Everyone has been talking about AI since ChatGPT was released, but even for years before that, AI has caused plenty of buzz in our industry. But where exactly is the money in AI?
On the cost side, it's quite obvious. Many billions of dollars are being invested in AI by the cloud hyperscalers, different platform companies and everyone else. On the income side, however, it's a little less obvious.
Last year, the four big tech giants increased their spending in AI by a staggering 63 percent. Microsoft, Alphabet, Amazon and Meta reported combined capital expenditures of $246 billion in 2024, up from $151 billion in 2023. Their spending is projected to exceed $320 billion in 2025. That's a lot of money, creating lots of expectations.
At first, the stock market reacted positively to these investments. Now, though, it is becoming impatient: Earnings are not growing at the pace it had hoped. The hyperscalers all invented new and wonderful AI services that customers all over the globe love and use, but the bump to their profitability is smaller than investors wanted -- and the stock market is punishing them for it.
There's a very important exception, however: Meta, the company behind Facebook and Instagram. Meta engineered a successful path for embedding AI in its services, and it found the formula to improve ad targeting on Facebook and Instagram, which is great for its profitability. Meta doesn't sell AI tools; instead, it sells its two flagship services, Facebook and Instagram, and has used AI to improve them.
This validates my thinking that the low-hanging fruit for AI profitability is improving internal processes and existing products, and reducing your cost base. Using AI to gain better internal efficiencies is something you can control and start immediately. Not since the advent of PCs have you been able to boost the efficiency of any company as significantly.
There are exciting new services based on AI and a growing number of vendors investing in them. But what will deliver a positive bottom line return today -- never mind tomorrow -- is using AI internally. Even if you're not as big as Meta -- and you're probably not -- there are a number of things you can do internally with AI to drive increased profitability.
Embed AI in your service desk so you need fewer people to handle a larger volume of support tickets -- and use AI to reduce the number of tickets. This means you can grow faster and easier than before because you don't need to hire in the same pace. You might even be able to redistribute your talented people to other areas of your company.
Use GitHub Copilot for software development. AI will not be able to create every line of code needed, but it will probably give you 80 percent or so, and that is a game-changer in terms of cost and time to market. Replace all, or some, of your junior developers with GitHub Copilot and keep your senior experts.
Marketing with AI is revolutionary. Experiment until you find the right tool for creating all the assets that you need. You'll be able to do so much more in-house and outsourcing will be rare. Your younger marketing people might be the best ones to empower and to encourage to use AI. Start experimenting!
Classify and organize your data so your internal AI services read the data that is up to date and confidentiality is respected. There are a few great tools out there for how to do this.
Personal Copilots will make each employee more efficient. There are more than 100 available from Microsoft today, and even more from other vendors. Make sure that everyone has a license for Microsoft Copilot and let people freely experiment. Create policies and build awareness for what data should not be shared externally so that your confidential data is not being used to train publicly available large language models (LLMs).
Add functionality driven by AI in the products that you sell. If you're an ISV, adding AI driven features might make sense. If you're more of a services company, explore if AI can make your services better for your customers and less expensive for you to produce.
Build agents that takes care of various processes, and let the agents interact with each other as needed. Agents will be used for various roles, and they can interact with people or with other agents. Don't be surprised if a new title in your company's organizational chart is Agents Director (you heard it from me first).
Aim to reduce friction inside your company with the use of AI. Increase speed in everything that you do and always ask what else can be made better with the use of AI. Make sure this spirit permeates all levels in your company.
And here's the added bonus: When you use AI internally for your own company's benefit, you'll not only enjoy higher profitability, but you'll also be in a terrific position to help your customers achieve similar positive outcomes. You'll be tremendously trustworthy when you tell your customers about how you use AI internally, and the conversation with customers will be a walk in the park.
Good luck and please share your success stories with me!
Posted by Per Werngren on March 25, 20250 comments
Thank for all the fantastic responses to my post in January where I talked about recurring revenue. This is clearly a topic that everyone loves; everyone is seeking the magic formula for recurring revenue growth. Part of the secret sauce of recurring revenue is that you need to build scale -- and that means volume.
The best way to build volume is to price your services competitively and provide top-notch customer satisfaction. And if you want to sell at volume and maintain both quality and profitability, you need standardization: Think about your company as a highly efficient plant where you always safeguard the quality of what is being produced and delivered.
Being affordable and generating a great ROI for your customers will pay off. After all, that's what Microsoft has always done and it has served them well. When Microsoft enters a new category, they make sure to bring great value for money as they want to build volume and market share. This benefits you as a partner, as well as your customers.
Happy customers are your best sellers. It's crucial to make sure that they are indeed happy and don't leave. If customers leave too early and in significant numbers, that indicates that you're doing something wrong. It's demotivating to sales teams if they have to hunt for new business just to compensate for old customers leaving. In fact, nothing should be more important than whether your customers are happy or not. And winning back an unhappy customer by working with them to resolve issues can actually turn them into great ambassadors.
What can you do about customer satisfaction? Here are the guiding principles that I make sure the organizations I lead follow:
- Make sure your services constantly evolve and become better every month. Don't try to upsell your customers to the new version; just roll it out for free. (As a side note, make sure the monthly improvements are incremental, and not major new releases every other year.)
- Survey your customers in a rhythm so you get an overall view of their customer satisfaction.
