Microsoft CSP Manager: Shift To Cloud Requires Shift In Sales Mentality Beyond Individual Deals

The manager of Microsoft's Cloud Solution Provider program told attendees of NexGen Cloud conference Monday that to seize the tremendous opportunities for profit presented by the shift to the cloud, they need to shift their sales mentality to focus on customer lifetime value, and not individual deals.

Microsoft understands its channel is the only way to negotiate the massive migration of customers—both existing and new—to Azure and other cloud services, said William Lewallen, Microsoft's senior manager for national cloud partner sales, at the conference sponsored by CRN parent The Channel Company, in Anaheim, Calif.

For that reason, the world's largest software company is "making a triple-down bet on our channel," Lewallen said as he looked out at many familiar faces in the room.

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The CSP program, which allows partners to bundle products, add services and manage billing while leveraging Microsoft's cloud platform, has scaled to five thousand partners in its first 18 months.

"Were now at this point where the place we need to go again is very reliant on you guys," he told partners.

Of attendees who answered questionnaires before coming to NexGen, 61 percent have earned Microsoft's Silver or Gold competencies, Lewallen said.

But most of those partners still have a lot of room to add profit by expanding their cloud practices—managed services accounted for more than a quarter of total revenue from 44 percent of attendees and 35 percent saw more than a quarter of their revenue generated from cloud services.

The market opportunity is still emerging, Lewallen said, and Microsoft is investing heavily to help partners navigate the transition to recurring revenue models.

That starts with differentiating their practices and developing a specialization strategy, the Microsoft executive said, "because the reality is things are much, much more competitive for us. And I believe for you."

Microsoft has many large customers who are now competing with its traditional partners, thinking about how they can add value by leveraging their own intellectual property to implement Microsoft's solutions, he said.

Developing reusable IP is a great way for partners to remain competitive and pursue high margins while shifting to recurring revenue, Lewallen told attendees.

"At some point there has to be scale in your business, because the cash flow gets restructured" through subscription services, he added.

Achieving that scale ultimately comes down to partners adopting the right sales model that appreciates how their customers are changing.

Lewallen told NexGen attendees that according to Microsoft's research, two-thirds of cloud customers want to purchase a variety of cloud services from a single vendor. About the same amount usually engage a sales rep after they've already made a purchasing decision—basically serving as "fodder for an RFP."

More than 60 percent of purchases are funded by the customer's line of business, and more than 80 percent of those decisions are at least influenced by business—not IT—leaders.

And that's why Microsoft believes "the holy grail that we're seeking" is for its channel partners to focus on customer lifetime value, not deals, Lewallen said.

"And I haven't seen it solved anywhere," he said about how best to implement that shift in mindset. "I think we know it's going to happen, but we have no idea exactly how it's going to happen."

Vendors and partners need to continue to learn from customers to figure that transition out.

But partners should know, as the evolution of the industry unfolds, that despite concerns years ago that the cloud would prove a vehicle for Microsoft to turn toward more direct sales, the opposite effect has played out, Lewallen told NexGen attendees.

"We would wither and die" without the channel, he said, and Microsoft leaders are more committed than ever to funding and enabling their partners.

"At the end of the day, if people want to simplify their purchase experience, they're not going to get it from us, they're going to get it from you," he said.

Alex Brown, CEO of 10th Magnitude, a Microsoft partner based in Chicago, said that sentiment about simplifying the customer experience nailed the value of the channel head-on.

"The channel is becoming even more crucial," Brown told CRN after Lewallen's keynote. "Being able to fit all the pieces together and deliver the superior customer experience is something you can only do with the channel model."

And most major vendors have figured that out, Brown added, and are throwing a lot of money to drive their partner practices.