In-Depth

Marching Orders 2010

Are we continuing in a recession or coming out of one? No one can be sure. In our fourth annual Marching Orders feature, RCP's experts offer advice to put your company in good stead either way.

• By Scott Bekker
• January 01, 2010

Illustrations by Michael Witte

For more than a year, the economic backdrop was the most important factor in the performance of your Microsoft partner business. But 2010 may be when execution once again becomes the factor that primarily determines success or failure.

Allison Watson, Corporate Vice President, Microsoft Worldwide Partner Group Mike Harvath, President and CEO, Revenue Rocket Consulting Group Julie Bennani, General Manager, Microsoft Worldwide Partner Group

In this fourth annual installment of the Redmond Channel Partner magazine Marching Orders, our panel of channel experts from inside and outside Microsoft offers tips and tricks across all kinds of areas that involve execution. In these pages you'll find an overview of new Microsoft business opportunities and advice on transitioning to the

Microsoft Partner Network (MPN), managing other vendor relationships, sales planning, mergers and acquisitions, focusing on cash flow and growing your business. We hope you'll find useful ways to transform your business for a more prosperous 2010.

The last 12 months have been quite a ride. But in spite of the economy, Microsoft partners are seeing great results due to the tremendous opportunity to take share in every market. Customers are demanding low-cost, high-value solutions that drive innovation and help them save money. In this environment, salesmanship remains a key differentiator, and the power of the MPN helps enable powerful partner selling motions. And, most importantly, it remains true that visionary organizations excel in challenging times -- and to show our commitment to you in this regard, Microsoft is bringing out the greatest innovation lineup in the company's history this year.

So what is your call to action? Get out there and start using this groundbreaking technology. Microsoft's most successful partners embrace our innovative new technologies in their own businesses and as a result become enthusiastic evangelists. That expertise is critical because Microsoft partners play such an important role in helping customers identify, purchase and deploy the right technology solutions.

Microsoft Office 2010 and Microsoft SharePoint 2010, in combination with the recently launched Exchange Server 2010 and Windows 7, provide a robust platform and tools to enable partners to build innovative solutions for customers. Partners should deploy these products internally, as well as visit the Web sites to learn more about how embracing them can help you create profitable business opportunities.

Now is also the time to transform to Software plus Services. We're seeing exciting momentum around the Business Productivity Online Suite (BPOS), with more than 7,000 Microsoft partners helping businesses take advantage of the platform, and more than 100 partners joining the community each week. Partners are taking advantage of our special BPOS partner licensing and pricing benefits, including up to 250 internal-use seats. There are opportunities for partners of every type on the recently launched Windows Azure platform, whether you're an ISV building new Software as a Service offerings, a systems integrator migrating existing applications, or a VAR packaging cloud-based offerings to sell to customers. Partners should download the Windows Azure Partner Resource Guide to learn more.

The MPN is an important resource enabling partners to transform their businesses around all these new opportunities. The network can help you to expand your sales and marketing skills, deepen your business and technical expertise, and build meaningful connections with Microsoft and other partners -- and with new customers as well.

Your formula for success is to provide in your offering a value proposition combining elements that save customers money and drive customer innovation, all balanced with the right mix of on-premises and in-the-cloud solutions.

Microsoft is in the midst of the biggest technology launch wave in the company's history -- and with every new innovation comes additional opportunity for you, our partners. We know that you're facing tremendous economic and business challenges, but we see you rising to those challenges, and we're working hard to help you seize the opportunities that come with our offerings.

In July 2009, at the Microsoft Worldwide Partner Conference (WPC), we announced that the Microsoft Partner Program was evolving into the MPN. The transition is based first and foremost on your feedback and feedback from our mutual customers. You told us that you need deep technology and business expertise, marketplace differentiation, customer opportunity and partner-to-partner networking. We took this feedback and directly reflected it in the MPN.

We're simplifying the competency structure to align with how customers buy and how you connect with them. We've revamped our membership options to allow our most dedicated partners to better differentiate themselves and sustain competitive advantage, while enabling other compelling connection points for the rest of our ecosystem.

Another important aspect of the MPN is its greater emphasis on relationships. Partners can more easily engage with other partners, customers and Microsoft to create meaningful connections through communities like the Microsoft Partner Network Community, Digital WPC and the MPN's presence on Twitter, Facebook, YouTube and LinkedIn. Partners who engage in partner-to-partner networking find it helps build their business, improves profitability and better enables them to compete. Digital marketing and social media training are also available for you via the Partner Marketing Center.