- Talk to some of your customers and ask them how they feel. When you're small, you should talk to everyone, but as the number of your customers grows, you should prioritize meeting the ones where you have challenges.
- Involve your customers in your services roadmap. (And yes, you should definitely have a roadmap as that is crucial for long-term planning.) Customers can help you determine what to add and what to prioritize. Involving your customers in roundtable discussions or other gatherings creates a community of ambassadors while also giving you valuable insights.
- Take care of problems right away; don't leave your customers hanging if you want them to be happy. And over-invest to win customers back.
- Don't raise your prices too much or too often. Profitability comes foremost from volume.
- Don't be greedy and forget to invest in improving your services. Rest assured that your competitors will always invest to try to win your market share.
- Make sure that your people are happy. You can never have happy customers if your own people are unhappy. Make sure you delegate heavily and provide viable internal career paths. Make sure that your internal culture reflects how a healthy workplace should look like and give people freedom to flourish.
- In all your team meetings, customer satisfaction should always be on the agenda. Looking at trends and deciding what you can do to make your customers even happier leads to long-term success.
And if you're lucky to have partners that resell or refer your services, then everything above also applies to them. Happy partners, with happy customers, will create an unstoppable wave of success for you to surf.
Posted by Per Werngren on February 24, 20250 comments
"Don't pay over the odds" was a line I used in the mid-1990s in reference to advertising. Paying over the odds is the most common problem for customers in IT today and many of them are unaware of it. They pay a lot and get far less than they should -- or deserve.
The easiest thing for a cloud customer to do (most of the time) is to look at their Microsoft Azure, AWS or Google Cloud spend and implement a few changes to reduce their monthly bill significantly. If a customer is unoptimized, doing this can often slash costs by as much as a third, and sometimes as much as two-thirds. I will never understand why some customers just let it slide and choose to pay the highest price available by being passive.
However, here's where there's plenty of room for any partner to step in and become a hero.
The biggest reason a customer pays over the odds is not cloud subscription fees; it's the number of hours involved managing their cloud and the associated cost for these hours. The first thing that you as a partner should do is determine what cost your customer actually got today. This can be a difficult task as people might have mixed roles.
My approach is to look at the big picture because the exact number of today's cost might be hard to determine. If your customer has X number of people at an average annual cost of Y dollars who are working Z percent of their time managing their IT, that gives you a pretty good idea of cost. It's the big picture that is important here; your cost-saving efforts should be huge and not just marginal, so the details are less important. (Just bear in mind that people often downplay how many hours they actually spend running IT, or forget the number of hours spent on incidents outside normal office hours.)
There are two main reasons your customers use up so many hours:
- Their methods and processes are manual and not updated to the cloud era. That means they're using plenty of hours taking care of tasks that are no longer necessary as they're handled by Microsoft, AWS or Google.
- Sometimes a customer uses too many tools from too many vendors with little or no integration between them. Using tools is good, but customers shouldn't go out and buy every single one.
No. 2 is a less obvious driver of cost. My preferred approach is to reduce the number of vendors if they're not integrated with each other. For that reason, I'm opposed to the "best of breed" approach to buying because that just drives unnecessary cost and seldom leads to higher-quality service. Other cost drivers are outdated outsourcing agreements -- for instance, agreements where the customer pays for people's time, not for outcomes. Sometimes these agreements are multiyear and adjusted according to inflation, which gives vendors little incentive to make improvements.
Customers are better off finding a partner that can provide these services at scale. They can purchase a distinct set of services from someone that provides tangible ROI and measurable outcomes (SLA), and keeps uptime and security top of mind, at a much more competitive cost than they're getting today. Approach running your customer's IT as a utility service. To round out your portfolio, find a channel partner that works with resellers or referrers.
As Microsoft partners, we often would rather talk about providing excellent service and highly innovative solutions over cutting cost. But sometimes, it's wise to focus on how customers spend their budgets and help them redistribute their funds so they don't spend too much just running IT. It's good business practice to make sure your customers don't spend too much in any area -- especially areas that don't give them a competitive edge or build the business. A modern partner can help customers cut costs so they can spend more on areas with great ROI, like AI solutions, business applications, automation and dashboards. You won't win any industry awards by reducing cost, but you'll create huge customer satisfaction, and that's probably the best prize you can ever win. You will not only benefit your customer, but also your business.
Customer satisfaction is what drives longstanding relationships, and that's what all partners are striving for. So let's embrace cost-cutting the smart way and help our customers to not pay over the odds.
Posted by Per Werngren on January 22, 20250 comments
I have been exploring and driving business models based on recurring revenue all my career. It started with a business in the early 1990s, when we offered a server-as-a-service. That meant we placed a physical server with Novell NetWare (this was before Microsoft was a major player in this area), printing services and e-mail system at the customer's office. We connected to the server remotely for maintenance and support. Occasionally, we had to send for a technician to fix something that couldn't be fixed remotely, like a hard drive that needed replacing or a power supply issue. Essentially, however, we became that customer's IT department and ran the system for them. Everything was included in the fixed monthly cost.
We simplified how to buy and consume a "server and network solution," winning new customers at a great pace because of it. However, we were three young owners with little experience so, eventually, after a few disagreements, I bought them out and continued on my own.
Fast forward to the new millennium, when I was leading the transformation of a midsized Scandinavian Microsoft partner from selling hours to selling managed and hosting services. We started with a service desk, firewalls-as-a-service and various server monitoring solutions. After a couple of years, we built our own datacenter and started to offer hosting services to both existing and new customers. Everything circled around Microsoft's technologies. With several millions of users all over the globe, I made an exit in 2016.
