In-Depth

The Importance of Being Microsoft

Microsoft isn't just the world's most powerful software company. It's also the world's biggest brand. Here's why -- and what that means to partners.

Coca-Cola. GE. McDonald's....

They are icons of American consumerism, not to mention American culture -- decades-old brands that have become household names for people all over the world.

Nike. UPS. Ford....

Their corporate owners have spent billions of dollars to ensure that these magic words give you the right impression, the right feeling, when you see or hear them. You think fun, reliability, longevity, strength; most of the time, you think what the brand's imagemaker wants you to think. You have an emotional, almost subconscious reaction to these symbols every time you encounter them.

Budweiser. Disney. Rolex....

They're all giants, all carefully crafted and maintained, all immediately recognizable. But there is one name that stands out above them all, one mark that has risen in a relatively short amount of time to be what some experts call the most powerful brand in the world.

Microsoft.

That's right. Not only does Microsoft dominate the technology industry, it also dominates the glitz-and-glitter, high-dollar world of branding and brand recognition. It's bigger than anything the beer companies, the car makers, the clothing giants or any other massive corporate advertiser has thrown at us. Microsoft is the world's biggest brand.

For partners, the power that comes with being associated with the Microsoft name can be hugely advantageous. It can also produce negative consequences. Representing the Microsoft brand means carrying a lot of responsibility; partners, ultimately, play a critical role in keeping the brand strong.

How Microsoft Got To Be No. 1
Back in 1975, when a little software company then located in Albuquerque, N.M., began its quest for -- quite literally -- world domination, nobody knew who Microsoft was. How has the pride of Redmond gone from anonymity to fame in such a relatively short period of time?

The world-domination thing has helped. It's hard to say whether Microsoft's strong brand recognition played a role in its becoming the global technology giant, or whether its position as the runaway leader in the software industry solidified its brand's spot as most powerful in the world.

"There's a little bit of chicken and egg there," says Ove Haxthausen, director of Millward Brown Optimor, the global brand valuation unit of Naperville, Ill.-based marketing research firm Millward Brown.

It's All in the Packaging

It's a gift, mostly, but also a responsibility. Microsoft hands its partners what experts call the most valuable brand in the world. In this package of articles, Redmond Channel Partner magazine editors explore what makes the Microsoft brand so strong, what responsibilities Microsoft places on its partners to protect that brand value, and how partners handle cases where the brand's baggage outweighs its benefits. Also read:

In any case, Microsoft's desktop ubiquity has been critical to its brand's success, experts say. In April, Millward Brown Optimor ranked Microsoft No. 1 in its BRANDZ Top 100 ranking of the world's most powerful brands. The firm estimates the value of the Microsoft brand at more than $62 billion, outpacing GE ($56 billion) and Coca-Cola ($41 billion), and leaving competitors Google ($37 billion), IBM ($36 billion) and Apple ($16 billion) in its digital dust.

"The ultimate power of Microsoft is its leading position," says Jack Trout, president of Trout & Partners Ltd., a firm based in Old Greenwich, Conn., that specializes in strategic positioning. Trout is also co-author, with Al Ries, of the seminal marketing book Positioning: The Battle for Your Mind (McGraw-Hill). "When you have the leading brand, it gives you an enormous edge on your competitors. Leadership is probably the most powerful differentiator in the marketplace."

The Microsoft brand has also surged in value as the technology industry as a whole has gained more recognition over the last two-and-a-half decades thanks to the rise of the personal computer and the Internet. Google and IBM sit at No. 7 and No. 8, respectively, in Millward Brown's list. In what is perhaps a sign of things to come, China Mobile is No. 4. Nokia, Intel, Vodafone and Cisco all rank in the top 20, with HP and Dell not far behind. By contrast, long-established brands such as Ford (No. 37) and Budweiser (No. 46) from big-spending companies trail their technology counterparts.
"Computers have become household products," Haxthausen says. "If you have a computer in your house, most likely it has Microsoft [software]. There's a scale effect there that happens."

Never Ignored, Not Always Loved
But Redmond having the world's most powerful brand doesn't mean that images of Microsoft are universally positive. Millward Brown rates Microsoft's "connection" with consumers as a three -- right in the middle of a scale of five. Luxury brands -- think Porsche and Louis Vuitton -- usually dominate that category. A three rating for Microsoft, in perspective, isn't too bad.

"Relative to other technology companies that we've looked at, it's actually pretty high," Haxthausen says. Again, a lack of serious competition helps. "Microsoft connects more strongly than IBM or Dell, which certainly makes sense in the consumer business where there's a lot of competition on the hardware side and messaging on price."

The results of a Redmond Channel Partner reader survey conducted in May, though, showed that there are still plenty of negative impressions of Microsoft among the company's customers. Most respondents said that they still encounter old-fashioned Microsoft "haters" among their clients (see "Dealing with Microsoft Haters"). The hater, however, is something of a dying breed. Criticism of Microsoft now focuses less on the company's industry dominance, and more on specific issues surrounding security and pricing.

Concerns about security top the list of reasons to not like the software giant, according to survey results. Many customers see Microsoft applications as a popular target for hackers and doubt Redmond's ability to deal with those threats, responses indicated.

Pricing is also an issue, namely because many customers see Microsoft applications as being too expensive and doing much more than what they need. Complicated licensing schemes don't help.

