In-Depth

Marching Orders 2009

Thanks to the downturn, plenty of partners are entering the New Year wondering which way to go. In our third annual Marching Orders feature, RCP's experts offer advice to point you in the right direction.

• By Anne Stuart
• January 01, 2009

What a difference a year makes.

In last year's Marching Orders cover story ("2008 Marching Orders," January 2008), channel leaders offered partners advice on moving aggressively into Software as a Service (SaaS), tapping Microsoft's rich repository of partner resources and, above all, expanding their businesses. The word "opportunity" came up a lot.

For this year's feature, we asked our channel luminaries -- some returning participants, some newcomers to the project -- to consider two questions: What should partners' priorities be right now, as they enter the New Year? And what should they be thinking about for the rest of 2009?

Our contributors' answers, which follow, make up RCP's Marching Orders for 2009. Not surprisingly, their recommendations, driven by the economic turmoil that's cropped up over the past year, focus less on growth and more on survival. This time, we're hearing a lot more about "challenges" -- but many of our contributors still see opportunities as well. Read on for their advice -- and read to the end for an invitation to continue the conversation.

Keith Lubner
Managing Partner
Channel Consulting Corp.
2009 will be the most challenging year yet for resellers, service providers and software vendors. Every publication, speaker and news organization is telling this story.

I say: "So what?"

Listen, you have a choice. You can choose to run and hide and be afraid of what's happening with the markets, or you can choose to do something about it. I'm talking about taking action.

Partners that view 2009 as a year of opportunity will undoubtedly be the ones whose businesses will be thriving at this time next year. Let's break this down into specific action plans for three types of partners:

• Resellers: Members of this group need to diversify the technology offerings in their portfolios. Specifically, they should look at services or products that are both quick to implement and that offer low costs to customers. The underlying reason is simple: customer acquisition. The more customers that resellers can capture in 2009, the better off they'll be in the long term-because they'll be able to sell additional products and services to these customers. An additional note: 2009 definitely won't be a year of long implementations around complex products. Instead, we're talking more along the lines of shorter implementations around strategic products.
• Service providers: Here, I'm talking about hosting or managed service providers. At one time, people were touting 2008 as the year for such entities, but I think 2009 will pleasantly surprise people even more. Hosting provides customers with cost savings, plain and simple. This year, more than ever, customers are looking to reduce costs while maintaining or increasing productivity-and those are both areas that play well with hosting.
• Software vendors: This group will face tremendous challenges this year. The vendors that will win are those who figure out their channels and get their resellers to sell more of their products. That's more complex than it sounds. Some vendors don't have channels. Others have misguided or misaligned reseller networks. Still others aren't providing their channels with the right messages or products. Ultimately, a successful channel allows software vendors to minimize overhead expenses, broaden their reach to customers and geographies that would otherwise be unattainable and diversify themselves in periods of economic uncertainty. If you're a software vendor, get busy and make it quick. You need a strong channel in 2009 -- or you risk extinction in the years ahead.

Kerry Gerontianos
U.S. President
International Association of Microsoft Certified Partners
Now more than ever before, with the pressure of the economy, deepening partner relationships can offer big benefits to partner companies. There are many partnering success stories out there that involve both parties gaining critical business insight as well as sharing business opportunities. By going deeper, both grow stronger.

My own company is currently looking at strategies to go deeper in our partnering arrangements. Specifically, I'm interested in linking resources such as sales and executive management and being held accountable, across the company boundaries, to make the most of what we've got. This approach has already had some short-term benefits. As we continue down this path, we'll see stronger results.

Meanwhile, with an economic contraction underway and access to capital shrinking, it's critical to focus on opportunities that don't require large up-front investments. The challenge for all partner companies will be sustaining volume and profitability. But for some bold partners, we can even plan for growth!

Like most companies, though, we're also re-evaluating what we're spending on and how each expenditure impacts our bottom line. The other key items for me this year are quality, customer satisfaction and driving the front of our pipeline.

