The Top 10 Partner Takeaways From Microsoft Inspire

A New Era For Microsoft And Its Partners

This week, at Microsoft's global partner conference, Inspire, CEO Satya Nadella and other executives unveiled an avalanche of changes to how the company will work with partners from now on. By all accounts, the moves represent a momentous shift for the Redmond, Wash.-based software giant, which is enacting the changes to accelerate an already fast-growing business. Microsoft is continuing its all-out push to become a company focused on enabling digital transformation -- through technologies including cloud infrastructure, SaaS, artificial intelligence and the Internet of Things -- but the difference now is that partner needs are factoring even more heavily into the go-to-market calculus, executives and partners said.

A number of partners shared their thoughts on the changes with CRN during the conference in Washington, D.C. What follows are the top takeaways from partners at Microsoft Inspire 2017.

Microsoft Is Catching Up To Its Top Partners

For a number of leading Microsoft partners who spoke with CRN, the focus on going to market by solution area and by industry is not a novel concept. Neither is the emphasis on digital transformation. But these partners said they're enthused to see Microsoft putting the approaches front and center in their sales and product strategies.

"We've gone to market by industry for years and years. That alignment to us is ringing very positively," said Tony DiBenedetto, CEO of Tampa, Fla.-based Tribridge, which was acquired this month by DXC Technology. "The organizational changes in the U.S. are well received from most of the partners I've talked to so far. They've made it simpler -- simpler customer segmentation, going by industry. We think this is how customers buy."

At Watertown, Mass.-based BlueMetal, a division of Insight, Vice President and National General Manager for Corporate Matt Jackson said he also thinks Microsoft has been learning from its partners on go-to-market and digital transformation.

"The way Satya framed it -- focusing on the customer, operational optimization -- we've been talking about basically the same thing for about two years. But it's finally real," Jackson said. "If you look at our portfolio of clients and products, they're almost all in that general digital transformation category. I do wonder how long it'll be before it's overplayed. But we'll ride it while we can."

Why The Changes Are Such A Big Deal

The flood of changes from Microsoft come as the company is experiencing strong growth, particularly around Azure and its other cloud offerings. For instance, Azure revenue rose 93 percent year over year in Microsoft's fiscal third quarter, ended March 31.

Ric Opal, senior director at Oak Brook, Ill.-based SWC Technology Partners, said the shift within Microsoft is "unquestionably the largest change that I've seen occur from a vendor while experiencing success. They're not doing this out of desperation."

"Assuming it's executed well, it should propel their long-term growth," he said.

Jackson echoed the sentiment. "They're super-successful right now, and yet they're still changing. I think that's an indication that they're future-focused, and have a vision for where this is all headed, and they're not complacent."

Customer Success Managers And Channel Managers

Microsoft said during Inspire that it's creating a formal customer success organization, with cloud solution architects and data solution architects that partners can leverage to help customers get the most value out of cloud solutions. With the introduction of customer success managers, "it's now easier to figure out who to engage with," said Tony Pagnusat, senior alliance director at St. Louis-based Perficient. "We know that if we talk to the CSM team, they'll be interested. ... I think Microsoft is making the right investments to focus around deployment."

Microsoft is also adding a brand-new role, the channel manager, focused on connecting partners with end-user clients. That should help to boost business for partners, and help to ease some of the complexities of working with different licensing and sales reps within Microsoft. The role should mean that partners are "not spending time on internal Microsoft stuff, but spending that time on customer stuff," DiBenedetto said. "So you can go to your channel manager and get the right people to the table to impress the customer."

Changes In The Sales Approach

Microsoft unveiled a series of changes to how its sales organization operates, with the general theme of emphasizing revenue that can be accrued over time -- through services and consumption -- rather than revenue from up-front sales. "This is the sales model of the future. It may seem like it's slowing down the licensing sale, and it may be. But when the customer is ready to buy, they'll be buying something bigger than they thought they needed," said Tony Safoian, president and CEO of Los Angeles-based SADA Systems.

One key example is that Microsoft salespeople will now be compensated based on consumption of Azure rather than pre-commitment sales. The change in Azure compensation aligns Microsoft salespeople with the way that most partners sell the cloud offering, partners said. "This is a model we've been asking for for a long time," Safoian said.

If Microsoft salespeople "feel like the key to their getting paid is consumption, the likelihood of them bringing in a partner is much higher," DiBenedetto said.

This is in part because partners -- especially those that develop software -- will help to increase usage and salespeople's pay, partners said. "We as a partner drive consumption -- we build apps that consume Azure," Jackson added. "It's much better that [Microsoft salespeople] are encouraged to stay engaged throughout the adoption curve."

Incentives For Boosting CSP

Another key change involves incentives for Microsoft's salespeople that are tied to promoting the Cloud Solution Provider program to customers. Historically, Microsoft salespeople haven't always had incentive to work with CSP partners because of mechanisms such as the Enterprise Agreement, which is offered to customers with at least 500 users or devices and offers volume licensing and other benefits. Microsoft salespeople will now "get an incentive, an accelerator, to give them the total contract value of every Office 365 seat you sell through CSP," Microsoft channel chief Gavriella Schuster told thousands of partners in attendance during Inspire.