A few smaller exits later, and guess what? The preferred business model is still recurring revenue.
Recurring revenue business models have always been my passion and I often advise Microsoft partners about how to make this transformation. In today's marketplace, customers love to buy subscription-based services, so that's what partners should offer. Instead of constantly having to find new customers and new projects, you can spend your organization's time on improving your services and exceeding expectations so your customers are happy and make referrals. Happy customers are the best salesforce you can ever dream about, so make sure to measure customer satisfaction so you know where you stand and what to improve. Customer satisfaction should be the most important KPI in your company.
Partners that provide a service that brings great customer satisfaction can afford to be bold and waive the traditional lock-in with long contract terms, and instead allow their customers to cancel at any time. The usual one-year or multiyear agreements in B2B is only for the weaker partners that don't trust their own services. After all, you serve at the pleasure of your customers.
So what should you offer? Look at your existing services and see if any of them can be transformed into "as-a-service" product. Some typical recurring-revenue services are:
- Monitoring something, together with incident management
- Updating services for infrastructure or applications
- Private or public cloud capacity services (often the same as traditional hosting)
- Subscription to an application without hosting
- Subscription to an application with hosting (SaaS)
- Cybersecurity services of many kinds
- Firewall-as-a-service, physical or virtual
- Desktop-as-a-service, physical or virtual
- Printer-as-a-service
- Compliance-as-a-service
- AI Agents-as-a-service
Always consider your portfolio as subject for evaluation so that you discontinue what's not working and experiment instead with new services that might be useful for your customers. In fact, I encourage you to experiment and involve your existing customers in the evaluation process. Consider a mix of services produced in-house, then add services that you resell from other partners. Core services are ideally produced in-house, but complementary services can be sourced from other partners that you trust.
Recurring revenue services shouldn't be about high margins; they're about creating large volume and efficiencies so your customers stay forever. High margins create tensions and smart customers avoid overpaying in the long run. Microsoft has always opted for volume over charging customers a premium and selling in small numbers, so you should do the same.
Make sure that your services are affordable and that the business-case calculations that your customer makes are easy for you to win. One secret to success is to have standardized offerings and implement an industrialized approach in your delivery. A standardized offering, like an SKU, means that you will deliver your services with a predetermined quality and efficiencies of scale means that you can work on improving your production cost.
If you customize your services and go for bespoke offerings, you will lose the ability to grow and maintain a healthy margin. Quality enforcement will also be hard, your support people will have problems handling bespoke versions of your services, and your customers might have problems upgrading to your latest and greatest version. Sometimes there's a need for light customization, but make sure you do it outside the core of the service so it's a layer on top and not part of your actual SKU.
If you have built a successful recurring-revenue business, make sure you constantly improve it so your customers can expect to receive even better service over time. Build roadmaps of your services and invest in constantly adding improvements.
Building a healthy recurring revenue business will over time transform your bottom-line profits, and cash-flow problems will be a thing of the past. Not only will your shareholders, management and employees appreciate this, but it also means that the multiples used when calculating your Enterprise Value (EV) will so much higher than when you had a traditional business. This is good not only if you ever want to sell, but also when you make acquisitions as you can pay with your premium-priced shares, making M&A easier and protecting the dilution of your own shares.
If this all sounds too simple, it shouldn't be that complicated -- just remember that this transformation will not happen overnight. The transformation starts with a strategic decision, perhaps a little bit of experimentation, and then it will happen gradually, month-by-month. Your existing salespeople might be hard to convince; in my experience, you may need to add a few more who are laser-focused on your new portfolio of subscriptions. Most partners that embark on this journey will increase their investments in marketing and take a more modern approach, enabling them to deliver more and better qualified leads. Often, they'll redirect funding from the sales department to the marketing department to support this motion.
We live in a world that loves subscriptions. By moving toward recurring revenue services, you'll be in better shape to become a winner in the marketplace. Good luck and please let me know how it goes!
Posted by Per Werngren on January 14, 20250 comments
Many partners that have been around for some time are classified as value-added resellers (VARs). The VAR business model entails working to get the most, biggest and most profitable transactions as possible. Some VARs have a small services arm, where they install, repair and maintain customers' equipment; if they play it right, they can make the bulk of their profits this way. However, a VAR's business is often based on reselling hardware and software, plus the margin that customers will accept. VARs try to add value to their transactions in multiple ways, but ultimately, it is mostly a reselling game.
Personally, I have always seen being a VAR as a risky way to run a business because you're always fighting to find a new deal. Margins have been shrinking for decades; nowadays, they're razor-thin. I have always believed that recurring revenue streams are a better foundation for a successful company. You'll sleep better if you don't have to worry about what next month's revenue will be.
Today, there is good analyst evidence that becoming an MSP is the better choice. Company valuations of MSPs compared to VARs are night and day. MSPs are growing much faster than the tech sector in general, and most are not just growing revenue, but also their bottom-line profits. But what are the characteristics of a successful MSP? How do they operate? Here are some ways to tell if you're looking at a thriving MSP:
- They don't resell hardware, but they might create packages where a piece of hardware is included in a service that is being billed monthly (like a managed firewall).
- They might resell software licenses, but that's not where they earn their money; they don't compensate people internally for licensing deals that have extremely slim margins. Selling software licenses is just one service for their customers that might improve their status with vendors and give them a few incentives.
