The Partners' Partner
Allison Watson, head of the Microsoft Partner Program, tackles issues from licensing and marketing to program changes, while offering her take on how to get the most out of Microsoft -- and grow your business.
- By Paul Desmond
- July 01, 2005
As vice president of the Partner Sales and Marketing Group at Microsoft,
Allison Watson has responsibility for the Microsoft Partner Program
on a global basis. We talked with Watson about some hot-button issues,
including licensing revenue, the level of resources Microsoft is
delivering to partners, opportunities for growth and the biggest
competitive threats (yes, that means Linux). Watson also offers
her assessment of how the dramatic Partner Program changes implemented
over the last 18 months are playing out and what Microsoft is doing
to increase the visibility of the Partner Program—and partners in
RCP: Microsoft invested $1.7 billion in the Partner Program
in 2005, up from $1.5 billion in 2004. What's your assessment of
the impact that money made, in terms of additional resources for
Watson: That investment accrues to multiple audiences in
our partner channel, and in many ways, the investments we made this
year were in account management resources, and technology sales
resources to support account management, and competitive sales resources
and marketing resources. We invested in giving partners access to
people and processes around the joint selling process, everything
from prospecting to having a key offer in the marketplace to move
prospects deeper down the pipeline, and then, for turning them from
proof of concept into a closed-customer opportunity. Those are the
investments we made that are really making a difference for our
partners this year and one that we will continue to make in years
How does that manifest itself in the field? Does it mean
partners have more Microsoft people they can go to for help?
The resources that we apply do vary based on the level and depth
of the partner's commitment to Microsoft, as well as the segment
and technology area that the partner is focusing on. However, if
you're a Microsoft Certified Partner today, compared to even one
year ago, we now have easily available and accessible inbound and
outbound coverage for account planning, sales assistance and competitive
sales assistance that we did not have before. So at a very basic
level, the opportunity for a partner engagement with Microsoft is
higher than it's ever been.
The challenge I have in running the program is to educate partners
that those resources are available to them, and more importantly,
encourage them to use them in a way that will help them grow their
business. Where I've gotten the word out, we do have partners starting
to take advantage of all of those resources. And I routinely receive
feedback about how it's really starting to make a difference in
growing their business.
It seems like still a fairly small percentage of Microsoft Partners
have a one-to-one relationship with a Microsoft field Partner Account
Manager (PAM) or even a tele-PAM. Are there plans to increase the
number of PAMs, or the number of partners who get that close attention?
"The opportunity for a partner engagement with Microsoft is higher than it's ever been."
We are fully committed to tele-coverage and account management
for Certified and Gold Partners. So that's 35,000 worldwide partners
today. And that's an area where we are sincerely invested in doing
a strong job. We have gotten various feedback to date in terms of
areas where we are doing well and areas where we are not doing well,
and are committed to making sure we turn that around. We hear more
often that that's going well for all Certified and Gold Partners.
In terms of generating licensing revenue, what would you
say your biggest challenges are? Does licensing still need to get
Microsoft is having a wonderful year in terms of its top line revenue,
and that top line revenue is generated by licensing revenue. Now,
if you ask how is that impacting customers or partners, I'd say
it is absolutely top of mind for our partners and our customers
that we have got to make licensing simpler, more consistent and
more understandable. And as such, we're very focused on work in
that area and there are several executive teams looking holistically
at [making licensing] better and simpler. We don't have anything
in particular to announce at this time, but it's something we're
very focused on and committed to, and I believe you will see key
innovations from us there in the next 12 to 24 months.
Partners in the small and midsize business (SMB) space say they
see much of their software license/Software Assurance (SA) revenue
eroded as clients purchase from self-serve Web sites or Large Account
Resellers (LARs), although the partner provides influence and implementation
services. What is Microsoft doing to address that issue?
First of all, our customers have become savvy in the information
world and use multiple potential sources for any piece of software
technology and often use multiple sourcing for the appropriate services
partners to implement it. As such, partners who have operated on
traditional VAR margins, both on Microsoft software as well as any
industry software or hardware, have come under increasing pressure
to rely on margin when they're thinking about their profitability.
