worldwide partner organization.

In his tenure as Microsoft's channel chief Roskill has overseen the overhaul of the company's partner program, now known as the Microsoft Partner Network (MPN), and helped define the channel's role as Microsoft expands into cloud computing and other new areas.

CRN Senior Editor Rick Whiting caught up with Roskill on the last day of WPC, interviewing the channel chief in a food court across the street from the WPC headquarters hotel after a fire alarm forced an evacuation and temporarily disrupted the day's proceedings. Here is an edited transcript of the conversation.

[Related: 10 Things We Learned At The Microsoft Worldwide Partner Conference ]

Talk about the things you announced in your keynote, about the increased MPN spending on cloud and solutions incentives. I know the current MPN program has been running for more than 18 months and it's more a case of tweaking the programs. But I didn't hear as much about MPN in the keynotes as in years past.

We did an MPN Value Keynote, which we have never done before. A lot of partners have a person in the company whose job it is to keep track of the MPN program, what the competencies are, training and certifications they need, understanding the incentives. And so the Value Keynote that Julie [Bennani, partner programs general manager] did was really focused on that. Probably over 1,000 people went to that.

And because we had that, it allowed me to pull some of that detail out of my keynote. What I tried to do is move it up, being more aspirational, more visionary. Which I think lines up with where we are right now.

The changes involved are absolutely more than tweaking. We [combined] the two SharePoint competencies. We've evolved the digital marketing competency, which is one we're very excited about. Honestly, I think it was a little unclear who the target was. It's much more that the digital marketing agency partners. They're the type of partners who are typically working with Bing and Bing advertising. So it's great because it's another part of the company that is officially coming into the MPN fold.

Microsoft is really so broad. It's business is as broad as 10 companies. And [the partner organization] has not had this deep connection with Bing. And one of the things that did was, we worked with Bing to bring a value element back to our partners. And so there is a Bing advertising component, a Bing advertising benefit that we're now able to offer our partners. And I've heard some pretty good enthusiasm for that.

So it was SharePoint and digital marketing competencies. And we've done work around the desktop competency, to support Windows 8 and what's happening with Windows 8. I'd say those are the big ones.

And you asked about incentives. What I said in the speech is we've added more than $20 million to our incentives budget at a worldwide level.

NEXT: Expanded Channel Models For Selling Cloud

I think you specifically mentioned "cloud" and "solutions" incentives.

We've focused that incremental money in on those two areas. With cloud, we've increased what we've done with the Microsoft Online Services Partner Advisor program and that's moved from a program where, depending on which element you were in, it was 18 points, we've now increased that so you can get up to 23 points with the accelerators in year one [of a subscription contract].

One of the other things we did that I think is very important, we had, unintentionally, created some channel conflict in that we sell to large corporations through enterprise agreements. I think one of the brilliant things we did was we created a cloud EA [Enterprise Agreement] where our field [sales], our LARs [Large Account Resellers], everyone can just continue to sell the way they sell today and include Office 365, Azure, and [Dynamics] CRM [Online] into their EA.

The problem we created, though, we also spun up this channel Advisor program and the Advisors have been, in some cases, very big SIs [systems integrators]. And, in some cases, they are also working in these large accounts. So we had both sides sometimes pitching Office 365, which is good. But then when it was time to sell, we were creating a bit of channel conflict there.

So what we've done for this next year in accounts like that, where they're covered by an EA, we're going to continue selling through an EA, but Advisors will get paid and we want them to focus their activity on activation and deployment. So they will get paid as those seats that get sold get activated. It's great because it's driving that alignment with a set of partners [whose] competency is really on selling and the other set of partners that really have the deep competency on activation. And we're really looking to bring those two together and really accelerate going into the next year the activation of Office 365 in large accounts.

There's a couple of other stats that I thought were really exciting. We've seen the classic channel dimensions, reach and frequency, grow substantially. We [have] over 7,000 partners selling [Office 365] on a frequency of more than once a month. And that to me is really material. The numbers we're starting to see in our cloud offerings are becoming very impactful for the channel. That's Office 365 specifically. It would be broader if we folded in some other [cloud products]. The enthusiasm around these products is exciting to see.