- They are heavy on marketing and have fully and successfully integrated it with sales.
- They talk about value and business outcomes, not about products.
- They love helping their prospects along their buying journeys without necessarily interacting one-on-one with them. They invest a lot in being where their customers are. This means that they invest in their Web site, in podcasts, in being at relevant marketplaces and everywhere else their customers seek information and guidance. They know that their customers are highly intelligent and able to search for information themselves.
- Their culture is about "forever customers" and being relevant to them over the long-haul. They seek to constantly improve their services by being driven by SLAs and constant innovation. This way, their customers have more reasons to stay and give them warm referrals. Shifting from selling pieces of hardware to selling a service that is measured by an SLA is a paradigm shift. It starts with the senior leadership but everyone needs to be on board, and that often takes time.
- They might have different people in sales and marketing than when they were a VAR. It was not a change they intended, but some salespeople might not have liked going from selling big transactions to being an SLA-driven, recurring revenue business model.
- They identify what is core to them and what they should produce internally, and then they add services from external partners that they embed and resell (sometimes white-labeled and sometimes not). I've seen a lot of success with this method in cybersecurity.
- They take an industrialized, large-scale approach to how they produce their services so that both cost and quality are under control. Their services portfolio is heavily standardized; they do not customize for specific customers, as that will divert from their standard, jeopardizing both quality and cost.
- They always strive to innovate and improve their services, but never ad hoc and always with a structured approach.
- They love partnering! They work with others and make sure that the partnership is successful for all parties involved. Giving and getting warm referrals is in their DNA and they have taken a strategic approach to this. Partnering is something they're proud of and it's endorsed by the senior leadership.
- Cashflow was really tough at the beginning of their transition from VAR to MSP, but nowadays, the CFO can easily predict cashflow from quarter to quarter. In fact, the cashflow is so good that they can make smaller acquisitions without additional loans or external investments.
- They have identified their own unique path to success. They often serve certain verticals or other segments, and have taken the bold decision to be specialized, highlighting their expertise in their marketing.
- As much as they love their vendors, they don't let those vendors distract them from their plotted course. Incentives are nice but shouldn't pull focus. They participate in partner programs, but they're still recognizably their own organization, and not just a partner of a certain vendor.
- They are strategic to their customers and they can easily justify the value that they provide.
- They are fanatic about customer satisfaction. They make sure to know exactly how happy their customers are and they are constantly trying to improve customer satisfaction.
- Their company valuation was not much to be proud of before, which made it hard to issue shares when making acquisitions. Today, the multiples based on revenue or profits are much higher, and the company can use their own share as currency when growing through acquisitions.
Bonus: If I were writing this two or three years from now, I would add that successful MSPs make great use of AI to improve their services, and to become more efficient and profitable with a smaller staff. AI is a great way to reduce the cost base for a MSP. This is something that we'll see a lot of evidence about in the future.
These are my own observations based on what I have seen in the ecosystem and meeting with partners. I'm also drawing from my own experience when I successfully led the change of my own organization several years ago.
Hopefully you can find your own successful path from VAR to MSP. It's rewarding and a whole lot of fun.
Posted by Per Werngren on September 30, 20240 comments
The AI wave can be seen as hype, something that needs to mature before money can be made from it. At the moment, everyone is thinking about what they can do with AI -- though many have already started to experiment.
Earnings from the big hyperscalers (Microsoft, Google and AWS) weren't driven by AI services as much as the stock market expected, which hurt valuations short-term. Investors expected the AI hype to have translated into higher revenue by now. But this is the time for us all to make investments, to plant the seeds that will give great harvests.
As I see it, the AI opportunity will not be in standalone siloed solutions; customers will not buy just AI. Instead, they will buy solutions that have AI embedded and that enhance their products. Examples include be any line-of-business (LOB) application, solutions for analysis and forecasting, or something else that is part of the customer's core business.
The whole AI movement is perhaps the first major tech wave where partnerships play a crucial role. In order to successfully build AI solutions, you will need to be really good at what you're doing, and you'll need to use a combination of in-house and external talent to do that. There might be specific tasks that customers require in a fully operational solution that are outside your core IP. These, you can outsource to a partner.
Here are a few observations around strategic AI partnerships based on what I'm seeing right now:
- Analyzing and determining great business cases for AI: This is where it all starts, with management consultants analyzing what processes and procedures can be enhanced by AI. They will build the business case, determine the ROI, and get buy-in from the senior leadership.
These consultants often come from traditional non-IT management firms, and they need friends in IT companies to partner with. Expect to find them at accounting firms, strategy and management firms, and also at smaller boutique firms focusing on certain industries. They will likely not want to be part of the financial transaction as they need to be independent, but they will refer business to partners that they know will do a great job.
The quid-pro-quo here is in helping them stay up-to-date in terms of technical knowledge, and do a great job so their reputation gets a boost. If you fail just once, it leads to huge embarrassment for all parties involved, but when you're successful and go the extra mile, there's nothing to stop the flow of new business coming from your network of management consultants.
- Preparing the customer's data: This is an area that is often forgotten, and it's the roadblock before a customer can move forward. It makes sense to partner with companies that have great knowledge around data analysis, classification, sorting digital information, and setting up boundaries for access. It's also worth looking at ISVs that have special tools that can streamline the work and ease the auditing (i.e., quality assurance).