With a focus on customer needs, the MPN prioritizes connecting customers with the right partners. More than 2.3 million customer visits occur on average each month on our online marketplaces, such as Microsoft Pinpoint, which -- beyond the connection and lead opportunity -- also provide partners with online selling support, business analytics and lead-qualification information to help attract and engage customers. The results of these connections are evident in a recent IDC study, which found that Microsoft partners earn $8.70 for every $1 of Microsoft revenue.

The MPN will continue to evolve with our ongoing conversations with our partners. Recent evidence of our response to feedback and customer centricity is the launch on Nov. 20 of the simplified Core IO competencies and improved online experience enhancements.

Partner Call to Action: Now is an opportune time to become familiar with the new MPN requirements, including participation in Customer Satisfaction measurement for all Gold Certified Partners. Also, adopt, deploy and extend our latest technology and use our resources to expand your network and make it easier for customers to find you. Keep the feedback coming to let us know how we can help you continue to innovate in the market to benefit our mutual customers and capture new business opportunities for your organization.

Think of two things this year: mergers and acquisitions (M&A) and business focus.

We saw a healthy volume of M&A activity in the sector of the market in which we specialize: IT services companies in the $5 million to $50 million range. These executives took advantage of the long-held dictum that they can gain a competitive advantage with a countercyclical strategy for M&A.

We see M&A continuing to be a smart growth strategy in 2010, but we also see new pressures coming to the market in the declining dollar. Domestic buyers could find themselves being priced out of the market by foreign buyers looking to increase their share of the U.S. market. If you're looking at M&A in 2010, you'd be well-advised to acquire smartly and strategically. This means buying companies that strengthen your tightly defined offering in the market. On the other hand, if you're looking to sell, you may find some attractive suitors out there.

The IT services companies that prospered in 2009 did so because of their strict allegiance to focus and execution. They were uniquely positioned at the intersection of a technical and vertical specialization. This allowed them to attract skittish, tight-fisted buyers who were looking for the assurance of delivery that comes from companies that can speak from a position of authority, with strong expertise and demonstrable proof-of-performance. While the global IT services market looks to begin growing again, the rate appears tepid enough to keep customers playing the risk card closer to their vests. Focus is the name of the game for 2010.

For those companies that stayed focused and acquired strategically in 2009, good for you. For those that didn't, couldn't or wouldn't, there's still time to catch up to your newly fortified competitive brethren. Don't despair, but also don't hesitate.

Be Ready to Change Everything
Tiffani Bova
Research VP, IT Channel Programs and Sales Strategies
Gartner Inc.

As the channel wraps up a tough 2009 most are looking toward 2010 as a turnaround year that will be focused more on business growth than on cost cutting. However, 2010 will be far from "business as usual" when compared to the IT and business strategies of the past. The assumptions that IT can be reactionary and viewed as a cost center have changed for end-user organizations, and the rules for success and growth will forever be different.

Customers have hit the reset button, driven mostly by their experiences in 2009. Those experiences will impact how they expect to handle IT in the future. All the things both vendors and channel companies did to keep their clients happy and buying during a global economic crisis will be difficult to adjust going forward, especially related to aggressive price cuts.

Some view the new "normal for the channel" as just more of the same with different acronyms, while others see the changes as fundamentally impacting the way the entire ecosystem interacts with each other and its customers. Whichever narrative you choose to embrace, the bottom line is: Prepare for considerable changes over the next two to three years. What has worked for the channel in the past to drive growth and profitability may not work in the future; the entire channel organization's business and processes should be reviewed to ensure you're positioned for healthy growth in the future. The key skills required for future growth will include not only technical acumen, but a keen ability to understand and articulate how to improve business processes from the inside out by leveraging IT.

In 2010 and beyond, the impact of cloud computing on those partners who provide consulting and system integration services is positive. Net new revenue is expected to be generated through cloud strategy and planning, private and public cloud building and integration of on- and off-premises environments. These new alternative delivery and acquisition models are an ideal way to generate meaningful recurring revenue streams from customers while providing scalable and flexible solutions.

Take Time to Set Your Company's Direction
Ken Thoreson
Managing Partner
Acumen Management Group Ltd.

Our message for the new year is to make 2010 your best year, not a "2012"-style catastrophic event. This will not be an easy year for most partners, but it can be better than 2009. What makes a "best year" versus one that brings to mind a disaster movie?

As many organizations have cut back or reduced their focus, the winners will now take the time to create plans to increase market share and position their firms for greater growth -- even in continuing challenging times.

