Microsoft Channel Chief: Booming Azure Growth Driven By Partners

Microsoft is about to close out its best fiscal year ever, complete with Azure revenue increasing by an impressive 93 percent year-over-year in its latest quarter. The reason for the unprecedented cloud growth? Channel partners.

It's been the year of the cloud for Microsoft, and the Redmond, Wash.-based tech giant has been heavily promoting its investment in Azure by focusing its partner programs, including the fast-growing, four-year-old Cloud Solution Provider (CSP) program, to reflect its cloud-first approach, according to Microsoft partners.

Gavriella Schuster, corporate vice president for Microsoft's One Commercial Partner (OCP) organization, said that the company's recent organizational changes and partner programs updates that have helped the company get closer to its partners, is also to credit for its record cloud growth.

[Related: Microsoft Channel Chief Schuster On Shifting The Sales Focus To CSP, Bringing In Partners Earlier And Offering 'Richer' Cloud Compensation Than Competitors]

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"Our partners make more possible," Schuster said in a press briefing ahead of Inspire. "Our revenue growth will continue to be driven by the transition to cloud services."

To boost Azure adoption, Microsoft hasn't been shy about increasing margins and boosting incentives this year for partners, said Vanessa Simmons, vice president of business development for Pythian, a solution provider headquartered in Ottawa, Canada, and Microsoft partner. At the same time, Microsoft is advocating for partners to customize, and bring extra value to its services.

"Microsoft knows that partners will focus on programs that affect their financials, but it’s not just about offering more incentives," she said. "While Microsoft wants to own the cloud platform, they believe that customers are better served by partners who know their industries and can solve specific business problems."

Microsoft has also been busy investing in specific partners that are making themselves known from a product adoption standpoint, as well as those that are impacting revenue, Simmons said.

Partners that resell Azure, or those that perform specific services on Azure, can be designated the Digital Partner of Record (DPOR) for that client, which qualifies the partner for incentives and Azure consumption recognition, she explained.

The Azure migration initiative, a program that allows partners to offer extended services for on-premise customers to migrate to the cloud has been a major focus for Microsoft, and will be a "tremendous" opportunity for partners this year, Schuster said. Microsoft introduced an accompanying deal migration accelerator that lets partners earn up to 30 percent of the value of large migration deals.

"This will enable customers to actually move off older platforms and into the cloud at a higher rate, and enable partners to support them through even more services," she said.

Pythian's Simmons said that Microsoft is betting heavy on owning the data platform and the infrastructure that supports it within the cloud. Whoever owns the data and the analytics being derived from it, owns the customer, she said.

"As customers expand their operational abilities, they are aware that there are many vendors available to support them, but many are inclined to continue with the vendor that supports their foundational structure when looking to integrate new services and offerings," she said.

Microsoft's 2018 reshuffling has led to a stronger partner focus all around, partners said. Another positive change has been the addition of channel territory managers who are mandated to have a grasp of partner capabilities within their region.

With its organizational changes behind it, partners are hoping there will be less major restructuring from the cloud behemoth in the coming year. However, these big changes, including compensating partners based on cloud usage and shrinking the number of incentive programs while making these programs more targeted, is paying off for the channel, according to a Microsoft CSP partner who spoke on condition of anonymity because he is not authorized to speak to the press.

"FY18 was a great year for us and for Microsoft, so I'm eager to see even more success in FY19," the partner said.

Throughout 2018, Schuster said that Microsoft has succeeded in drawing closer to its partner base. Microsoft is seeing about 7,000 partners enter the ecosystem each month, she added.

"That's nearly double the rate we say just two years ago," she said. "We really now have a true, two-way partner approach."