Finding the most efficient ones, the ones with the most relevant expertise, is the key to success. It's like building a house; you want a solid foundation so your house can withstand even the strongest storms.
- Building AI solutions: You don't need to build the solution yourself just because you've sold the project to a customer. There's a monumental need for partnering with custom development practices, which can build the whole solution based on your design and terms of requirements. I also see a great need for ISVs that provide crucial building blocks.
Sometimes, the main reason to partner with a custom development practice is a lack of internal capacity: You want to take on more customers than your in-house team can manage. These types of partnerships can cross geographical borders, as we all know that sourcing talent is hard, but it becomes easier if you are open to finding partners abroad.
- Integrating AI solutions with LOB apps: Gone are the days when customers accepted software that worked in isolation, with zero connections to other sources of data or applications. Today, it's all about integration. Younger decision makers, in particular, see integration as crucial and strategic.
But integration requires specialized knowledge, and partnerships with companies that are great at building integrations is a winning concept if you want to please your customers. Integrators are sometimes equal to the ones that have developed or implemented a certain application, or they can be companies that have great expertise building integrations using hubs for information exchange.
- Infrastruture implementation: Nowadays, most AI solutions are deployed in one of the Big 3 hyperscalers' clouds, but sometimes they're partly deployed in the customer's datacenter. This portion of an AI project is best left to skilled infrastructure engineers. You will find it more useful to partner with a specialized practice instead of trying to maintain this knowledge yourself. This can often be a roadblock, and having the right specialists involved early in the planning saves time and cost for everyone.
- Maintenance and support: Even the best solutions need regular maintenance and support. Instead of old school "break'n fix," your customers deserves decent monitoring, preventive maintenance and immediate action to deal with incidents in real-time. These are often low-margin contracts, and the scope is often 24/7, as many customers wants to cover multiple time-zones. This seldom fits companies with traditional office hours, where the specialists are less interested in waking up in the middle of the night.
Partnering with a specialized maintenance and support partner and making sure that you regularly discuss with them the wellbeing of the solutions that are under their wings are great paths to success with your customers. This also gives you insights into how to further develop your solutions with the customers. These companies might also be great at giving you referrals if you treat them well.
In the era of AI, everything moves extremely fast and it's hard for partners to keep up with the high pace. At the same time, the fast pace provides opportunities for the ones that can best serve their customers and win new ones.
Teaming up with partners is the best way to not lose pace. It gives access to knowledge and customers that you would otherwise not be able find. And the beauty is that you can adjust your team of partners as the market adjusts to the latest variations in the AI hype. With partnering as your strategy, you'll always show up at your customer's doorstep with your top A-team
Good luck, and please share your success stories with me! I love to hear about them.
Posted by Per Werngren on September 03, 20240 comments
I'm not a software developer; I'm just a guy helping Microsoft partners find their path to success. Nitty-gritty technical conversations have never been my arena.
But even a non-techie like myself sees that AI-driven software development is a revolution. Software development will never be the same again, to the benefit of both customers and partners. And this is where I'm an expert. I love to talk about business transformation and driving better business outcomes.
We can thank GitHub Copilot for this new era of software development. To say that GitHub Copilot can help you write code faster and better is an understatement of giant proportions. With GitHub Copilot, you can perhaps get 80 percent of your code generated and can spend time really focusing on the remaining 20 percent.
Here are some ways GitHub Copilot (or current and future competitive solutions) can reduce time and cost in software development:
- It can generate code from natural language descriptions. You can use comments or prompts to describe what you want to do, and GitHub Copilot will suggest relevant code snippets or functions that match your intention. This can save you time searching for existing solutions or writing code from scratch.
- It can learn from your code and style. GitHub Copilot can adapt to your project's context and style conventions, and offer suggestions that are consistent with your codebase. This can improve the quality and readability of your code, and reduce the need for refactoring or debugging.
- It can help you discover new APIs and libraries. GitHub Copilot can suggest code that uses popular or relevant APIs and libraries for your project, and even provide documentation or examples for them. This can help you explore new possibilities and features for your project, and reduce the learning curve for new technologies.
- It can help you test and optimize your code. GitHub Copilot can generate test cases, benchmarks or performance metrics for your code, and suggest ways to improve or optimize it. This can help you ensure the reliability and efficiency of your code, and reduce the risk of errors or bugs.
There might be people out there who say that traditional software development is far better than taking help from AI, or that using AI is like cheating.
My response would be that I've heard similar things before. The first time was when I was young and desktop publishing with the Apple Macintosh was just becoming popular, and the oldies said that it was not good enough. All of us also heard it when cloud computing started to become popular.
But guess what? As these new technologies became got more popular and refined, we haven't looked back.
If I were running a software development practice -- either as an ISV or as more of a custom development -- I would transform the way we work and use GitHub Copilot right away. In so doing, I could significantly increase my team's output and perhaps reduce the number of developers.
This opportunity is, of course, larger in developed economies with higher salaries than in less developed ones, but the same logic still applies: AI-driven software development is here to stay, and refusing to become part of it will hurt your business.
I'm also pretty sure that investors will start demanding that their portfolio companies start to use AI-driven software development. The ones that are stubborn and refuse will probably have less pleasant conversations with their investors.
This is a revolution -- and, for many, still an untapped opportunity. Don't be left behind. Join it instead of watching from the sidelines.