NEXT: Evolution Of The Office 365 Open Program

And I think the change in Office 365 billing, the Office 365 Open initiative, is a big deal.

That's the other piece. So clearly partners have been talking to us about that for some time. When I first took this job, it was one of the things that was being raised at the time pretty consistently. It's interesting, since then I would say the noise level around it has actually dropped quite a bit. It could that either they figured that with [the Advisor program] we're not trying to do a bait-and-switch. It could be they just assumed we were done talking about it and they gave up on us.

But the reality is that in this new world of cloud services, the business model, the channel model, and the product are so interleaved. We spent a lot of time talking with the [distributors] about whether there was anything we could do, for instance, with a sort of a pre-paid card, to put Office 365 in the channel. We had a lot of different things we pursued with the disties. Because at the end of the day they need something to sell. They sell millions of SKUs, and they just need to be able to SKU these things up into their system. We worked with them a lot and they were never really able to get it set up. We talked about a lot of different things, [but] we couldn't figure out something that would work with what we had.

And so that's why it's taken us, really, an extra year, because we've now built the model into the products. This next release of Office 365 has this, what we call five-by-five code capability. It's very similar to the way our product key card works in retail full-packaged products.

Five-by-five code capability?

So what happens is you buy [software seats in] one-, five- 20-, 50-, 100- and 500-seat increments With those denominations you can make up any amount you want. And each one of those will come with a code. So it gives you the unique code for a one-year subscription, one year of service, and it goes into the channel like any other product. From a disties' standpoint it just looks like anything else they can put a SKU number on. For us to support that actually required us to go into the guts of the product to make it so you could activate the codes. There's a whole billing component behind it.

NEXT: Making Money With Microsoft's New Products

That's in Office 365 today or in an upcoming release?

It's in the next release of Office 365, which you're going to hear more about this summer. It's an impending release.

We've actually been doing a lot of direct digital advertising for Office 365, driving it to our trial Web site, and then working as hard as we can to attach partners at that point. Because what we learned was, every opportunity that we're able to attach a partner to, we saw a larger deal size and we saw faster activation. It was very clear from early on that partner involvement in these deals was good for both sides. So we've been driving that with the Advisor model and I think the fact we've been driving that volume of leads out to our cloud Advisor partners has been a really positive thing. I think it's settled down some of the noise around this. They saw we were genuine, [that] we were trying to drive the leads to them.

This new model, Office 365 Open, is going to open up the broad, classic channel to the cloud in a way that nobody has done yet. You talk to the guys from Ingrahm or Tech Data and they are very excited about this. What percentage of volume is going to go through that channel, versus Advisor, versus EA, remains to be seen. But I think we're opening them all up – I said the other day [in a keynote], we've got the broadest array of business models of anyone. I think the channel should feel good that we've been receptive, we've listened – and in a way that's the thing to take away from this whole conference.

Our pitch to partners has always been that we are a platform company, we build extensible platforms, and we look to partners to build their intellectual property on top of our platforms and then take it to markets and customers. And I think they are really getting it at this conference that we have taken this same model to the cloud and [partners] believe that we're going to be successful with that.

Broadly speaking, how can partners make money with Microsoft today, given all the changes going on in the industry?

It's really no different than in the past. To answer that question fully you need to start with, well, what kind of partner are you? You can start with disties, and I'd say, in some ways, it has been the most unclear of how disties participate in the cloud. We've now made it super clear. You can resell the Office 365 Open offering and the distie can fully participate.

SIs have been participating through Advisor, the LARs through EA. The hosters, we've had our [Service Provider License Agreement] program for a long time and we've also opened that up to some syndication.

And for more traditional VARs?

