Microsoft's Channel Chief Talks Cloud, the MPN Switch and More

In an exclusive interview with RCP, Jon Roskill, Microsoft's top channel executive, talks about the challenges of his first year -- the cloud transition, the MPN switchover -- and the huge opportunities he sees for partners in year two.

Since Jon Roskill took over the Microsoft Worldwide Partner Group (WPG) in late June 2010, he's faced a set of three interlocking challenges.

On the one hand, he was tasked with delivering the message to partners that Microsoft was "all in" with the cloud and trying to accelerate the movement of the Microsoft channel toward Microsoft cloud products.

Next, he inherited the massive, programmatic evolution from the Microsoft Partner Program to the Microsoft Partner Network (MPN). While his predecessor of eight years, Allison Watson, had overseen the design and a lot of the pitching of the MPN to Microsoft's 600,000-partner channel, it fell to Roskill to flip the switch on the largest part of the MPN launch on Nov. 1 and to shepherd Microsoft's huge partner community from the old system to the new.

Finally, the MPN was in the midst of a major overhaul of its partner incentives program throughout the Microsoft fiscal year that just ended.

All of that occurred against the backdrop of partners wondering more seriously than they have in years whether Microsoft was up to the competitive challenges in the cloud and around the consumerization of IT, as media tablets and smartphones get more important every day. Questions from Microsoft partners about whether they're betting on the right horse when they commit to Redmond have been louder than ever.

"The feedback I was getting from partners back in the January-February time frame as they were going through this, was, 'You're making us go through a lot here.' Yeah, we are."

"I think we've continued as a company to make moves that I believe are perceived as being partner friendly. I think these points are accruing. People are seeing that our intent is really what we're saying, that our actions are proving out what we're saying. We are the vendor that's going to go to the cloud with the partner."

Jon Roskill

Asked early last month if he knew what he was getting into a year ago, Roskill was unequivocal: "Yeah, I did." The answer would hardly be a surprise to the many partners who have talked to Roskill in his first year as corporate vice president of the WPG. His standard conversational gambit is to ask what you want to talk about, listen carefully, answer questions directly and still manage to get across all the things he wants to say. He's not a person who gets knocked off balance easily.

He credits his ability to handle the job in the first year largely to the inheritance of one other thing from Watson -- her partner team of executives, such as Julie Bennani and Ross Brown, who stayed in the same roles they held. Roskill and Watson essentially switched positions, with Watson becoming corporate vice president of the U.S. Business & Marketing Organization.

That he was confident about his ability to tackle the challenges doesn't mean he's arguing the first year wasn't tough. "It was a bit of a high-wire act," Roskill says. "It's been a year of major transition both for Microsoft and for partners."

Coming up on his second Microsoft Worldwide Partner Conference (WPC) this month in Los Angeles, where Microsoft expects a record 15,000 attendees, Roskill points to strong progress between Microsoft and its partners in all three transition areas. While substantial challenges remain, he's excited about the opportunities for partners with Microsoft in the year ahead.

The little "we're all in" clouds were all over Microsoft WPC 2010, and Roskill says he's happy with the progress that Microsoft and its partners have made toward the cloud over the last year. "I think Microsoft and its partner community is so underestimated right now," Roskill contends. "I don't think anybody understands how far along we are -- with over 100,000 customers using the beta of Office 365 and over 16,000 partners reselling it."

Part of the cloud message last year was the launch of a pair of programs called Cloud Essentials and Cloud Accelerate.

In the United States, requirements to participate in Cloud Essentials for a sales or services partner are having a Microsoft Partner Profile, signing a sales agreement and a services agreement with Microsoft, completing some training, and essentially making some sales to stay in the program. For those modest requirements, and with no annual fee, the program brings internal use rights (IUR) for 250 seats of Office 365, 250 seats of Dynamics CRM Online, management of 10 PCs on Windows Intune and a raft of Windows Azure services.

The Cloud Accelerate program has similar IUR benefits but also includes substantial marketing benefits, such as pre-sales and technical support hours and business development tools. Those benefits come with a price tag of $1,850 in the United States, and a sales requirement -- partners must have closed three cloud deals for a minimum total of 150 seats to join, have three customer references and make a commitment to sell at least eight deals for a minimum total of 500 seats.

"Every country is beating their Cloud Essentials and Cloud Accelerate targets" for a set number of partners to enroll in each program, Roskill says.

