In-Depth

Dynamics: The Power of Referral

A new Microsoft program pays partners when Dynamics leads that they refer turn into closed deals. Will the program reach critical mass, and spur other pay-for-referral programs within Microsoft?

• By Scott Bekker
• March 06, 2011

Selling Microsoft Dynamics isn't for every Microsoft partner, especially lately, with the Microsoft Partner Network becoming more stringent in its rules about which partners can use gold and other labels for their ERP and CRM practices.

But a relatively new program is designed to make Dynamics referrals a potential source of real income for Microsoft partners who may come across Dynamics opportunities but who want to stay in their own lanes, either as infrastructure partners or as Dynamics partners specializing in other verticals or geographies.

Called the Dynamics Lead Referral program, it launched in mid-August and Microsoft is still in the process of raising awareness among both Dynamics and infrastructure partners.

Jon Roskill, corporate vice president of the Microsoft Worldwide Partner Group, says that the program, unfortunately for Microsoft, remains mostly a well-kept secret.

"I don't think the rest of the channel is fully aware of the new Dynamics Referral program we've put in place where traditional Microsoft partners get 5 percent for referring a Dynamics opportunity when it closes, whether it's a CRM or an ERP opportunity," Roskill says.

In some countries, uptake has been faster than in others, Roskill says, with the United Kingdom an example of a Microsoft subsidiary leading the pack. "These guys are really excited about this from a partner-to-partner opportunity," he says of the subsidiary.

According to Roskill, the program gets to the core of Microsoft's partner program. "The whole reason we called it the Microsoft Partner Network is we want to accentuate and accelerate that partner-to-partner opportunity through that naming. I think this referral program is a great example. This is a place where we're putting dollars behind what we say. If this goes the way we expect it to, I think you'll see us doing more things in a similar fashion."

Microsoft Program Goals
In the program's basic outlines, partners who come across a potential Dynamics customer can refer the deal to Microsoft by registering it with the Microsoft Dynamics organization, and Microsoft makes a referral to an appropriate Dynamics partner. If the deal closes within 12 months, the referring partner gets 5 percent of the deal value, up to $20,000 per deal.

To get that much in bird-dog fees out of a single deal, would require a final transaction of $400,000, which is a high-end deal in the Dynamics world.

"To get to that size of a deal, it would be pretty much a whale of a deal," says Kevin Machayya, senior partner development manager for the U.S. Partner Dynamics Channel Team at Microsoft. "We like our whales," he adds.

Indeed, getting more deals moving through the pipeline, whales or not, is Microsoft's goal for the program.

"It's setting up a new engine to increase the overall lead flow that's coming into Microsoft," Machayya says. "One perspective would be to give some sort of incentive to our non-Dynamics partners. How do we entice those partners to potentially pass along ERP and CRM opportunities that they may run across without a lot of heavy lifting on their end and still get some incentive around the products?"

The program also fits Microsoft's recent efforts, involving both carrots and sticks, to encourage Dynamics partners to differentiate themselves.

Says Machayya, "If you're an existing Dynamics partner, we really would like our partners to become more industry and vertically focused. If you're a partner that focuses on distribution and you run across a banking opportunity, you can still get something out of that lead," he says.

KeyQuest Consulting LLC is one of those existing Dynamics partners. The Hickory, N.C.-based provider of Dynamics GP and Dynamics Retail Management System and Point of Sale solutions to the Carolinas and southern West Virginia has been submitting leads through the program since November, says KeyQuest Vice President Valerie Huffman.

"We firmly feel like sometimes leads are not right for us. We could try to work them, but then everybody would lose on the deal," Huffman says. "We realize that the more quality implementations of Microsoft Dynamics that take place, the better it is for all Microsoft Dynamics partners."

KeyQuest had that attitude before Microsoft put the referral program in place, but ran into difficulties sometimes finding partners to hand hard-won leads off to.

"We've found some lead-generation sources where we pay by the lead. But sometimes we get leads that aren't a good fit -- it's a geography or an area like manufacturing, where it's not a sweet spot for us. In the past, we could either let the lead die, which nobody wants to do, or negotiate directly with another partner," she says.

"The problem with that is that it takes a lot of time and energy to find the partner that we think would be a good fit, and to hammer out those details, and then to manage those details, and it's just resource intensive," Huffman says. "When Microsoft came out with their program, we figured they're doing all the work for us."

Aside from Dynamics CRM Online, Microsoft Dynamics deals typically take months to close, so none of the KeyQuest Consulting lead referrals have paid off yet, but Huffman is optimistic. "Hopefully they might," she says, noting that in any case, KeyQuest's level of effort and investment in handing off the leads is greatly reduced.

Preferred Partner Profile
Machayya won't say how much traction the program is getting so far, but it's understandably limited by the time it takes to close deals and the constrained awareness the program has. While Dynamics partners may already be attuned to programs initiated by the Dynamics team such as the referral program, infrastructure partners who don't already have Dynamics practices of their own may be less likely to pay attention. Meanwhile, many of the larger partners most attuned to Dynamics opportunities have already set up both types of practices. One group of infrastructure partners that Machayya hopes will get involved in Dynamics referrals is SharePoint specialists, whose impact on the Dynamics business could be substantial, he says.

At this point, participation is split among partner types. "If I look at the United States, it's pretty much 50-50 as far as Dynamics partners participating and infrastructure partners participating," Machayya says. Also, the types of partners providing leads varies from organizations with fewer than five employees all the way up to some larger providers.

"There isn't a preferred partner profile that's bubbling up," he says.

Meanwhile, Microsoft seems to be taking a long view on the program, with modest goals for the first year (Microsoft FY '11), a big ramp up in FY '12 and what Machayya describes as "pretty aggressive" goalposts for both the number of partners signing up and number of leads by the end of '13.

Simple by Design
When Microsoft began designing the Dynamics Lead Referral Program in early 2009, a key goal was simplicity, says Machayya. Accordingly, the main requirement for partners making a referral is that they're enrolled in the Microsoft Partner Network, and any level of enrollment is enough. To register a deal, a partner must then enroll in the referral program, which involves a short profile and acceptance of a referral agreement. A confirmation e-mail directs the partner to a referral page on the Microsoft Dynamics PartnerSource portal, where the partner can enter new leads and, later, monitor the status of previously submitted leads. Deal status indicators include saved, accepted, rejected, closed, cancelled, paid or deleted.

Exemptions apply, but they're fairly limited. Public sector deals aren't eligible. Solutions sold through the Service Provider License Agreement (SPLA) also aren't eligible. Partners can't recommend themselves for a deal or earn referral fees on a deal they receive Solution Provider Agreement discounts or Certified Software Advisor fees on. If a deal referral involves multiple products, say ERP and CRM, the referrer can get the bounty on the total size of the deal. A caveat there is that if those combined projects push the value greater than $400,000, the referring partner won't see more than $20,000.

A less structured exemption, but also a consideration, is that if a deal is too small, perhaps a one-person law firm, no partner may be interested in taking up the referral. Officially, there is no minimum deal size set on the program.

For those on the other end of the deal, Microsoft is paying the fees out of marketing funds and not reducing the fees or the deal sizes implementation partners are earning in any way, according to a Microsoft FAQ on the program.

The Dynamics Lead Referral program has a lot of potential as a relatively painless way for partners to turn Dynamics leads into money for themselves, other partners and Microsoft. If this almost casual approach to referring leads catches on with partners, and works well at scale when or if that scale arrives, similar referral efforts could become more common throughout the Microsoft Partner Network.