More traditional VARs will join in with the disties under the Office 365 Open. That's the way to think about that. And what's cool about that, the thing that's really lightened it up, is Intune. The latest release of Intune that went out in early June, the momentum for that is really kind of spectacular. It's delivered a set of features that helped [partners] manage desktops and manage mobile devices. And not just Microsoft mobile devices, but non-Microsoft devices. We've seen a very high attach rate of Office 365 to Intune. So it's sort of a way for a VAR that's trying to move further up the services stack, starting to be more of a managed service provider, to a small/medium business.

[Partners] can come in and say, 'Hey, you really don’t want to be managing all these desktops, you should be concerned about what's going on with these phones, if one gets lost it's got data on it, you've got no security policy, no ability to do remote wipe. And at the same time we can help you with moving into some of these cloud solutions.'

NEXT: The Deadline For New Competency Requirements Approaches

What about applying this Office 365 Open model to other Microsoft cloud products?

We have not announced anything around that. But you can see it as the prototype of the direction we will go. Office 365 is the "big dog" [cloud] product. If there's demand for other [cloud] products in that channel model, we will go this route, no doubt.

Talk to [Washington D.C.-based solution provider] New Signature, they're a great story. These guys are a prototype of what I see as this next generation. They started out as a VAR, moved [to become] a managed service provider, broke into Intune and it's accelerated the rest of their business. They've grown and they've got additional competencies now. And they're just on fire. It's so cool to see these guys. They're doubling, tripling year over year. At the end of the day that's what really drives a healthy partner ecosystem. It has to be revenue growth and partner growth.

So looking around the conference, I think you see how much momentum we have there. And that's what a healthy channel is all about. You can have the best program in the world, but if people aren't making money you aren't going very far.

You mentioned the number of gold and silver competencies Microsoft partners now have. Do you have a goal for that for this fiscal year?

Right now, where we are is 10,000 gold and 25,000 silver. For our managed reseller program, we are introducing a new requirement which is that you have to have at least a silver competency to be able to participate in that program. That's our program aimed at the bigger VARs that typically resell greater than $75,000 of products a year. I'm expecting we'll see a spike of several thousand silver competencies as we head into the deadline, which is December 1.

So will we see the competency numbers grow? Yes, we will. Is that something we're driving hard behind? I would say, broadly speaking, no, because I feel at this point we've got a really good set of partners in place and our goal now is around deepening the business relationship with them, growing the business we've got.

That said, you can look across the 29 competencies, you can create a matrix of the competencies by all the countries in the world. You know, I looked at France the other day. France has six Gold CRM partners. France can certainly support more than six.

What I think you'll see happen is, as demand grows for some of these offerings, I think you'll see some of the silver partners grow and they'll become gold. And clearly, when you look at places like Russia, Brazil and, massively, in China, the geo-coverage model will drive additional partners. There are places in northwest Brazil, eastern Russia, central China, [where] our coverage is very, very light right now. And so Microsoft teams in those countries are very focused on working on capacity in those areas.

NEXT: Aligning Microsoft's Sales Force With The Channel

What's the one takeway from this WPC for channel partners?

I think [partners are] sitting there saying, 'Wow, the products are real.' They were super-excited to hear about how the Microsoft field is going to be compensated on cloud revenue. And we showed them the path to profit in the cloud.

About the Microsoft field sales representatives and partner account managers, you covered that in the keynote. Can you explain that briefly?

We create these revenue buckets by revenue lines that the field [Microsoft sales force] has to hit a target in order to get into what we call the revenue accelerators. And we've created a special one for cloud products for this [fiscal] year. The field is anyone in Microsoft that's getting paid on a revenue number. So that includes all of our account reps, all of our partner account managers – we are all carrying a cloud revenue number now.

Will it also spur sales and foster more cooperation? Or is it to avoid conflict?

I've had cases where partners came to me and said: 'Hey, I actually saw the Microsoft team in this account selling on-premise when we were in there selling the cloud. And they won't see that next year.

I think it's driving huge alignment. These partners, they know how our guys work. We're pretty transparent on that stuff with them and they want to know that they've got this alignment.

PUBLISHED JULY 27, 2012