Microsoft has focused on signing partners up to its cloud programs this year largely to get partners positioned to start selling Office 365, which is entirely a Microsoft Fiscal Year 2012 initiative. The WPC this year closely follows the June 28 general availability of Office 365, the next version of the Business Productivity Online Suite (BPOS), which adds Office Web Apps, some Lync Server functionality and the first opportunity to buy the Office suite in a monthly subscription.

To Roskill, Office 365 presents a much bigger opportunity for Microsoft and its partners than BPOS did.

"From the start, it's got a SKU lineup that was designed to be our bread and butter, our core SKU lineup," Roskill says.

Because of the flexibility, the partner opportunity will range from the deskless or kiosk plans for retail and factory floor workers at $2 per user per month, all the way up to the full enterprise desktop with the Office Professional suite installed and full Lync voice capabilities for $27 per user per month.

"The way it opens up the SKU lineup is incredibly well thought out," Roskill says, adding that Microsoft cloud offerings can now match the solutions that partners have the expertise to sell. "Thousands and thousands of partners out there who are reselling our stuff know how to do this already. The fact that some SKUs have Office inside them makes the subscription incredibly powerful."

With his marketing background, Roskill also thinks Office 365 has something else going for it: "We've joked about how the branding of BPOS sounds like all sorts of things. Office 365 is a brand that we can really get behind as a company."

In his ongoing conversations with partners over the last year, one of the biggest areas of partner pushback around cloud involved direct billing. With BPOS, Microsoft bills customers directly and reimburses partners later. Many partners, especially managed services providers, say the approach doesn't fit with their business models of bundling services and providing one bill, which gives them better control over their margins. Having Microsoft own that billing relationship with customers also takes partners out of what many consider a critical touchpoint with customers, although some are happy to avoid the frequent headaches of customer billing.

The issue came up during one of Roskill's partner town hall meetings late last year, when he fielded a question about billing, acknowledged the point, made the case for the company's existing model and promised that the company was looking into it.

While many partners have said privately they hope the issue will be resolved around the time of the Office 365 release, Roskill didn't have any news on that score last month.

"I don't have anything to say beyond what [I've said before]. We're continuing to examine and evaluate. I would say the partner requests for that are still there. So, absolutely, I'll continue to acknowledge that," Roskill says.

At the same time, Roskill says partner requests for billing control have been declining: "If I had to go off my last six months of feedback, those requests have attenuated somewhat."

He points instead to Microsoft's March announcements about licensing mobility that allow enterprise customers to pick, choose and move between on-premises licenses and in-the-cloud seats. "We've had huge positive feedback around that, obviously, from hosters who like being able to talk to their customers about private cloud and moving back and forth," he says. "There's been a very strong, positive response from the reseller community that we are loosening the constraints."

In all, Roskill asks solution providers to consider Microsoft's entire record as a cloud partner. "I think we've continued as a company to make moves that I believe are perceived as being partner-friendly," Roskill says. "I think these points are accruing. People are seeing that our intent is really what we're saying, that our actions are proving out what we're saying. We are the vendor that's going to go to the cloud with the partner."

The cloud transition may be the one longest in the making. Partners were eyeing what was then known as the Software as a Service trend heading their way back in 2005. A close second, though, is the MPN transition, elements of which Microsoft began telegraphing to partners in 2008.

In a lengthy planning process befitting a change to a program that affects hundreds of thousands of partners and impacts hundreds of billions of dollars in ecosystem revenues, Microsoft established several core goals for the MPN. One of the biggest was differentiation of partners. Microsoft wanted to make its most specialized partners stand out and shape the program to help highlight those partners and their expertise -- and reinforce their success.

The final touches on the transition went into effect with the launch of the gold competencies on Nov. 1, 2010, a few months after Roskill took over the WPG.

He acknowledges that Microsoft is asking a lot of longtime partners, with the competency changes, the customer satisfaction requirements, the higher fees for gold competencies, the more intensive training requirements and the personnel requirements for each competency.

"The feedback I was getting from partners back in the January-February time frame as they were going through this, was, 'You're making us go through a lot here.' Yeah, we are," Roskill says.

Having just completed a tour of five of Microsoft's 13 geographic areas, Roskill says he's getting begrudging acknowledgement from partners that the process was worth it, especially for gold competencies. "The feedback from the partners is that it's very valuable," he says.

While Microsoft is only in the middle of the re-enrollment process, Roskill says overall re-enrollments are going very well. "At this point I feel very, very good about the work that's been done in the Partner Network team, and with the partners," he says.

Although many partners tell us they're holding off on re-upping their gold competencies while they assess the value, that's not necessarily counter to what Microsoft was aiming for. To Roskill, the gold numbers are a bright spot.

