The Changing Channel

When It Comes to Microsoft Partners, Size Matters

With the tide shifting to favor Microsoft's larger partners, smaller shops need to seriously consider revisiting their partnering strategy.

Let's start by agreeing that Microsoft is a company that is in business to make money, and has the right to decide what's best for itself and its stakeholders.

Many partners who have grown up with Microsoft over the past three decades can easily forget that a partner ecosystem is still not a country and certainly not a democratic one where decisions are ostensibly made for the good of all. It might have its own constantly shifting and sometimes frightening culture, but there is no reason for partners or anyone else to expect that Microsoft will put anyone's interests ahead of its own. We've seen at least two major strategic shifts in Microsoft's relationship with partners in the past decade that illustrate this.

Partner Account Manager Creation
It was 10 years ago when Allison Watson became corporate vice president of the Microsoft Worldwide Partner Group. During the early part of her tenure in that role I had the opportunity to sit down and talk with her. At that time I was executive vice president at one of Microsoft's premier New York-based partners and Allison had come to ask what Microsoft could do to make it easier for partners to do business with them.

I explained that I was lonely when it came to Microsoft. I had nobody to talk to. There was no one person who was assigned to focus on me as a partner, so I seldom knew exactly who to go to in order to get various things done. As a result, I annoyed a lot of Microsoft people unnecessarily, and it often took way too long to get simple things accomplished, like reserving a room for a seminar at the Microsoft New York office.

While I'm certain that other VAR executives were giving her similar feedback, I was nonetheless impressed when Allison introduced the Partner Account Manager (PAM), and I was really thrilled to meet mine and start moving much faster. For eight years after that I worked closely with a succession of PAMs, the best of whom took the last word in their title, "Manager," seriously and really helped manage our company to success.

The Microsoft Partner Network Shift
In 2009 Microsoft announced the replacement for Allison Watson's Microsoft Partner Program (MSPP), which is now called the Microsoft Partner Network (MPN). Few partners took the time to read the guide that was published, but those who did were immediately up in arms, deeply concerned about the changes. Many said, at that time, that it was obvious that Microsoft was just listening to their largest partners and didn't seem concerned about the impact on smaller ones.

Part of the reason was that the MPN significantly changed the rules to accommodate a major shift in focus. Microsoft no longer wanted to level a partner organization as Certified or Gold Certified. Instead, they wanted to focus on and recognize the investments they had made in achieving competency in specific Microsoft technologies. At the same time Microsoft increased the investment required to achieve the highest level of competency by requiring that each engineer in a partner's employ could only qualify them for one gold competency, meaning that the partner had to employ at least four engineers for each gold competency in which they wanted to distinguish themselves. Microsoft called this "raising the bar." Many partners called it much nastier things.

Perhaps no group of Microsoft partners was affected as seriously as the small Dynamics partners. Many of these were very small companies of just a few people with excellent accounting and technical skills who had helped build the Dynamics channel over the years. Now, suddenly, many of them no longer employed enough people to remain at a gold level.

This might not have been as severe a problem except that, unlike the classic infrastructure partners who derive the overwhelming majority of their profits from the services they provide, Dynamics partners depend far more upon the profit that comes from license sales.

When I brought this concern to David Willis, corporate vice president for the U.S. Dynamics Business at Microsoft, he immediately assigned members of his management team to work with Dynamics partners from the northeast chapters of the International Association of Microsoft Channel Partners (IAMCP) on finding a solution that would enable those partners to remain whole. Some of the smaller Dynamics partners were trying to band together to combine their resources, but the business models they chose were unacceptable to Microsoft. David Willis' team members worked tirelessly to try to identify models that would satisfy both Microsoft and the partners.

Enter the Master VAR
Ultimately, the effort resulted in Microsoft's suggestion of a "franchise model" that was resoundingly rejected by the partners. This was followed by the Master VAR model, which is now in place. Redmond Channel Partner recently reported on the efforts of one group, Katalys Partners, that was still trying to build a model that wouldn't compromise the smaller partners' relationships with their clients while still remaining within the boundaries set by Microsoft. Microsoft shut down their Solution Provider Agreement, forcing them to find homes for their near 70 members, most of them winding up with Master VARs.

Again, this is not a complaint about Microsoft changing the rules to suit its own needs. The company has an absolute right -- in fact, an obligation -- to its stakeholders to do just that. Clearly it has decided that it wants to focus on larger partners and spend less managing thousands of smaller ones. From a business perspective, that's a sensible decision.

Ultimately, what readers should take away from this column is that the channel is once again changing. Large manufacturers and software providers now prefer larger partners. Smaller partners need to take a good hard look at their business and revisit their partnering strategy. The smartest partners invest time in creating and cultivating personal relationships that enable them to weather storms like this.

How is your Microsoft partnership? What have you done lately to shore it up? E-mail me at hmc@howardmcohen.com or leave a comment below.

Next Time: The Changing Role of IT Sales

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About the Author

Howard M. Cohen is a consultant to IT vendors and channel partner companies and a board member of the U.S. chapter of the IAMCP. Reach him at hmc@hmcwritenow.com.