Based upon our last 12 years of consulting with partners, I can say that those organizations that have created a strategic plan with a vision for the firm -- and are focused on execution -- greatly exceed the growth of partner organizations that are reactive to the marketplace or blindly follow trends or vendor marketing. With a plan, leadership become less reactionary, and everyone has a mission, direction and sense of purpose. This is critical because many salespeople -- and certainly our technical teams and administrative staff -- are highly stressed because of the emotional issues in 2009, such as job security, reduction in income and working extended hours. When employees have a shared sense of direction, they remain energized and focused.

Strategic planning doesn't have to be a drawn out, formal and expensive process. But it does need to take into consideration a variety of challenging issues, including revenue, products, competitive environments and employee development. We start with projected sales by practice, by net new customers and by current customers. We then add defined 18-month goals that are broken into departmental objectives with actionable plans that can be measured. This aids in building accountability into your process.

[Additional insights into planning and building a profitable partner organization can be found in Thoreson's columns and blog postings on RCPmag.com.-Ed.]

Make Your Firm Stand Out
Keith Lubner
Managing Partner
Channel Consulting Corp.

In the January 2009 Marching Orders issue, I suggested that you take a proactive approach and add products to your portfolios. Many of you did exactly that, and now you are well positioned to take advantage. However, as we all know, success does not just happen. We need to put forth effort, but more importantly, you need to "stand out" in 2010. Differentiating your business should be a key strategy in the new year. Here's how.

"Many employees are highly stressed because of the emotional issues in 2009. When employees have a shared sense of direction, they remain energized and focused." Ken Thoreson "Customers have hit the reset button, driven mostly by their experiences in 2009. Those experiences will impact how they expect to handle IT in the future." Tiffani Bova "We naturally gravitate to the people who are the experts in an industry ... Why not become one of these experts yourself?" Keith Lubner

Be different:

• In your marketing. Can you stand out doing a webinar that looks just like every other presentation? We're being bombarded by the same things over and over again, which makes us numb to the messages. Breaking out and projecting uniqueness livens up the crowd -- making them more attentive and receptive to your communications.
  
  
• By becoming a thought leader. Become the expert in a vertical this year. Promote your firm's knowledge. We naturally gravitate to the people who are the experts in an industry, seeking their counsel and advice. Why not become one of these experts yourself?
  
  
• With your own culture. Talent wins opportunities. Talent completes projects on time. Talent grows companies. Talent is attracted to companies that are unique and fun. Think about it: If you had a chance to go work for a really "cool" company, or just another solution provider that implements the same software, which would you pick? I visit a solution provider in New York, N.Y., often, and every time I'm impressed by the culture. People are smiling but still intensely motivated to succeed. As you walk the halls there are company pictures of holiday events, picnics and other company outings hanging on nearly every wall. This is done to make every visitor -- and employee -- feel really good about the company.
  
  
• In focus. Think outside the box about what your company can do. I know of a solution provider who has core competencies in several areas, CRM and business intelligence in particular. They realized a community need in these spaces and are taking the necessary steps to fill the void. Look at your internal competencies and try to envision different things you can offer from a business perspective.

You have relationships, both young and old, with vendors in your portfolio. Take a look at what other resellers with similar relationships are doing and try something different. You will stand out not only in the marketplace but also in the eyes of your vendors -- giving you more visibility and consequently more potential for more opportunities. This is the year to leverage the hard work and perseverance you put forth in 2009. Those companies that stand out will rise to the top.

Concentrate on Cash Flow
Arlin Sorensen
Chairman and CEO
Heartland Technology Solutions, Gold Certified Partner

We are coming off an historic year filled with economic challenges that most of us have never experienced before. While I'm not an economist, I certainly believe the short-term outlook is brighter for 2010. With that as the backdrop, my marching orders are really focused on how we manage our companies financially in the coming few years.

For 2010, I believe there will be significant credit challenges. As recovery kicks in, partners will struggle to be able to get enough credit to meet the pent-up customer demand. I believe there will be more partners that fail during the recovery than during the recession because of a failure to understand and manage cash flow correctly. Too much success and too many sales without having a firm handle on cash and accounts receivable (A/R) will lead to companies becoming overextended and unable to meet cash flow demands.

As always, cash will be king, and those who manage it well will be the ones who enjoy the benefit of our recovery and economic reset. I see more problems coming in a few years from the big backlog of credit issues that haven't truly been corrected. But the current focus needs to be on managing cash, building your equity and preparing for some rocky economic times in a year or two after we enjoy some good times in 2010.