"We have well over 5,000 organizations out there who have earned well over 8,000 gold competencies. We're slightly ahead of our plan on gold," Roskill says.

What Roskill's numbers underscore is how radical a change that is from Microsoft's previously permissive attitude toward the Gold Certified Partner level. In April 2009, the last time that RCP received detailed figures from Microsoft, there were 16,000 Gold Certified Partners worldwide. Admittedly it's an apples-to-oranges comparison, but the change represents a 68 percent decrease in the number of partners who can call themselves gold under the new definition versus the old. By any measure, gold has become much more exclusive.

If the transition has gone according to plan on gold, persuading partners of the value of the silver level is proving harder than expected. One of Roskill's two keynotes at the WPC this month will be on "The Value of the MPN." Bet that part of the presentation will focus on the benefits of the U.S. $1,850 silver competency.

"Silver, which was tracking a little bit behind, has been an area of focus. It's a place where we needed to do a better job," Roskill says, and transitions into the pitch for the competency level: "Silver is not second best, that's not how people should be thinking about it. It puts you in the elite top 5 percent of the Microsoft Partner community. Many partners don't understand that it's unlimited support on sales opportunities greater than $3,000. Then, of course, the internal use rights software ..."

The trouble with getting partners to sign up for silver helps explain why MPN General Manager Julie Bennani was blogging about "The Value of Silver" in May, when she noted, "We have heard from some partners that they are still not clear on the value of a silver competency vs. Action Pack subscriptions."

Where is Microsoft on silver and where does the company want to be in terms of numbers of partners? Roskill isn't saying, but the 5 percent figure indicates the company is aiming for about 30,000 organizations with silver competencies. While it's not a direct match with the old Certified Partner level, that group consisted of 18,000 partners in April 2009, so Microsoft had apparently aimed to nearly double the important group of partners who have significantly more qualifications than Action Pack subscribers but less than gold competency partners.

In other words, partners holding off on pursuing gold are playing into Microsoft's strategy. But because partners also seem to be holding off on qualifying for silver, Microsoft could be developing gaps in its distribution of qualified partners across regions and vertical industries.

Tightly related to the MPN transition is an overhaul of the way Microsoft distributes its $4 billion in incentives for partners.

"Another big set of changes that we had going into this year was around incentives," Roskill says. "We've made some substantial updates, and I think very positive changes have been rolled out."

A key element of the new incentives is matching the workloads around which Microsoft organizes incentives with the MPN's new competency structure. "Workloads line up with competencies now; that's what's exciting about it. [In Dynamics CRM, for example], we can say we've got X number of CRM gold competent partners around the world and Y number of silver competent partners around the world, and we're going to go to market with them and grow and take share," Roskill says.

In a Microsoft Partner Network Interactive Leadership Forum a few months earlier, Ross Brown, vice president of Microsoft Worldwide Partner Sales, explained some of the other changes to partner incentives over the last year.

"We've been trying to ... create a more standard framework around our channel incentives, and really try to limit the amount of short-term promotional activity that's going on in lieu of more structured, stable programs that [are] consistent both in terms of how you claim and the qualification process, as well as consistent in the economic benefits," Brown said.

Another mention of incentives in the online forum covered efforts to drive solution incentives to gold competency partners who are not necessarily doing the licensing transactions.

"The solution incentive program ... puts real meat behind the gold competency. It starts to provide additional revenue opportunities for partners that are able to go off and achieve that gold competency," Roskill said during the forum. Brown said pilot versions of the solution incentive program were running in the United States and some other Microsoft subsidiaries.

With a year of major transitions behind the WPG, Roskill is looking forward to exploiting the position that Microsoft and its partners have developed in FY '11 to make money together in FY '12.

"I love to talk strategy, but I like to get into execution. This year has been really about execution. The thing that's exciting about coming out of this year is now we can look forward," Roskill says. As an example of a large opportunity among many, he adds, "Now we're really set up for Office 365 in our FY '12." He says Lync looks poised for hockey-stick-like growth and points to partner excitement around Dynamics CRM, Windows Azure, Windows Intune and Windows Phone.

At the partner conference starting on July 11, Roskill says Microsoft will put the focus on partners in keynotes, videos and sessions. "I want to make this much more about partner success," Roskill says. "Partners have a choice where they can work with us or they can work with other companies."

He says he regularly reminds Microsoft employees why partners work with Redmond, where they've been central to Microsoft's success for more than 30 years. "These guys are there as a business. We need to be able to help them make money."

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