Posted by Per Werngren on February 23, 20240 comments
Probably nobody in our ecosystem has missed the wave of news around AI. Besides the great products we've seen from Microsoft and others, AI has also been widely democratized via ChatGPT, which has really accelerated innovation. In just the year since it hit the scene, ChatGPT has become the engine for multiple solutions that build services on top of it.
At this month's Microsoft Ignite event in Seattle, there was a very strong focus on AI and the marching orders from Microsoft are crystal clear: AI is the chosen path and partners should get on board. But what exactly does a partner play for AI look like?
This is a coat of many colors. There are multiple avenues for partners to embrace AI. In this post, I will go through the ones that I have seen and been thinking about. I'll divide them into two buckets: One is what you can do internally, and the other is what you can do for your customers. (There will, of course, be hybrid scenarios where you utilize the success you have internally and bring it to customers; eating your own dogfood has always been successful as it builds trust.)
AI Within Your Own Organization To Drive Profitability
Marketing is low-hanging fruit for AI. You can use various tools to generate sales material, blog posts and scripts for webinars. You can also use AI for prospecting and for recording videos. AI can reduce your need for outside marketing agencies, not only saving you money but also to enabling you to become more agile in your marketing.
Software development can be powered by AI solutions like GitHub Copilot and Copilot in Power Apps. You can generate the bulk of your code almost instantly, which will radically shorten your development cycle and reduce the man-hours involved. With skilled developers hard to find (and salaries high), using GitHub Copilot will dramatically increase your competitiveness, enabling you to sell projects at a much lower price and most likely also increase your profitability.
Software development with the help of AI is a revolution; my advice is that you fully embrace it. When 80 percent of the code is generated by AI, you can focus your expert developers on refining the remaining 20 percent.
Adding AI to your ISV products is something to consider when you plan your roadmap. Not all products will benefit from adding an AI component, but it's well worth considering as AI might add great new capabilities. We have started to see lots of mission-critical systems adding AI and the purpose is often to provide better abilities to plan, make decisions and analyze.
Everyday efficiency is another area where you can easily use AI to streamline your work and accomplish more in your workday. Using a product like Microsoft 365 Copilot will enable you and your colleagues to free up time. Imagine if everyone in your organization could save an hour per day. That would enable you to grow while hiring fewer people -- and that has a big impact on bottom-line profits.
AI for Your Customers
Strategic advice aimed at customers is an important area that is currently underserved. Your customers will need a strategically focused partner to help them understand what AI can do for them and prioritize where to implement it. But they will also need partners with a great understanding of their industry and their company. The combination of AI and business understanding will fuel your strategic advisory practice for years and is a great avenue for selling other projects from yourself or from trusted partners.
Speaking about trusted partners, when you give strategic advice, it is crucial to know who the best players are to realize the strategies that you have set for your customers.
Implementing AI is not just as simple as signing up for a service. It takes a skilled partner to understand how to classify and structure the data that is being used by AI. There are also security and privacy implications that need to be addressed. AI needs access to the right data -- and that data might be in isolated siloes, which takes a skilled partner to handle responsibly.
The new AI-powered SharePoint Premium is a great solution to transform content management and content experiences and get content ready for Microsoft 365 Copilot. I would also recommend building skills around the new Copilot in Microsoft Fabric (and in Microsoft's various other "copilots," as well). You cannot become master in all copilots, so aim for a general understanding of all and specialize on the ones that make the most sense for the needs of your customers.
Building or customizing copilots for Microsoft 365 will be popular among your customers. Microsoft has just announced Copilot Studio, a low-code tool that enables you to customize Microsoft 365 Copilot and build standalone copilots. You also need to become a master on Azure AI Studio, which is a platform for developing generative AI solutions and custom copilots.
Maintenance contracts for AI refers to offering a retainer for monitoring, policing and fine-tuning your customers' AI setups. This will give you a recurring revenue stream and your customers (and your CFO) peace of mind.
Restructuring software development is when you turn the same approach that I described for your internal software development toward your customers and their own software developers.
Don't Be Left Behind
Start your AI transformation journey by making a roadmap and motivating your organization. Make sure you take the first step quickly, and then take it step by step at a pace that works for you and your organization.
Early movers in AI will become popular and spark enthusiasm within both Microsoft and customers, which will drive business opportunities. (We all know that Microsoft loves partners that are forward-looking and drive its business. If you bet on Microsoft's strategic choices, Microsoft will bet on you!) These early movers also will deliver a more exciting workplace for their people; it's always more fun to be part of the future than belong to the past.
Good luck and let me know how it goes!
Posted by Per Werngren on November 27, 20230 comments
In my previous article, I talked about CPOs -- chief partner (or partnership) officers -- and I'm overwhelmed and a bit surprised by how much interest this discussion has attracted. CPOs are the talk of partner ecosystems -- not just specific to the Microsoft ecosystem, but also in much broader terms, and even with regard to partnering outside tech.
Why Should You Want To Hire a CPO?
One of the biggest mistakes partners make is senior leadership not extending their buy-in and support. People in an organization might go out and forge partnerships, but it's risky when it's not part of the company's strategy.
Another problem is that partnership efforts across a larger organization get reinvented over and over again, as there is little coordination. That means everyone is working in their own siloes and no one shares best practices in a structured way. That can also lead to certain critical issues (like legal ones) getting overlooked or duplicated.