Paul DeGroot
Senior Analyst
Directions on Microsoft
In the tech boom of the last 20 years, we've tended to pay the most attention to the novel and innovative. But technology also has enormous capability to reduce costs, and that's a message that a lot of CIOs will be far more receptive of these days. Your customers won't buy something with a great payback three years from now. They have to cut costs now.

Here are three approaches for helping them accomplish that goal:

• Lightweight programming: As an IT guy 15 years ago, I begged users to tell me about their repetitive computer tasks. Computers are extraordinarily good at routine; humans hate it. Macros, using software we already owned (in other words, no new investment required), dramatically speeded up these tasks. For example, one repetitive task took an employee about 30 second to complete. A macro did it as fast as you could hit Alt-B. By using the macro, 20 users had, between them, about eight extra hours to do other work that actually helped the business. Not bad for a programming project that took one afternoon. One caveat: You can't identify these opportunities without talking to users. And you need to make sure that whatever solution you're offering is easier, faster and more reliable than what they were doing before.
• Training: It can be painful to watch some people use their software. They do everything the hard way, and every job is a one-off. I estimate that for every hour of training that people receive on software that they use at least one hour per day, they'll save up to 40 hours in the first year alone. For companies wondering how they'll manage with fewer employees, a small investment in training has enormous potential for helping people work smarter. Many partner companies already have someone on staff who can provide such training, or they can encourage customers to leverage the training vouchers that many already get with Software Assurance and never use.
• Financing: Microsoft has been offering financing for IT projects for about five years, not only for Microsoft software, but for other vendors' software, hardware, and -- bada boom! -- partner services as well. But you need to know two things about the program. First, Microsoft Financing works primarily through partners, who bring in the deals. Second, partners get paid in full as soon as their work is done, not in installments over the finance period. So if you don't know everything there is to know about Microsoft Financing, you're not -- to put it simply -- putting enough weight on the evolutionary scale.

2009 Marching Orders Contributors

Many thanks to this year's Marching Orders contributors. In order of their appearance in these pages, they are: Keith Lubner, Managing Partner, Channel Consulting Corp. Kerry Gerontianos, U.S. President, International Association of Microsoft Certified Partners and President, Incremax Technologies Corp. Paul DeGroot, Senior Analyst, Directions on Microsoft, Directions columnist, RCP Tiffani Bova, Research Vice President, IT Channel Programs and Sales Strategies, Gartner Inc. Darren Bibby, Program Director, Software Channels Research, IDC Mike Harvath, President and CEO, Revenue Rocket Consulting Group Ken Thoreson, Managing Partner, Acumen Management Group Ltd., Selling Microsoft columnist, RCP Harry Brelsford, CEO, SMB Nation Allison Watson, Corporate Vice President, Microsoft Worldwide Partner Program Anne Stuart, Executive Editor, Redmond Channel Partner

Tiffani Bova
Research Vice President, IT Channel Programs and Sales Strategies
Gartner Inc.
I think that the nature or the demographic of our collective channel is going to begin to shift, and we're going to see the acceleration of that shift over the next five years.

Specifically, partners have to begin having very different conversations with their customers. They need to recognize that it's no longer just solution selling. It's much more about selling the business outcomes. You may or may not ever mention the technology solution. For instance, you might never specifically mention that the customer needs servers and a [customer relationship management] system. It's about selling the business outcome that the customer wants. It's similar in some ways to solution selling, but the conversation has to be different.

Short-term, I recommend that you:

• Take inventory of your current portfolio: vendors, products, services, solutions, support, maintenance, etc. Say, "Based on what I'm doing today, is there anything I could do to make it more profitable, get greater customer satisfaction, gain greater scale?"
• Establish a recurring source of revenue. Those with predictable revenue streams are far less stressed than those that are looking for the next project to pay the bills.
• Keep distributors in mind -- many offer financing.
• Consider seeking advice from training and consulting firms that are focused on the channel -- they're popping up all over the place.

