Partners On Microsoft-Nokia Deal: Don't Mimic Apple's Channel Strategy

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Microsoft partners Tuesday said the success or failure of the software giant's planned $7.1 billion acquisition of Nokia's mobile devices and services business ultimately rests on whether Microsoft sheds its Apple envy.

The biggest potential pitfall for Microsoft is if it insists on attacking the mobile market by mimicking Apple's consumer strategy and not leveraging the power of the Microsoft channel, said Mont Phelps, CEO of solution provider NWN, No. 88 on CRN's SP500 list with $266 million in annual sales.


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"The big risk for Microsoft is approaching the device market like Apple," said Phelps. "Apple does not have a successful [device and services] channel strategy. Microsoft's strongest play would be to leverage the channel to penetrate the market. The thing about the channel is it can not only be your best friend, but your worst enemy.

"This deal depends not only on product offerings, but the channel strategy," said Phelps. "The question: Is Microsoft going to be able to get the channel to work with them, or are they going to end up with the channel working against them?"

Microsoft's retail store channel strategy for the Microsoft Surface tablet is just the latest sign of the company's Apple envy. In July, Microsoft snubbed the vast majority of partners with plans to distribute Surface through just 10 large account resellers.

The LAR channel strategy, which ignores the solution power of partners such as NWN in the enterprise market, leaves Microsoft vulnerable in the battle against Apple, said Phelps, and leaves a huge void in the midmarket channel, where it could be capturing significant devices and services market share.

Microsoft's channel strategy has been hampered by a sales compensation model that simply does not recognize the power of partners such as NWN, said Phelps. "Big companies like Microsoft run their business with comp plans," he said. "Microsoft has no way of tracking how much revenue we influence. They don't know who we do business with, and they don't track it. There is no compensation metric around our relationship with Microsoft."

Douglas Grosfield, president and CEO of Xylotek Solutions, an Ontario-based solution provider whose Microsoft sales are up about 20 percent in the past year, said Microsoft needs to aggressively engage the channel if it is going to be successful with the Nokia acquisition.

NEXT: Can Microsoft Redeem Itself With Channel Partners?

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