Directions

Taking Another Look at the LAR-VAR Balance

• By Paul DeGroot
• July 01, 2010

An experiment with deal registration for Microsoft partners suggests that the company is looking for alternatives to its current reseller structure. As with many changes, this is fraught with both opportunity and risk.

There's no question that something needs to be done, particularly with regard to sales to larger organizations. I'm catching a lot of dissatisfaction around the Large Account Reseller (LAR) community -- from every side. LARs are unhappy with what they feel are more demands and less money from Microsoft; Microsoft is unhappy with LARs that aren't driving sales and adoption; customers are unhappy with LARs who don't provide services; and LARs are unhappy with customers who demand services after they've also demanded that the LAR rebate them the fees that the LAR gets to provide such services.

But the solution might not be to dispense with a tiered system in which a few resellers sell to enterprises, and a lot of them sell to everyone else. The reason: selling at that level is complicated. As I write this, I'm on an airplane heading to Washington, D.C., where my colleague Rob Horwitz and I will spend two days explaining to 65 Microsoft customers what licenses they need for various solutions and the optimal ways to buy those licenses through Microsoft volume programs. When your customers (and occasionally your employees) willingly sign up for two days of intensive instruction on how to buy your product, are you really ready to let anyone sell your product simply by registering the deal?

So let's make clear that licensing is a competency and advanced licensing is an advanced competency. If we're going to use deal registration for everything, then Microsoft must ensure that a partner cannot register a deal that exceeds the partner's demonstrated competence to fulfill it. This will be a complicated chicken-and-egg calculation, because a partner may not understand the full dimension of the customer's requirements from an initial cold call, but until they register the deal they won't want to spend the considerable time it could take to understand exactly what is required.

I know there's a licensing solutions competency already, but the requirements are far too low to meet the demands of enterprise sales, and besides that, Microsoft does not expect these partners to do everything else as well: there are specific competencies for other facets of Microsoft's business. Trying to turn every partner into a vertically integrated sales machine -- expert at driving leads, pre-sales, sales and licensing, deployment, customization, integration and maintenance -- is a pipe dream.

Get this wrong, and what happens?

Already I'm seeing LARs bolt a services arm onto their sales organization to meet Microsoft's demands for "more-than-transactional" capabilities. This creates well-documented distrust in the marketplace between resellers and partners who don't resell software -- if your (partner) business relies on post-sales technical services and you send your customers to a reseller to get the required licenses, what guarantee do you have that the reseller won't grab the post-sales integration and deployment services as well? None.

If Microsoft wants an efficient sales channel, it must recognize that license fulfillment is a skill of its own, and the best solution might be to properly distinguish licensing from the technical skills that are the center of most partners' businesses. That distinction doesn't require the current "broad reseller vs. LAR" differentiation, and if deal registration is the technique that will make it happen, wonderful. But Microsoft already knows that every partner can't do everything -- that's the whole point of the competency approach to partnering.

Finally, please don't forget the customer. They already have a native distrust of resellers and of vendor reps. If they suspect that they're always paying more than they have to because partners have neither the skill nor incentive to optimize the deal, their interest in adoption and deployment won't improve.