Having a CPO is about making a stand -- internally, as well as externally -- to show that partnerships are important and are part of senior leadership's responsibilities when running the company. It's also about recognizing the people who are working with partners. The value of sending a strong signal about how much you value partnering cannot be underestimated.
Why Should You Want To Become a CPO?
Great question! Being the CPO is one step up on the corporate ladder. It comes with some superpowers but also with responsibilities. You will have a seat at the senior leadership's table, which enables you to participate in important discussions, but also gives you access to the tools needed to navigate your organization toward success.
And, of course, you will become a very important ambassador for your company's partnership efforts. That means that you will need to be socially competent, great with media and the press, and great with partners. And remember that being candid and honest goes a very long way, as everyone will hold you accountable and remember your promises.
So What Does a CPO Do?
A CPO owns the strategy for all partnership efforts, as well as the execution of that strategy. This includes building and nurturing great relations with people in sales and marketing. The CPO might be alone or have a larger group of people reporting directly (or indirectly) to them, depending on the size of the company.
A CPO's effectiveness is multiplied when sales and marketing are aligned with the company's goal and efforts in partnering. The role of being both an internal and external public ambassador is extremely important, as that gives you a great deal of influence -- and that is perhaps your strongest superpower. Using that influence wisely will be instrumental in achieving your company's goals.
As mentioned, the CPO builds, sells and owns their company's partnering strategy. A large portion of the role is dedicated to this ongoing task. You can use internal and external resources to help, but as a CPO, you should have the right level of strategic knowledge and insights to build the strategy yourself. After all, you are the one that needs to sell it internally; the buck stops with you. That means a successful CPO will need to be a true master at partnering with relevant real-world experiences. It's hard work and should be treated as a long-haul venture.
The CPO role is gaining lots of interest. My guess is that this is not the last time we’ll heard about CPOs this fall.
Posted by Per Werngren on October 03, 20230 comments
For as long as I can remember, whenever we in the channel have talked about "P2P" or simply "partnering," we were referring to transactions that either went in a single direction (as is the case with resellers) or a bi-directional flow of deals.
Nowadays, however, people are talking about "ecosystems." What is an ecosystem of partners? As a Microsoft partner, we are all part of a worldwide ecosystem that circles around the concept of doing business with Microsoft and using Microsoft technology. But inside this ecosystem of more than half a million companies. There are smaller ecosystems that circle around either a geographical area, an industry/vertical, a technology, a type of practice or something else.
This is where the path to success lies -- being part of a smaller ecosystem. Unlike the ecosystems in nature, a partner ecosystem is not a food chain, where the stronger eats the weaker. Instead, a partner ecosystem should be about companies that enjoy working together and that see a positive financial outcome doing so.
A partner ecosystem is often built organically. There might be both active and inactive participants. Most of the business (i.e., revenue) will, over time, be handled between the ones that trust each other the most and where the involved parties earn the most money with the least effort.
But what vendors are really dreaming about is building a channel and to be the center of their own sub-ecosystem.
I see a shift in the market where we see a newly found interest for indirect business models. Some of the larger vendors have understood that the cost for selling direct is much higher than when building a healthy channel of partners that acts as either resellers, agents or ambassadors. The knowledge and market contacts that partners got are crucial for success and is hard to replicate. Recent announcements from Dell and others are just the beginning of this trend.
I also see a big increase in support within our ecosystem. Like mushrooms popping up in the woods, there are more communities and boutique firms than ever that are offering help to partners trying to build their channels. We see networks like the well-established International Association of Microsoft Channel Partners (IAMCP), a couple of highly active networks for women, networks for African Americans, dedicated learning companies providing training, podcasters, advisory boutique firms and members-only communities that run their own conferences.
The demand for help is high and there is business for everyone; the tide lifts all boats. Lots of the DIY advice is free or comes at a minimal cost, but if you want someone to do it for you, you'll pay for the gig. I see a newly found willingness to pay for these services, and this itself is proof that the level of interest in building a channel is high.
We've also started to talk more seriously about the need for CPOs, or chief partner (or partnership) officers, as a way to give more weight to the strategic endeavors of working with partners. In many organizations, the task of partnering falls under the VP of sales, but perhaps elevating it to a separate CPO role makes sense if you're really serious about it. Alliance managers should report to CPOs. In my mind, this will be a highly sought-after role given the impact it has. Recruiters have probably already started to look for savvy CPOs as it seems to be this year's hottest new position.
As we enter fall, it's certainly springtime for ecosystems of partners and for CPOs.
Posted by Per Werngren on September 11, 20230 comments
Customers often need multiple partners. The more a customer grows, the more partners it is likely to need and have. Smart customers know that a single partner cannot do it all, and that it isn't wise to rely too much on just one dominant partner, so they end up with an ecosystem of partners in various business areas or geographies. Some partners transact goods like licenses and hardware, but most partners supply various types of services -- and their paths are likely to cross yours now and then.
Traditionally, the holy grail for partners was to become a customer's single "trusted advisor" that influences everything. Perhaps some partners still dream about that. However, nowadays there are often several trusted advisors for various parts of a customer's needs (which makes sense as partners become more specialized to be successful).
As a modern Microsoft partner, it is important to enthusiastically work together with the other partners that your customers have chosen. Collaboration between other partners that are part of your customer's ecosystem is crucial. But collaboration alone is not enough; you need to put your soul into it -- and you should encourage, or perhaps demand, that the other partners do the same. True collaboration doesn't mean complicated or costly, and it doesn't mean having meetings in which each partner sticks to their entrenched positions. Instead, true collaboration means finding the best alternative for your common customer.