The big message here is: Take advantage of something. I do not recommend doing nothing.

Ken Thoreson
Managing Partner
Acumen Management Group Ltd.
As partners face the toughest business times that they've experienced in at least 20 years, we recommend adopting the following approach: Focus on brilliant execution. This means operating at optimal levels -- at every level. Everyone in the company should be asked to cut costs, work more productively and seek additional business opportunities. Remember, everyone must sell.

Meanwhile, in the current economic situation, it's especially easy for salespeople to get distracted-and more important than ever to keep them focused on the steps they must take to achieve your organization's goals.

Specifically, we recommend:

• Establishing quarterly team bonus plans for achieving standards
• Selling additional products and services to your existing client base
• Pursuing opportunities for partnering and collaboration

Bottom line: The downturn offers an exciting opportunity to improve your sales team's performance and increase market share as your competitors fall behind.

Darren Bibby
Program Director, Software Channels Research
IDC
Going forward, it's going to be very important for Microsoft partners to figure out how to offer solutions in a services model, and partners are going to have to think about repositioning what they're doing. Customers are reacting to the financial crisis and want to use operating expenditures rather than capital whenever possible. We're also seeing lines of business that are making their own purchasing decisions without the IT department involved, especially around SaaS offerings.

One example stands out to me as a sign of things to come. About a year ago, the Mexican government came out with what its officials called their Decree of Austerity, focusing on ways they could save money. Among the line items in this decree was one banning capital outlays for IT -- all expenditures had to be on a monthly services basis. This sent IT providers scrambling to find new ways to meet these requirements.

What does all this mean for Microsoft partners? It means that if you're selling Microsoft products and solutions to the Mexican government, or another organization with such a rule, you must approach this very differently. You might be able to buy the software and charge on a services basis, you might leverage Microsoft financing offers, or you might become a managed services provider or partner with one that can do application hosting and billing on a monthly basis. If the Mexican government is starting to issue mandates that they can only purchase on a monthly operational-expense basis, that raises the question: What companies are going to do that next? What other scenarios might there be? Partners have to be ready.

I think we'll see more of this subscription approach in life in general. My boss in San Francisco pays his barber $65 a month for as many trims as he wants, plus shoe shines-with a glass of wine to top it off. Normally, I don't think a customer would spend $780 annually at the barber. But you offer unlimited access and a couple of other services and it becomes an attractive option.

Basically, this all involves a different way of thinking-and partners are going to have to start thinking in this new way.

Mike Harvath
President and CEO
Revenue Rocket Consulting Group
Amidst the doom and gloom pummeling our economy is a glimmer of opportunity waiting for aggressive Microsoft partners.

Forrester Research Inc. predicts that while IT spending will be down overall this year, "there's a brighter outlook for IT services, with demand for services holding steady." Forrester says that while the economic slowdown has prompted companies to reexamine their spending plans, exercise additional caution in choosing vendors and renegotiate rates, "they're still expecting to pay more for services." Consider that finding as you plan for 2009.

Other recommendations for this year:

• Love the one you're with: Go out of your way to provide the best possible service to your current customers, both to protect your turf and to identify new revenue opportunities.
• Cut prudently, invest smartly: Find the right balance between where to cut and where to invest. There's plenty of evidence that companies that invest wisely during a downturn emerge in a stronger position.
• Specialize, specialize, specialize: The winners-that is, the healthiest survivors-will be companies that are not only focused on specific market segments, but that rank first or second in those markets.
• Ramp up marketing: Far too many companies are insufficiently differentiated, which can lead to difficulties in getting audiences and forfeiting added-value pricing. Look to upgrade demand generation for short-term sales and long-term prospect cultivation.
• Consider a merger or acquisition: There's empirical evidence that companies can gain a competitive advantage with a counter-cyclical strategy by merging with or buying another company.

IT services executives, by their very nature, are risk-taking entrepreneurs. The challenges we're all facing in 2009 represent just another opportunity to showcase these talents.