In fact, I think it's one of the single biggest pressures in the
small and mid market and it's driven, again, not from the software
or hardware vendors but from the customer pressure. As such, our
VARs have to really take a look at the cost of running their businesses
and have to understand how their business is operating from a margin
perspective and a services perspective, and then they have to start
to optimize their business models to recognize the trend and adjust
for it. So in many cases, people who have been relying on software
margins really have to look at what the potential opportunities
are to insist on their services revenue and to also insist that
the revenue they spend in closing down a customer deal is covered
effectively, because in the past, that might've been covered up
in some kind of margin. There are some tools we'll be providing,
business planning templates and tools, so that partners can do a
good job understanding where their real costs are being driven from
in their cost of sales. And they've got to rely on a profitable
services business to make that shift. I'd say that's one of the
largest areas of pain for our partners.
In terms of what Microsoft is doing about it, we're very focused
on a profitable partner eco-system. We are investing in helping
more deals go through any partner's pipeline, and taking costs out
at any step of the way. We are not necessarily looking at alternative
incentive programs. However, we do have influencer incentive programs
out there in our license program called Open License Value, and
there are partners who have had some success with that program in
terms of it providing more of an influencer fee model instead of
a traditional margin. But it would be simply an element of a VAR's
revenue and, frankly, the work on the aspects of the costs of doing
business is a more important part.
What results were you expecting from the Partner Program
changes that you haven't yet realized?
In terms of the commitment to the partner community and the commitment
of our investments, we're 100 percent on track with our expectations.
The only thing that I probably underestimated was the time it would
take us to get all the way there. We're moving 250,000 partners
to a new way of doing business with Microsoft, and we're moving
all of the business groups inside Microsoft to a new way of doing
business with partners. We anticipate being right on track at the
end of this calendar year with 100 percent of the [Certified and
Gold Certified] Partners adopting a specialization and starting
to operate in the new model, with our business groups directing
investments to those partners against those specializations.
What is Microsoft doing to increase the visibility of the
Partner Program, and demonstrate the benefits of working with partners?
We're taking a comprehensive approach from the top of the marketing
pyramid all the way down to the sales process. At the top of the
marketing approach, I would look at global advertising and how we
are driving partners as the call to action. All the print-based
advertising and Web-based calls to action, starting in January of
this year, drive customers through to partners on our referral engines.
As you go further through the funnel on the sales process, we will
have joint engagements in subsidiaries around the world with what
we call through-partner marketing, so we will both co-invest and
co-brand in partner marketing efforts and we will include them more
consistently in efforts with us as we go to market.
The second major area is just the brand in and of itself. Getting
the Microsoft Certified brand into the minds of our customers such
that, as new projects are taken up by customers, they're actually
seeking out partners with the branding level that reflects their
competency in the marketplace. That's the one I would say at the
high end is the value that partners are hoping we bring in terms
of advertising the program to the marketplace.
The second area is what we are doing to bring awareness of the
program itself to partners. That's another area where we're making
several major investments. I'll talk about two in particular. The
first is a global, broad-scale advertising campaign about the program
itself and the value and opportunities for partnering in the program.
That program launched in February in seven markets around the world.
Additionally, one of the huge opportunities that Microsoft has in
the partnering program is partners building eco-systems with each
other. We just recently launched Partner Channel Builder, which
is an online tool that is coupled with offline events in local markets
around the world that encourage ISVs, systems integrators and VARs
to partner together in pursuit of mutual and common business opportunities.
The power that the partnering opportunity has in our marketplace
is when partners partner together. And you will continue to see
us drive up and out that major investment in the next 12 to 24 months.
"People who have been relying on software margins really have to look at what the potential opportunities are to insist on services revenue. "
What do you see as the top business challenges facing partners,
and how is Microsoft addressing them?
