Post-$3 Trillion Market Cap, Where Do Partners Stand with Microsoft Now?

Change is the only constant. That quote is commonly attributed to the Greek philosopher Heraclitus of Ephesus, but nowhere does it apply more completely than Microsoft. In the 43 years I've been involved with Microsoft, change has been nonstop -- sometimes blinding, often confounding, deeply frustrating and always challenging. But one thing has remained constant.

Jon Shirley, who assumed the mantle of Microsoft president in 1983 after being at Tandy for 25 years, was the first Microsoft executive -- but certainly not the last -- who ever said to me, "The most important thing to us is that you get the most out of your Microsoft relationship." Since then, I have had the same sentiment expressed to me by Steve Ballmer, Sam Jadallah, Allison Watson, Phil Sorgen, David Willis, Margo Day, Chris Capossela, Eric Martorano, Pam Salzer, Kati Quigley, Pattie Grimm, Gavriella Schuster, Rodney Clark and a host of Microsoft Partner Account Managers (PAMs). It is the one and only thing -- and perhaps the most important thing -- I can think of that has been constant throughout the past 40 years.

Quotas Reveal the Underlying Intent
Many years ago, I found myself at a quarterly partner briefing in Microsoft's New York office listening to one of the PAMs, Andy Pavarini, make some announcements. At one point, Pavarini suddenly stopped and drew a deep breath, as if his next announcement was going to be difficult. The entire room quieted.

"I now have to announce that, for the first time, Microsoft has a quota for you," he said measuredly. Everyone stopped breathing.

Pavarini continued, "Starting this quarter, Microsoft wants to see you earn $250,000 per quarter in revenue for your services related to Microsoft products."

It took a moment for everyone to unpack that statement (and I'm sure there were several in that room who never did). Being an analytics geek, I immediately realized there was no way for Microsoft to measure that. We didn't report our services revenue to them. At that time, they didn't even have a deal registration system in place.

Pavarini's point was simple. Microsoft knew that if we were inspiring, selling and winning projects that involved Microsoft products, those products would get sold. Perhaps not by us directly, but customers would end up buying them somewhere. This was the very beginning of what is today referred to as "transacting" versus "non-transacting" partners.

It had always been my experience that my Microsoft partners were anxious to help me close on projects that would have my team implementing Microsoft products. Pavarini was telling us that we should expect even more enthusiasm from them.

At around the same time, then-channel chief Phil Sorgen was telling me, "Microsoft has only one job, and that is to provide partners with the best possible platform to run their solutions on." This pre-supposed that partners of that era had solutions of their own. If you asked many of them what their solution was, their response would have a lot to do with adding more infrastructure. But then-Senior Director of Dynamics CRM Bill Patterson added that we should expect to see "an evolution of solution!"

That was then, and this is now. Much of the infrastructure has been supplanted by cloud services, which has caused Microsoft partners to completely redefine their "solutions." Patterson was right.

Making the Most
Today, many Microsoft partners have clearly defined the services they offer that complement Microsoft technologies. Many are managed services providers (MSPs), cloud service providers (CSPs) and other kinds of IT service providers (ITSPs). Others create their own intellectual property, often in the form of application software, that they sell to and through the ITSPs. Both groups recognize that customers can always enjoy superior pricing on software and hardware products, so they no longer depend on those for most of their profits; instead, they depend on the revenue they generate themselves from their services and/or their software.

Microsoft enthusiastically assures them that those whose solutions involve their own services should expect to see $7.63 of services revenue for every $1 of Microsoft licensing they sell. Those whose solutions are software can expect $10.11 for every $1 of Microsoft.

For me, this defines how today's Microsoft partner can make the most of their Microsoft relationship: Leverage the reputation and quality of Microsoft products as the foundation underneath the services and software solutions you produce, and look to your own generated revenue to produce far more than any product margin. This should come as a surprise to nobody.

Where Do We Go from Here?
Many people, including occasionally myself, can imagine a time when Microsoft phases out the partner program altogether. Two headlines have changed my thinking significantly: "Microsoft tops Apple as world's most valuable public company" from last month, and "Microsoft confirms more job cuts on top of 10,000 in January" from last year.

It's hard to determine what to think when looking at these two headlines in the context of each other. One could suggest that reducing the workforce by 20 percent (by some estimates) helped Microsoft achieve its lofty new market cap. Or one could see the transactional business model for Microsoft shifting.

Many of Microsoft's products and services can be purchased or subscribed to online, and Microsoft partners continue to drive the majority of their sales. Also, there's now a large community of advisors, consultants and other resources, many of them former Microsoft employees, who help partners improve their Microsoft relationships tremendously. Perhaps this has reduced the need for such a large community of Microsoft employees and contractors.