Harry Brelsford
CEO
SMB Nation
Short-term, the message is: cost-cutting. Cash is king.

Beyond that: We recommend going back to basics. The answer for us may be back to consulting. That's something for channel partners to consider as well. Many are focused on strategy, not day-to-day consulting. But if things get really bad, the one thing we can all do is go back to consulting. That may be a message for Gold Certified Partners: "Guess what? You've got to be billable again. You thought you were done with that, but it's time to do it again."

Still, not everyone is going to make it through this one. This is serious. This is real. This recession is going to separate the strong from the weak. The strong will survive and get the market share.

But I think we'll make it because I've never had a better staff. These days, I'm spending more time on staff development. That foundation is going to carry us. So I recommend having a strong foundation and a strong mindset. That's going to carry you through.

Allison Watson
Corporate Vice President
Microsoft Worldwide Partner Group
[The following is an excerpt from Watson's recent, and unprecedented, letter to partners, titled "Help Customers Prosper in Today's Economy."]

It's more important than ever for Microsoft and its partners to remain aligned in supporting our mutual customers ... We need to begin each customer conversation with how we can help them save money. I encourage you to take every opportunity to demonstrate the significant savings and value customers can realize when they work with a Microsoft partner.

I want you to focus on how you go to market and talk to your customers about solutions. We want you to reach out to technical decision-makers and explain the costs and performance benefits of core infrastructure optimization, application-platform infrastructure optimization and business-productivity infrastructure optimization. We know that you're talking to business decision-makers and they want to know how they can save money and be more productive in sales, marketing and finance.

Last, [consider how you can] reach out and drive information worker productivity so that your customers can focus on making their core business as productive as possible.

Anne Stuart
Executive Editor
Redmond Channel Partner
Over the past year-plus, I've seen something pretty amazing happening in the Microsoft partner ecosystem, and I'm not referring -- not directly, at least -- to the impact of the recession.

What I'm talking about is, in an acronym, P2P. I'm simply astonished by not only the volume, but the quality, of the partner-to-partner collaboration that I'm seeing all over the country-and, increasingly, internationally as well.

Of course, partners have always networked at the Microsoft Worldwide Partner Conference and through the International Association of Microsoft Certified Partners (IAMCP). But what I'm seeing more of lately is the true P2P activity, the kind of individual relationship building that Kerry Gerontianos, the IAMCP's U.S. president, describes in these pages.

There's no better example than the HTG Peer Groups network, founded by Arlin Sorensen, CEO of Heartland Technology Solutions Inc., a Gold Certified Partner based in Harlan, Iowa.

As RCP has reported, that network has grown from one group of five Iowa partners in 2001 to nearly 20 groups, each with up to a dozen members representing partner companies from throughout the United States-and, most recently, from Canada and the United Kingdom as well.

The numbers are certainly noteworthy. But what really knocks me out are the stories I'm hearing. As one handy example, there's the lucrative -- and award-winning -- relationship between two Cincinnati companies detailed in this same issue. But perhaps even more impressive are the reports of partners lending a hand to colleagues in trouble. Last fall, Sorensen says, two HTG peer-group members -- both top executives at their own companies -- traveled to another state to help out a third company that was facing massive layoffs and possible shutdown. As Sorensen describes it, the two helped their colleague develop an immediate action plan that helped put the company on the road to recovery. And he says that's not the only such example of partners reaching out to struggling colleagues.

To me, that's what partnering -- specifically, P2P activity -- is all about. Especially in economically turbulent times, it makes sense to band together. As Sorensen said in RCP earlier this year: "There's more to be gained by working together than there is to worry about." Or, in the succinct motto of the stranded jet-crash survivors on "Lost," the hit TV show: "Live together. Die alone."

Finally, we invite you to join the conversation. What do you think about our contributors' advice? What are your own Marching Orders for this year and beyond? Let me know at [email protected].