I'd say in general it's the evolution of customers and technology
in the marketplace, and then the ability to have a profitable business
within that marketplace. Customers have become more savvy in the
technology marketplace in terms of how they purchase, discuss and
express their pains. Partners have to map to that level of expertise,
which requires them to continue to invest in business process skills
and business development skills that in the past they may not have
had to invest in.
Once they invest in skills, then they have to be able to do delivery,
often in a heterogeneous environment, both in the traditional sense
but also within Microsoft technology; you might have older versions
of one platform and newer versions of another platform. So they
have to be technically skilled in areas that are broader than in
the past because systems all touch each other.
The third area is having security and compliance knowledge, because
there's no technology information system you can put in today without
You put all that together and it sounds like a lot of incremental
cost for a partner to stay in business. Where I see partners innovating
is in how they blueprint more and more of what they do, so they
can repeat the same service in a more predictable and consistent
way. For example, once a partner has learned how to do one, two
or three successful portal implementations, then it's incumbent
upon them to take what they've learned, and the tools we provide
them, and blueprint how they did that. That blueprint should include
what it took to get their people ready, the marketing required and
then how to implement the actual technology successfully. We have
tools throughout our program to assist them in blueprinting their
businesses for re-use, faster turns and higher satisfaction.
Where will the biggest partner growth opportunities be over
the next couple of years?
That's a hard question because I don't have just one answer. The
mid-market area is a huge growth area for the company and the industry.
You have an opportunity to look at how customers are communicating
cross-company and connecting companies together. Are those accounts
taking advantage of our Information Worker technologies with portals,
with Live Meeting and communications services and with the opportunity
to enable client programming, taking advantage of .NET Web services
from the traditional Office client?
Then you might look at the server layer and say, do we have highly
secure, highly manageable and highly controlled server infrastructures
that allow a company to have confidence in the compliance and operational
use of their infrastructure? Each one of those in and of itself
is a large opportunity.
In the enterprise space, I would talk to partners about how they
are driving a secure, well-managed, well-deployed infrastructure.
I've talked with partners who have excelled at putting what they
call zero-cost deployment and zero-touch management of client infrastructures
into the very largest companies around the world. That's a huge
opportunity for partners to take advantage of.
Similarly, the Information Worker area is virtually untouched when
you start thinking about extending beyond the core function of Microsoft
Office on the desktop. I have more and more partners in the Information
Worker competency area talking about portals, what we're doing with
Microsoft SharePoint Services and Live Communications, and even
the conference meeting services from LiveMeeting that are coming
together to enable workers in ways that haven't been enabled for
the last five to 10 years.
And we've had great success with Windows Small Business Server.
I believe the combination of accounting, business applications and
Small Business Server enablement is a very large growth area for
a local or small VAR or small business partner. I really see that
as a breakthrough area.
What do you see as the biggest competitive threats to Microsoft?
I put them in two buckets: Threats with customers that our partners
are going after, and then competitive threats in terms of Microsoft's
eco-system as a whole.
First, relative to our customers, there is continued pressure to
ensure that customers are getting real value out of their technology
investments at the right price. So we will continue to see Linux
being proposed as a potentially lower-cost alternative. However,
we have pretty good factual evidence, as well as partner and customer
evidence, that it's important to look more broadly at the total
cost when competing against Linux, and we are starting to see some
pretty strong, healthy competition when there is a head-to-head
approach against Linux.
Additionally, I'd say in the business application space we have
very strong and entrenched competitors on the high end with SAP
and Oracle and in the midrange with Sage, Best [Software] and others,
and certainly on the low end with Intuit. And I believe they will
continue to be formidable competitors for us into the future and
ones that we believe we have a strong story around. But nonetheless,
there's good choice in the marketplace for customers and therefore
there's good competition for Microsoft and its partners.
If I switch over to the partner side and say, 'What's the competitive
nature with our partners?' that's an interesting one. First of all,
I think we have to deliver continually the best partnering proposition
in the industry, to current partners and prospective partners. At
the point we stop delivering that, I believe there are vendors who
have competing opportunities in every aspect of our business and
those vendors would look forward to a share of our channel.