I myself have been in meetings where the larger partner tries to freeze out a smaller partner by making things overly complex or trying to grab every opportunity for themselves. I've also seen partners of the same size try to win more business by discrediting each other. This isn't the way.
The best protection against losing a customer is to ensure that they're a happy customer -- and therefore it's crucial for that customer's partners to help each other. You and your team should make every effort to eliminate friction and ensure that all partners are successful. Your customer will love that approach and it will lead to more business opportunities.
So how do you make this happen? Setting up meetings once a month with a recurring agenda is a great way to start. The extent of the customer's engagement with their group of partners determines how long each meeting will take; it can be anywhere between 30 minutes to two hours. Whom to invite will depend on the nature of the engagement -- don't make the groups too large! Taking notes is encouraged but don't make it too formal. And speaking of not being too formal, it doesn't hurt to break bread together once in a while so that you really get to know each other. Familiarity is an underestimated way to success.
In these meetings, take the opportunity to discuss new services and solutions that the customer might need. Discuss it first between yourselves. If, collectively, you see a potential ROI for the customer, then present your initiative to the customer. Just remember that it doesn't hurt if the new business opportunities are evenly spread over time between the partners in the group.
And don't bill the customer for your meetings unless he asks you to do it!
Another piece of advice is to have a "hotline" so that problems in collaboration with your mutual customer get escalated to senior people that can take immediate action. There's no better way to de-escalate than to pick up the phone and talk to your counterparts. If all parties see the long-term value, then problems are often easy to resolve. And solving problems together builds trust.
Becoming a master at orchestrating partners is an art, but it reduces the risk for both partners and customers so it makes sense to invest time to make it happen. When both customers and other partners see you as easy and friendly to work with, you'll generate positive buzz that transforms into more business opportunities for your company -- and that's probably the best ROI you can ever dream of.
A successful relationship with other partners, even if it was only a mutual customer that brought you all together, opens the avenue to finding more joint customers together. After all, you have at least one success story to talk about. So go make friends with your customer's partners and build success together!
Posted by Per Werngren on May 17, 20230 comments
Networking and collaboration might seem fluffy; how can just talking to people be a real job? But in fact, successful partnering happens between people and organizations that trust and like each other. We see many so-called P2P efforts being wasted because there's no genuine interest from the parties involved to make it a mutual success. True and successful partnerships are created when all parties are looking out for each other's well-being and when the level of trust is high.
The networking aspect is a key component here. The channel ecosystem consists of several communities. Sometimes they intersect and sometimes they're isolated and exclusive. A community can be formal with a structured way to membership, but it is more often unstructured. Some communities are online, some are offline and many are a mix of both. Everyone that has an interest can participate.
Your customers might have their own communities, but increasingly, customers and vendors are participating in the same communities. These channel communities are the often the best way to find both partners and customers -- and they're growing in importance. If you join them, you'll need to make sure that you and your company are considered relevant. It's paramount that you contribute to these communities with true value and that you're not just pushing your own services and products.
Channel communities are a great arena for learning about key trends and different technologies, making new acquaintances and getting closer to specific industry vendors. Perhaps the most important benefit of investing lots of time in channel communities is that you will find companies to partner with -- and you might also find customers to serve. Every vital and active community has one or more thought leaders that drive the community forward. By being generous, knowledgeable and active in these communities, you can become a thought leader yourself.
It's important to constantly bring content to your community. All communities need to be fed with content, as that creates topics for discussion. You can deliver webinars that focus on knowledge-sharing. You might even be able to sponsor events at cost depending on the type/size of the community and the event. Sponsoring a get-together for a few people in a local bar is obviously less costly than a premier-level sponsorship at a big vendor's conference.
My point is, the value of a community is the sum of everyone's contributions. It's important to have a "giving" mindset and constantly strive to create value for the community. Taking an active part in communities should be a key component in every alliance manager's list of duties.
Don't limit community involvement tasks to just the alliance manager, though. Instead, make sure you do a thorough analysis of which communities you want to invest in and send the best-suited people to each community. Some communities need technical people, others need marketers and salespeople, or perhaps C-level people. For important communities, send multiple people with different backgrounds and seniority to gain the best outcomes. And don't forget, your "elevator pitch" needs to be thoughtfully written and well-rehearsed so that everyone can deliver it without hesitation. Read more in this article, "The 7 Pillars of a Strong Partner-to-Partner Relationship."
The list of channel communities is endless and constantly changing, so I'm not going to attempt to list them all. My advice is to make sure you have a structured approach and that you and your team participate in the ones where you find it meaningful. Invest a lot in the ones that are core to you -- and then add some more when it makes sense. Just remember that it will take time before you see traction, so wait awhile before you evaluate your participation. In my experience, it goes quicker in social media-based communities and takes longer in communities that meet in-person. However, the most strategic value is often in the groups that meet face-to-face and that occasionally also meet in-person.
Whatever direction you choose, making sure that you engage with various channel communities in a structured and thoughtful way is a job to be taken seriously and will give great return on investment. When you are an active and appreciated contributor in channel communities, doors will open to new partnerships and to winning new deals. In my opinion, investing in communities is the best thing you can do as a partner. Just don't forget that it is a long-haul flight.
Posted by Per Werngren on April 17, 20230 comments