Michael Goldstein, president and CEO of Fort Lauderdale, Fla.-based LAN Infotech, said the incentive is a welcome announcement for partners. The change "makes us work better as a team versus just shooting for an early sale," Goldstein said.

"The CSP is no longer the enemy of the EA," Safoian said. The move shows that Microsoft "understands how big of a barrier it has been in the past," he said.

Microsoft previously had a "very successful sales force that was organized around the model of having a three-year sales cycle," said Reed Wiedower, chief technology officer at Washington, D.C.-based New Signature. "That model does not work with the cloud. ... Over the past three years you've seen increased tension and friction as Microsoft has introduced other ways to interact with customers."

However, with Microsoft's adjustments to its incentives, both salespeople and partners are now far better oriented to focusing on creating customer success, Wiedower said.

IP And ISV Cloud Embed

Along with frequently discussing the value of developing unique IP during Inspire, Microsoft unveiled ISV Cloud Embed, a new offering that aims to make it easier to modernize and develop business applications. The offering provides embeddable building blocks for app development on Microsoft's business application platform -- enabling developers to build their unique IP on top of the building blocks.

"If you're not developing IP, you're going to be left behind. But you've got to understand that that IP is going to be outdated six months from now," Jackson said. ISV Cloud Embed should help with that continuous process of developing IP that is becoming the new reality, by making the development process faster and easier, he said.

New Signature, which has an ISV arm, has been developing IP that can not only be used by its own customers, but that Microsoft sales reps are now incentivized to sell to other customers through ISV Cloud Embed, Wiedower said. "It's a great way for us to make money," he said.

Leading On AI And IoT

A major emphasis for Microsoft during Inspire was on artificial intelligence and IoT capabilities that are offered as part of Azure. These include AI services such as the Bot Framework (for integrating chatbots) and Azure Machine Learning, as well as the Azure IoT Edge service, which debuted in May. The services are critical to what Nadella, during his keynote, termed the "intelligent cloud/intelligent edge" paradigm that Microsoft is seeking to be at the forefront of pioneering.

"If you look at [Microsoft's] cloud services, they got to market faster with IoT than AWS," Jackson said. "In cloud in general, they were behind AWS. But if you look at the rate of Microsoft deploying updated services -- in identity and security, IoT, AI -- they're leading in those areas. And those are going to drive the next wave of products and services that our clients want to deploy."

"I think Satya's vision is more leading than following," DiBenedetto said. "The predictive analytics you've seen at the conference and IoT is where you're starting to see them lead."

Microsoft 365

During Inspire, Microsoft unveiled a new bundled offering that brings together Office 365 along with Windows 10, device management and security. There are two versions -- Microsoft 365 Enterprise for large organizations, and Microsoft 365 Business for small and midsize businesses.

Opal said he thinks Microsoft is on to something with the approach of Microsoft 365. "Instead of ordering three things, this gives all of the technology needed to participate in today's transformative workplace, yet in a very secure manner," Opal said. "If I can simplify that up in my ordering and provisioning process, and wrap managed security services around that, that's a pretty simplistic way for me to bundle, and a pretty simplistic way for a customer to transact."

Microsoft 365, Pagnusat added, feels like "one of those hockey stick growth opportunities for partners."

Opal said he sees a correlation between Microsoft's sales reorganization and the announcement of Microsoft 365. "Not only are they simplifying the organizational structure, they appear to be simplifying the licensing to go along with it -- which plays right back to Microsoft's focused effort to be easy to work with," he said.

Azure Stack

Microsoft said during Inspire that Azure Stack, the company's hybrid cloud platform, is available for ordering from initial hardware partners HPE, Dell EMC and Lenovo. Azure Stack enables hybrid application development and provides a consistent platform for connecting from Azure data centers to the edge, according to Microsoft.

Kevin Crowe, executive vice president for strategy at Calgary, Alberta-based Long View, said his firm has been part of a private preview of Azure Stack, and said the technology is "very important for us in our strategy."

"We think that's going to be a really great solution for the marketplace," he said, citing the "ease of moving workloads" between cloud and on-premises environments with Azure Stack. "When we move workloads for our clients right now, there's probably more effort than there should be. Azure Stack is going to make that easier," he said.

Now The Adjustment Begins

The sweeping changes will take some time to totally sink in, partners told CRN.

"You always want the field to quickly adopt and be able to do the things the CEO is saying. That'll take time, because of their size, and their global footprint," DiBenedetto said. "But I've been doing this with them for 18 years, and even if there are unintended consequences of organizational changes, they fix it pretty quickly. They get feedback from top partners about what's working and what's not working. We work with other tech companies, but Microsoft is the most partner-friendly, uber-billion-dollar business you're going to find."

DiBenedetto said he expects that "it'll take six months for [the changes] to have an impact, then another quarter for [Microsoft] to make another adjustment from what they learned in the first six months. There'll be benefits right away. But this is a much more major shift than had been in prior years."

Opal stressed that "change is always hard, and this change is massive, so it'll be a little harder. There's a reason that the windshield is larger than the rearview mirror. Those that are successful are focused on the windshield. The attrition will be for those that are too focused on the rearview."

Pagnusat feels like things got off to a great start with Inspire, however. "It feels like we were meeting with the right folks, talking about the right things," he said. "In past years it felt like we were just meeting to meet. This year we've been meeting with folks that are really important to meet with, and coming up with strategy."