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Behind the Curtain at Microsoft: Three Things You Should Know

Our former Microsoft field rep shares some insights about how Microsoft operates and what's behind the company's attitudes toward its partners and employees.

• By M.S. Partner
• April 23, 2014

Being with partner organizations for more than a dozen years prior to actually working at Microsoft, I really thought I knew and understood how Microsoft functioned as a company. But, really, there were many things that surprised me. OK, maybe I had hints, but I didn't understand the extent.

Contractors Do the Work
It's amazing how many contractors Microsoft employs to conduct much of the actual work in the company. Walking into a regional office, you'll find the secretary behind the desk works for a contractor, the marketing coordinator isn't a Microsoft employee and neither is the phone-based, inside-sales representative who makes calls all day "as Microsoft."

This operating model is caused partially by Microsoft's generous benefits plan and partially by a business approach that requires the ability to shift focus quickly from one thing to another, especially at the end of a fiscal year. Having contractors instead of employees is helpful for that flexibility.

As a partner, pay attention to the prefix of an e-mail address to determine if the person works for Microsoft or is just a vendor partner. For example, the prefix "v-" stands for vendor, "b-" for business guest. Another indication is the color of a person's security badge -- employees are blue. Hence full-time employees are occasionally labeled as "blue badged." However, don't underestimate the non-employee staffers, as they can have tremendous power over the process to get your invoice paid or your proof-of-concept funded. Frequently, the vendor cannot change the process itself, but it can move items through the process and the vendor typically knows who to ask for exceptions.

Partner Conflict
Microsoft is conflicted on partners. It fundamentally understands partners are part of the company's sales channel, but it's frustrated by them. Microsoft folks want to work with top, experienced talent, which is how they perceive themselves, but partners are hiring right out of college -- especially in the large account reseller channel. Microsoft wants partners that are totally loyal and driving all of its agendas, especially the niche or up-and-coming products.

This stands in natural conflict with partners that want to offer clients a variety of solutions and know that margins with other ISVs can be two times to 100 times what they find on Microsoft. The 100 times comes from the fact that most systems integrators can't sell software to clients with more than 150 users. Too frequently, Microsoft expects attention for its market share instead of earning attention from partners by caring about their businesses.

Internally there's a belief that everything is fine because the bucket of partner "rewards" hasn't shrunk. I don't think Microsoft truly realizes the enhanced complexity of a cloud sale that should have more rewards. Nor does it understand the tough fighting that happens at a street level in three different layers: Microsoft's direct software competitors, a systems integrator's competitors and, most frequently, a customer's own IT department thinking they can do it themselves and blaming poor performance on Microsoft products versus their own mistake-riddled setup. Microsoft struggles to decide if it wants fewer, more loyal partners or a bigger channel and tends to waffle back and forth, depending on the initiative.

End-of-Year World
The end of the Microsoft fiscal year might as well be the end of the world for the company. The calendar simply doesn't extend past June 30. In a customer world where deployments in the enterprise space can stretch for years, customers need a reason to purchase. Microsoft's end-of-year deal making can be a major reason. Also, the combination of pay escalators from the bonus plan and the frequency of internal job movement at each fiscal year end encourage maximizing compensation plans in the current year. My advice is: Don't fight it. Talk intelligently to your clients about the cycle and how they can take advantage of it.

My hope is that if you're more knowledgeable, it will help limit the negative impact to your business of how Microsoft operates.

More Columns by M.S. Partner:

• What Gaps Does Microsoft Want Partners To Fill? Check the Scorecard
• How To Motivate Microsoft To Close Your Opportunities
• Column Archive