"The products are far more valuable and feature-rich than the [needs of] the people who are using them," says Steven Lindner, CEO of Steven Lindner Holdings LLC, a Microsoft Registered Member based in Wynnewood, Pa. Lindner relates that when he visits small or midsize companies, he tries to explain his concerns about customers' infrastructure or compliance. He regularly meets with suspicion about how much value Microsoft really brings to smaller businesses: "They're not seeing it as a true opportunity to help their business. They're seeing it as an opportunity [for us] to make more money on the Microsoft brand."

And most customers still don't have many alternatives. While some respondents mentioned open source technologies as a threat to Microsoft's dominance, most indicated that the open source model has failed to make a strong impression on their customers. For operating systems and office suites, among other applications, the "Microsoft or nothing" perception lingers.

Getting Better All the Time
Then again, maybe that's not altogether a bad thing for the Microsoft brand. Trout says that industry leadership can lead not just to recognition, but to respect.

"Once people have a strong perception of your [Microsoft's] leadership and what you've accomplished, they'll respect you," he says.

Despite some lingering negative feelings, survey responses indicated that impressions of the brand are becoming progressively more positive. One reason is that Microsoft has helped its own cause -- Windows XP, Windows Server 2003 and Office 2003 impressed customers as stable releases. Plus, according to some partners, the company's pitch to small and midsize businesses is working.

"The company's done a very good job at adapting their business model and supporting the small-business segment," says Peter Ells, director of Microsoft business development and VARassist at SoftwareONE Inc., a New Berlin, Wis.-based Microsoft Large Account Reseller, Enterprise Software Advisor and Gold Certified Partner. "I've seen a ton of improvement in Microsoft's dedication to that segment, especially in the last fiscal year."

And Sol Rodriguez, director of IT at Schambach and Associates, a Whittier, Calif.-based Registered Member, says that Microsoft benefits from the inroads its brand has made with average consumers, who can also be business customers and who often attribute advances in technology to Microsoft -- whether the company has had anything to do with them or not. Some of his customers even attribute high-bandwidth Internet connections to Microsoft.

"All the things they're using their computers for in general are becoming more user friendly, more powerful, more exciting," Rodriguez explains. "They equate it al l as being Microsoft-backed. They can watch videos online and e-mail their pictures to their families and use a lot of the services offered. Everything seems better."

You Are the Brand
And everything can continue to get better for partners who know how to handle the power of the Microsoft brand. Partners can put Microsoft's powerful name to work for them, but they need to work to improve its image, too. As Microsoft's sales and support force, channel partners play a large role in setting perceptions of the software giant. And they shouldn't be afraid to talk about just how big and powerful Microsoft is.

"Because it has such a strong position in the market, there's an advantage to be selling Microsoft's products," Haxthausen says. "A brand is an identity and a reputation. The identity is certainly there, but the reputation has to do with how [resellers] deliver on the promise."

Providing hones t sales and service are a given, but there are other ways in which partners can do their part to improve Microsoft's image. Playing off of Microsoft's image as industry leader is critical, Trout says.

"Partners can take advantage of that [leadership position]," he says. "Why did they partner with Microsoft? Because it is the leader. That's exactly what they should say to their customers and prospects."

Partners can also embrace Microsoft's complexity in reaching out to customers. Rodriguez says he often diffuses common concerns about security and pricing by explaining to customers that the complexities of supporting Microsoft products -- which can involve seemingly constant updates -- really translate into advantages for users and value for money.

"I'll try to educate them about how Microsoft is supplying them with updates constantly in order to protect them," he says. "These are good things that are there to improve their security and their functionality. I try to use it as an advantage."

Gates: From Goat to Hero

Almost 10 years ago, in the throes of a lawsuit by the Department of Justice, Microsoft Chairman and Chief Software Architect Bill Gates had, at best, a fractured image. Seen by some as a persecuted capitalist and others as the head of an evil empire, Gates hardly got a hero's treatment from the mainstream press.

Last year, he and his wife, Melinda, appeared on the cover of Time magazine -- but not because of a lawsuit or scandal. They appeared with Bono, mercurial lead singer of the legendary band U2, as Persons of the Year, recognized for the charity work that has made Bill Gates the world's largest single contributor to good causes. Magazines from Time to The Economist have penned stories of Gates' generosity.

You might think that Gates' image as good guy should help Microsoft's image. Brand expert Ove Haxthausen, of market research firm Millward Brown Optimor, agrees.

"Certainly one would expect a founder like Bill Gates to be part of the brand imagery," he says. "I think a lot of IT companies have very iconic leaders, and I think that that does play a role."

But partners aren't so sure. In a Redmond Channel Partner reader survey conducted in May, most partners doubted whether Gates' improved image really helped them much in representing the Microsoft brand, although many had good things to say about the work he has done. In any case, in an era of CEO trials and corporate scandals, it can't hurt to have Gates appearing on the cover of Time for good reasons. -- L.P.

Good Times Ahead
Millward Brown Optimor gives Microsoft a "brand voltage" score -- an indicator of how likely the brand is to gain market share -- an impressive eight out of 10. That means partners will have the opportunity going forward to continue to both profit from and help build the Microsoft name.

"In the past, Microsoft has shown the ability to move within the market," Haxthausen says.

For his part, Rodriguez intends to make sure that IT perception of the Microsoft name keeps moving upward.

"It's going to be really hard for competitors to take away major market share for a long time," he says. "I'm placing my bets with Microsoft."
Right now, that gamble is as safe as it has ever been.

Additional reporting by Executive Editor Anne Stuart.

About the Author

Lee Pender is Redmond Channel Partner magazine's senior editor. You can reach him at lpender@rcpmag.com.

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