As part of that management, it's critical for employees to understand the importance of cash flow management and profitability. I'm still amazed at how many folks working in the IT industry have no idea how they're doing financially. And more troubling, their employees are totally in the dark and come to work day after day wondering if they're doing OK as a company.

Our experience is that there is far more to be gained by sharing financial snapshots with your team than there is to fear. In fact, we believe it's also valuable to share that information with non-competitive peers and gain from their feedback. People perform much better when they're working from a position of knowledge. They are far more likely to help with A/R collection and expense control when they understand the impact. So not only do we need to manage cash, control costs and prepare for uncertain financial times -- we need to educate our team and communicate facts so they can help in that quest.

We wish you all the best in 2010 as our world continues to come back to a more normal state. I don't believe we will ever return to the levels we were prior to this recession, and we need to learn what the new "normal" will be and make appropriate adjustments. But by doing a good job of leading in a fiscally responsible way, we can enjoy the profitability our industry has to offer and return to a good life.

Parry the Productivity Crush with Contracting and Partnering
Darren Bibby
Program Director, Software Channels Research
IDC

Productivity will continue to rocket upward in 2010. It sounds great, but it comes with a price. Solution providers that learn to use contractors and partners effectively should have greater success than those who don't adapt.

How did we get to higher employee productivity? There had been a lack of demand for products and services, forcing solution providers to lay off people. Now that the economy is starting to come back, employees are covering for the people who used to be there, trying to handle this uptick in business. Boom. Higher productivity.

Managing with new, lower levels of headcount is probably going to be an ongoing reality for most firms in 2010. But employees could get burned out, extremely disgruntled or even quit if they're not taken care of. This situation is not sustainable as is.

"I believe there will be more partners that fail during the recovery than during the recession because of a failure to understand and manage cash flow correctly." Arlin Sorensen "Employees could get burned out, extremely disgruntled or even quit if they're not taken care of." Darren Bibby "Like a desert after a rainstorm, Microsoft blossoms with marketing resources that smart partners can take advantage of in a launch year." Scott Bekker

In this environment, contracting and partnering are two skills that solution providers should consider gaining proficiency in:

• Contracting: On the contracting side, there's an "in-between-jobs" workforce out there full of skilled people who are very interested in doing good work. Their preference would be to get a comfortable full-time job, but they're very willing to take some contract work, either in a sales, marketing or technical capacity. Solution providers who can quickly and easily leverage that supplemental workforce can ease the burden on their overworked employees without committing to additional full-time headcount.
  
  
• Partnering: This productivity situation also lends further credibility to the argument for working with other partners. IDC has placed a lot of emphasis on partnering for a number of years, as have Allison Watson and Microsoft. It's a strategy many solution providers have used to allow them to focus, and partner for everything else. One of the best things Microsoft partners can do is get involved with the International Association of Microsoft Certified Partners (IAMCP). This group is a strategic advantage for Microsoft, as most of the other big vendors don't have partner-led groups that are as active and excited. IAMCP members know how to work with each other for both business development and also for sharing best practices around running their businesses.

If contracting and partnering are new skill-sets for you, one of the things you can do is get ready for both by preparing templates of legal agreements ahead of time. Then, when you have to do it, you'll be ready to go quickly and efficiently. That's one way the IAMCP can help. They have checklists and even some sample contracts that members can help each other out with.

Proactive steps on contracting and partnering can help ease the stress on valued employees while allowing your firm to grow at a time when business is up and headcount is down.

Steer Close to Microsoft in 2010
Scott Bekker
Editor in Chief
Redmond Channel Partner

Here at RCP, we've always held that Microsoft offers the best, biggest and most flexible partnering opportunity in the industry. We're a little wary of the effect that the company's cloud computing plans could have on that special relationship, but that's a future concern. Right now the industry is driven by traditional revenue sources such as server installations and upgrades, infrastructure replacements and PC upgrades.

In 2010, our advice is to steer as close to Microsoft as you can. Launch-wave years are the best times to be aligned with Microsoft. The company is willing and able to spend marketing funds on partners who show they can leverage the money to sell more of Microsoft's software. And like a desert after a rainstorm, the company blossoms with marketing resources that smart partners can take advantage of in a launch year: from Ready To Go campaigns to mailing list services or telemarketing services that cost far less than the prices partners could find on their own without Microsoft's economies of scale.

We'll do our best at RCP to keep you up-to-date on partner resources as they become available. With Windows 7, Windows Server 2008 R2, Exchange Server 2010 and Office 2010 all hitting the line at once, this is one of those years to follow Redmond's lead blocking for big yardage.