Co-Sell Revenues Climb as Microsoft Eyes SMB for Next Opportunities

Microsoft and partners continue to rack up co-selling revenues, and the company is now looking to the small and medium business segment for further growth.

Because Microsoft reports the figure oddly, as a total of all co-selling since the beginning of the program around four years ago, it's difficult to tell exactly how much revenue partners are generating under the program annually.

Nevertheless, the numbers are on a Microsoft (very large) scale.

"Since we started the co-sell program in 2017, we've been able to jointly sell more than $18 billion in partner services," said Gavriella Schuster, corporate vice president for Microsoft One Commercial Partner, during a Microsoft "State of the Partner Ecosystem" session on Wednesday for channel media. A slide put the figure at more than $18.5 billion in annual contract value.

Whatever the annual figure may be, the new total represents $10 billion more than the number that CEO Satya Nadella provided two years ago during an earnings call. During that January 2019 call, Nadella said Microsoft had generated $8 billion in contracted partner revenue.

As in the past, Schuster emphasized that the revenue is not Microsoft revenue. It is solely partners' services revenue that partners get directly from the Microsoft field taking partner solutions and services to customers.

In a metric related to that field activity, Microsoft also said there have been 166,000 co-sell opportunities and closed engagements so far in the current fiscal year, which started in July. Schuster also noted a few other indicators of the scale of the funnel that Microsoft is pointing toward its partners currently. The company's direct Web stores have 4 million monthly active users and its commercial marketplace has generated more than 3 million leads so far this fiscal year.

Over the last few years, Microsoft has expanded co-sell from a program for Azure ISVs to a program that encompasses Microsoft 365, Dynamics 365 and Power Platform. Additionally, Microsoft extended aspects of co-sell program from its own internal field sales force to its roughly 90,000 Cloud Solution Provider (CSP) partners. In other words, Microsoft was offering ISVs a "channel as a service," removing some of the friction of partner-to-partner engagement and allowing CSPs to more easily sell ISV solutions built on the Microsoft cloud stack.

Now Microsoft is indicating its next frontier in the co-sell program is small and medium business.

"We are increasing our focus on co-selling within the small- and mid-sized business segment (SMB). This includes making targeted marketing investments in top SMB customers, supporting and growing our ecosystem of ISV partners who serve SMBs and streamlining the way we help partners develop their practices," said Nick Parker, Microsoft's corporate vice president for Global Partner Solutions, in a blog post Wednesday.

Describing the effort as "being more intentional with the medium enterprise and small business segment," Schuster called it a huge growth opportunity for Microsoft partners. In addition to the efforts Parker outlined, Schuster said, "We're supporting our ISV partners to help them serve that customer segment with digital sales and marketing."

Even as new attention turns toward SMB, Casey McGee, vice president for Global ISV Sales at Microsoft, indicated that co-sell remains a strategic pillar of Microsoft's overall efforts around ISVs.

"We succeed collectively because we offer our partners both the technology platform and a business platform that consists of go-to-market, co-sell, top-line revenue growth and scaled growth through our partner ecosystem," McGee said during the channel media session.

Posted by Scott Bekker on February 11, 2021