I'll close this entry by adding my voice to the many who are encouraging you to focus on getting the most out of your Microsoft relationship. There are many resources out there to help you, both inside and outside Microsoft. Look inward to determine what it's going to take for you to get the most out of your Microsoft relationship.

Posted by Howard M. Cohen on February 08, 20240 comments

Partners, AI and Plagiarism

We have all been here before. When we first saw "VisiCalc -- The Visible Calculator," it was revolutionary: a ledger page on the computer screen. However, most early users weren't exactly sure what it could be used for. When Intel introduced its "TeamStation," we were introduced to the amazing ability to see and speak with each other from our computers. Amazing, but, again, what would we use it for?

Fast-forward to when Microsoft announced it was "all-in" on the cloud. Many customers could share one remote server -- totally revolutionary. However, early adopters feared security breaches. Non-adopters refused to let their data reside anywhere other than "inside our own four walls."

This past year, partners have been inundated with news about, and a mandate to adopt, generative AI and machine learning. The word of the year was ChatGPT. We've seen early adopters generate e-mails, letters, even whole reports and other documents using it. It's been made to create music, images, an endless "Seinfeld" episode. We've even read about how an AI "came on to" a reporter, encouraging them to leave their spouse and enter into a romantic relationship with itself.

But who really needs any of that? Once again, we are confronted with a revolutionary technology in search of practical application. Experience has taught us that those applications will eventually reveal themselves to us. In the weeks and months to come, much of this blog will examine how MSPs can leverage these new cognitive technologies to provide useful and valuable applications for their clients. There's plenty of technical information about the underlying magic, but we're going to focus on how MSPs, CSPs, SIs and other information technology service providers (ITSPs) can turn that magic into customer value.

Addressing AI Plagiarism in Your Role as Trusted Technology Advisor
To my recollection, it was HP that first used the phrase "trusted technology advisor" to describe to its partners what they should become. An online search returns literally millions of people who consider themselves to be "trusted technology advisors." I bring this up because of a fairly major wart that has grown on the surface of generative AI: plagiarism.

Actors and writers recently went on an extended strike over, in part, concern about generative AI. Actors were concerned that a GPT could be built based on a few brief recordings of them that could then generate whole performances. Writers were concerned that the models used to "train" machine learning engines were scraping their content from the Internet. In other words, it was plagiarizing them -- or at least paraphrasing them to a great extent. It was also feared that it might be impossible to tie the generated text back to the original.

These fears are well-founded. The University of Mississippi's Ole Miss newsletter published an article in February 2023 titled "Can Artificial Intelligence Plagiarize" that synthesizes much of the available reporting. In the article, writer Erin Garrett lists three separate criteria that researchers commonly use to test for plagiarism: "direct copying of content, paraphrasing and copying ideas from text without proper attribution." According to Garrett, "[Researchers] found evidence of all three types of plagiarism in the language models they tested. Their paper explains that GPT-2 can 'exploit and reuse words, sentences and even core ideas in the generated texts.'"

Your customers will be learning more and more about these plagiarism issues. The writer and actor strikes were very public and covered extensively in the news. The more generative AI technologies are explained to customers, the more concerned they will become. As you begin to propose pragmatic applications of generative AI, customers will very likely question how they can protect themselves from being sued for misusing copyrighted content.

You have two options. The first is to recommend that they consult their legal counsel (the last thing you want to do is dispense any legal advice that you're not qualified to provide). The second is to carefully track the emergence of the many anti-plagiarism tools that will inevitably be developed for just this purpose. There are, in fact, many already on the market. Just as you sell and implement data and network security systems, you will be building more business around protecting generative AI applications against committing plagiarism.

As you study the emerging AI engines, be sure to also survey the anti-plagiarism and other content-protection tools, utilities and systems as they become available. Your customers will thank you and your bottom line will grow with assured protection against legal entanglement.

Posted by Howard M. Cohen on January 12, 20240 comments

MSP Marching Orders for 2024: Realize It's All About You

Have you read the recent article about how many billionaires the channel has created? It's a perfect distillation of the core skill that channel analysts, pundits and journalists use to remain in business: misdirection. Get people to look one way while the real action is happening in another. Properly practiced, it's an amazing skill. Items disappear and reappear elsewhere. Things that were torn to pieces are suddenly whole again.

But apply it to your MSP business and it doesn't help you much. In fact, it can easily direct your attention and your focus away from where it really needs to be.

Many channel publications we've all known for years --, of course, being an exception -- are now gone. Some have been acquired and absorbed by others. Some are sourcing their content from overseas at little or no cost or value. Many make more of their money producing excellent events. What I'm concerned about is what is not showing up in these publications: you, the partner.

Why Do You Invest Your Scarce, