On Growth

Why Microsoft's Services Partners Need To Specialize

In addition to competing against other Microsoft partners and other software vendors' partners, there's now the possibility of competition with the mothership.

• By Mike Harvath
• July 26, 2012

There seems to be a groundswell of concern among IT services firms that the software giants are slowly but inexorably playing in their sandbox. That this is happening is not news. Truth be told, it's the inevitable move for software companies. Services are attractive because that's where the money is.

The money is there because of cloud computing, which is reshaping how software vendors and partners work with each other -- or not. What we see coming out of Microsoft, for instance, are two new strategies that have implications for IT services firms. First, the company is gradually shifting from a premises-based software model to a subscription-based software model. Second, still within premises-based software is the evolution to vertical-based, pre-configured software -- the beginnings of more customized software by industry vertical for subscription-based offerings.

In the past, Microsoft was content with creating the software and leaving the implementation, servicing and tech support to its IT services partners. Now, with more preconfigured and subscription-based software, Microsoft is slowly becoming a services company, and feeding partner anxiety in the process.

So, what does all this mean for IT services firms and their relationship with Microsoft? It means that in addition to competing against other Microsoft partners and other software vendors' partners, there's now the possibility of competition with the mothership.

So, what should Microsoft partners do? In a word: specialize. Why? Because it's what both the market and Microsoft want and need. To that end, here are three components of a specialization strategy that will have some muscle outward to the market and inward to Redmond.

1. Technical Specialization. SharePoint, Dynamics and so on. This is base-level specialization, and while it's important to Microsoft, the company would prefer you to be viewed as a management consulting firm focusing on technology, and not the reverse. Being a tech-focused company alone won't win you many votes at Microsoft...or distinguish you in the market.
   
   
2. Vertical Specialization. Take your cue here from Microsoft's expansion into vertical-driven, preconfigured software solutions. The company is looking for partners that can help it penetrate deeper into specific industries; partners that can take its generalized, preconfigured industry software and add layers of customization for the variety of disciplines that reside within each industry.
   
   
3. Geographic Specialization. What Microsoft partners need to appreciate is that their primary Microsoft audience -- the folks they need to win over and enlist to their cause -- is the Field Sales group. Unlike other software companies that might be organized along vertical lines or product lines, Microsoft is organized by geographies. It's all about sales-to-sales connectivity at the geography level with Microsoft. This is where the rubber meets the road for Redmond.

The partners that win favor with Microsoft will be those that can fashion for themselves a specialization strategy that says to Redmond, "We're reading the same tea leaves, we're on the same page and we're raring to go." As a matter of practical business, Microsoft will reward leads to those it perceives to be low-risk partners, and by that I mean partners that can be counted on to deliver the level of specialized expertise that customers are seeking.

So the question remains: How can partners better manage their relationship with Microsoft in this changing landscape? I'll get some more insights during the 2012 Worldwide Partner Conference (WPC) in Toronto this month. I'm hosting a panel discussion featuring a variety of former Microsoft executives and Microsoft partners who will offer their experiences and insights in managing Microsoft relationships, which I'll highlight in my next column. If you're going to the WPC, please join the discussion. For more information on the session visit RevenueRocket.com.