Microsoft Incentives Could Just Be the Distraction you Don't Need
As a Microsoft partner, you may be under the impression that Microsoft-based incentives and margins should be your core focus. There are plenty of webinars, LinkedIn posts and presentations around how to get incentives from Microsoft. Everyone is talking about how to optimize incentives, and from a Microsoft standpoint, they are very important as they drive the right behavior for THEM, but not necessarily for YOU.
Microsoft prefers partners who can influence and sell their offerings. The partner channel, consisting of half a million partners, remains at the frontier, meeting customers every day. In my mind, incentives are a distraction for partners. I see incentives as nice to have and you should try to get them, but they are hardly important.
Getting 5 percent, 10 percent or even 20 percent on the revenue that you drive for Microsoft does not necessarily build your company’s success. It will not differentiate you, as it does not build much IP (Intellectual Property), and it will not make your company a shining star that someone will pay a good amount to acquire. If the money that you get from Microsoft is an important part of your company’s bottom-line profits, then you have a structural problem.
Your success should come out of the value-added services that you add on top of what you sell and influence for the benefit of Microsoft. Research by IDC (IDC Microsoft Partner Economic Value Survey, IDC PEVI Model, May 2024) says that a partner will add $8.45 if they are services-led, and $10.93 if they are software-led, on top of every $1 in Microsoft licenses or services. The numbers will vary a bit year over year and on the nature of your business and geography.
It is the margin that you get on the additional $8-11 that will drive your business, not the margin or incentives based on the first $1. A healthy margin somewhere north of 50 percent is a testimony to the value that you create and to be worthy of that success, you will need to find your own path.
What is important with incentives is that it is an indirect indicator of how valuable Microsoft sees you and that will have an impact on what kind of opportunities you will be able to get from them. It is important to work together with Microsoft and to develop both formal and informal co-sell activities, as well as strive to get relevant solution designations and specializations. Being on Microsoft Marketplace with a strategy to drive sales can be extremely lucrative when you do it right. So, yes, the Microsoft partnership is very important, but the incentives are not.
Do not get me wrong, if there’s money lying on the table, you should of course take it. What I am reiterating is that you should not see it as something that is important. If this money is very important to you, you've got a problem.
Your company focus is a strategic decision, and it is an especially important decision to lay out a new course on the map that takes you to where you want to be.
A few pointers to keep in mind for a successful new course:
- Nothing is more important than customer and employee satisfaction.
- You will need to sell something that solves a real problem so that you ensure great business outcomes. If you do not understand the value, no one else will either.
- Recurring revenue is a wonderful avenue for long-term growth and profitability that builds great EV (Enterprise Value).
- Dare to specialize and do not be afraid to narrow down your offerings. Partners often try to do too many things and end up being a ‘Jack-of-all-Trades, Master-of-None’.
- Forge and nurture partnerships. Make sure that you have a solid partnership strategy that has buy-in from the senior leadership.
- Be patient; driving change always takes longer than originally anticipated.
- A great leadership team is crucial, and nothing kills a company quicker than leaders who are distant, dishonest, unmotivated, uncompassionate or just have passed their expiry date.
- Have your finances in order and make sure that your CFO has what it takes to ensure that you do not run out of liquidity or try to survive on poor profitability.
If you are busy chasing incentives and margins from Microsoft, you will not have time and energy to build the most lucrative part of your business that increases your company’s value and longevity. And it’s YOUR strategic choice of direction that is important, not what suits Microsoft.
So definitely do not say no to the dollars that come from Microsoft; just do not change your behavior because of them.
As part of driving the desired behavior for your company’s success, you should align your compensation plans with the value-added services that you provide in-house and not on the revenue that comes from Microsoft. Make sure that your people’s compensation is aligned with where you see your future.
I hope this shares some valuable insight with business leaders. Let me know how it works for you when searching for the right strategic direction to benefit your company’s future, holistically!
Posted by Per Werngren on October 05, 2026