Q&A: Microsoft Channel Chief Phil Sorgen Talks About Cloud Incentives, Surface, Windows XP

Phil Sorgen, who took over for Jon Roskill as corporate vice president of Microsoft's Worldwide Partner Group last August, has spent most of his 18-year career at the software giant in field sales leadership roles. In all of his various positions working for Microsoft subsidiaries, Sorgen has been responsible for the last mile of execution.

In an interview with CRN in late February, he talked about how this experience informs his current role as Microsoft channel chief. Following is a transcript from the interview.

CRN: What are you focusing on at the moment?

Social, mobility, big data and cloud. My No. 1 priority coming into this job was to start making sure the things we're doing are best positioning ourselves, with our partner ecosystem, to be successful in these four megatrends.

Second, we want to be a company that is easier to do business with. That means simplifying partnering with us, lowering the cost of partnering with us, and increasing the business value that you get from partnering with us. If we can do those three things well, that equals profitability for the channel.

Related: Microsoft Partners In Uproar Over Cloud Sales Commission Cuts ]

[CRN: Microsoft made some changes to Office 365 cloud partner incentives earlier this year. Can you explain the rationale for that move?

Truth be told, we're a self-critical organization, and there is a learning in that. We used vehicles [to communicate the changes] that we felt would reach the partner community. We learned that we need a megaphone larger than that when we announce changes. We have to consistently announce as far out as we possibly can. Because if a single partner didn't know, then there's a gap.

As we make decisions going forward, one of the principles is going to be looking for opportunities to drive stability and consistency. The next question is, do stability and consistency get us and our partners where we need to be? If not, then we need to change, and communications are a part of that.

So we're definitely going to look at that through a filter of minimizing change -- where minimizing change is the best thing for us and our partners.

CRN: Are these kinds of moves something that partners are just going to have to get used to -- because of the different way Microsoft is going to market?

With cloud incentives, we take pride in having some of the richest in the industry, and we will continue to richly reward partners for the work they do in cloud. In fiscal 2013, cloud incentives grew from 9 percent of the total [of $2 billion in channel incentives] to 18 percent. We pay more incentives, on average, across Windows Azure, Office 365, Windows Intune and CRM Online than any other products.

With a partner ecosystem as broad as ours, which covers many different partner business models and solution areas, any single decision could thrill one partner and potentially cause pain to another partner. We have to make [like] we're transparent with our communications, and that we're always sharing the rationale for decisions.

CRN: Did the total incentives paid to partners grow? Are you actually paying partners more?

I'd call it pretty consistent. It has shifted, and we told partners we are going to incent more for the leading areas. So it's absolutely shifted. It's increased in dollars year-over-year because of the growth of the business.

NEXT: Winning Hearts And Minds

CRN: What are you trying to accomplish with the Office 365 incentive changes?

We're trying to make sure we're aligning channel incentives all up. You have to look at the message of what we're doing broadly in market around channel incentives. We're investing significantly in cloud to help contribute to a profitable business for partners.

When I talk to most successful cloud partners, they are making significant money going beyond their project services, moving to managed services, introducing repeatable IP. They're finding that the way they did business before may not be identical to how they [will] do business in the future.

Those are things we are trying to drive with the channel, and partners can earn significantly higher multiples with these business model changes.

CRN: When you talk about the four megatrends of social, cloud, big data and mobility, what role do you see the channel playing there?

We have to keep innovating and creating great products. If we don’t create products that people want, it's going to be very hard for partners to build end-to-end solutions around those products.

We have to keep working on creating new markets. You can't have a broad ecosystem of partners trying to create markets themselves. We're also investing significantly in partner enablement, in sales specialists and pre-sales technicians.

To build our pipe, we do a fair amount of through-partner marketing. A very large percentage of our field marketing is done through partners. We run various telephone campaigns to call on behalf of partners and, sometimes, we work directly with customers to create the lead and then hand it off to a partner.

Lastly, we have a worldwide field sales force that is larger than most companies, with roles dedicated to driving sales velocity and close rates. On top of that are things like incentives.

CRN: What is Microsoft doing in the channel specifically with mobility?

We need a developer ecosystem and we're working to continue winning hearts and minds. Whether it's ISVs or systems integrators, we need them to continue driving preferences to our platform.

The two most important things that can help us win share are the right devices that will help us meet the customer scenario, and the right apps to fulfill their needs.

In addition, we need all of our infrastructure partners. We know enterprise and our partners know enterprise. If we can bring that combination together, we'll win in mobile.

NEXT: Not Quite Ready For Surface

CRN: Any update on when Microsoft will make Surface available for more channel partners to sell?

As of today, we're still continuing to evaluate the path, the best path, forward, and the timing in which it will make sense for us and our partners to be successful as they join us on that journey.

We're very bullish about the Surface opportunity. We have been a hardware vendor, but we haven't been a hardware vendor in the realm of tablet/laptop-type devices. And we want to be thoughtful, and when we build a commercial ecosystem for that, we want to do it the right way.

Today, we have a commercial ecosystem in 29 countries and approximately 130 resellers. We understand what a hardware channel looks like, and we're going to be prepared to do it the right way. In a sense you could say, at this point in time, we don’t think it makes sense for us to expand it because we can't do it fully to the degree that we want to.

CRN: You're just not ready for Surface in the channel?

We are driving towards that. The recent outreach [to select partners in December] was to continue to investigate and look at partners. And when we're ready, we have an intent to expand the channel.

Sometimes being an advocate for the channel is measured by what you do, and sometimes it’s what you don’t do. One thing I've learned is that the channel has a limit to their tolerance. When we're going all in, we need to be ready to go all in.

CRN: How are things going with Microsoft's efforts to get organizations to move off Windows XP?

XP usage has unquestionably seen a decline this fiscal year, and that's been quite deliberate.

We think we've been incredibly vocal around XP end-of-support. We have really amped up the message with campaigns through distribution and VARs to help customers get to a modern OS on their desktop.

We are aware some single-use devices that aren't connected to the Internet probably won't be switching. Other customers that don't move at the deadline at least have a migration plan in place. The customers I worry about are the ones that just aren’t doing anything.

PUBLISHED MARCH 20, 2014