In February, you launched the Competitive Sales Assistance
service, or CompHot line (to help arm partners with info on Microsoft
products when they're engaged in competitive bids). Can you say
how well that is working?
Competitive Sales Assistance is part of an integrated sales support
platform such that partners, both at the Registered and Certified
level, and in some cases even into the Gold Certified level, have
access to the most current, competitive knowledge and pre-sales
technical support that they would need to engage and move either
more deals through the pipe, or move deals more quickly through
the pipeline. We will be in full launch of the program in July.
In its soft launch we had over 1,000 usages of that tool. I personally
received mail from one of our Gold Certified Partners, Tim Huckaby,
CEO of InterKnowlogy. If I recall the quote correctly, he said,
'This is one of the best things to come out of Microsoft in a long
time. I was able to get high-quality information to deliver what
I needed to the customer to compete effectively, to win. I hope
Microsoft continues to invest in things like this.' So, it's early
to tell, but those who have used it are giving us good feedback.
What advice do you have for partners that want to climb the
ladder, whether from Registered to Certified or Certified to Gold?
One thing I encourage partners to do is really take the time to
invest and learn what the Microsoft Partner Program has to offer.
At the same time, take a very deep assessment of what their skills
and capabilities are today, and where they might have a natural
extension to either grow or extend their business. So, step one
is to sit down and say what are you really good at? What markets
are you really good at selling in? How do you assess your skills
from a technical, marketing, sales and delivery set? And be critical
with yourself relative to your skill sets. What partnerships do
you have, or not have? Do a capability or opportunity map in their
local market. Then marry the self-assessment of the company's skills
and availability to invest against the opportunities and benefits
that are mapped into the Microsoft Partner Program. And where there's
an opportunity to do so, sit down with a Microsoft representative,
either on the phone or in person at one of our many events or through
our account management framework. Have an open and honest discussion
about the potential ways to grow the business. Then sit down and
make commitments and goals and check in against them. Of the partners
that I've worked with directly, and I have the opportunity to do
so fairly frequently, the ones that are proving to be highly successful
are those that take the time and opportunity [to take those steps].
More InformationWhat kinds of things are you doing to better suit the requirements of larger partners?
If you look at the Gold and Certified Partner base, our satisfaction results in partnering with Microsoft have steadily increased over the last three years and are currently at an all-time high. Within that satisfaction rating, we assess both how we're doing with our sales and marketing efforts, our technical enablement and readiness efforts, account management, and how we're doing overall with ease of doing business with Microsoft, all of which are important drivers of partner satisfaction and, ultimately, ability to partner for profitability. Across the board, but especially in our largest partners, we've seen dramatic gains across all of those areas with the launch of the new Partner Program.
Is there anything in particular that they point to that's a big help to them?
Our investments in the Partner Program center around driving partner profitability. When we look at driving partner profitability, we look at two ways of doing it. Number one, what are we doing to drive up the number of deals or the top line revenue of our partners? And secondly, what are we doing to take costs out of their business? So when I look at our investments and talk to partners about how the investments are paying off, I will talk to partners who are benefiting in each of those areas.
For example, I was speaking to the CEO of Dimension Data, which is a South African-based large system integrator that does business in about 12 geographies around the world. As a result of engaging with us in the new Partner Program, they've selected three competencies for which they want to be experts in their practices around the world. They then took our Partner Program and looked at tools across all aspects of their business cycle. They looked at our business planning tools, our technical enablement tools, including training at all levels of their organization; they looked at our joint go to market planning tools, including everything from semninars to direct mail to joint account selling with our account team. And they looked at our competitive sales assistance tools, and are looking early on at what we call Channel Buidling, where partners connect with other partners in order to build out the services they offer in any geography. About one year into their effort, they came back to report to me how they're doing. And in each case they're leveraging the assets. The ones that tend to play the highest in terms of profitablity have to do with our joint marketing efforts and our lower cost of training efforts, in terms of delivering value back to our partners.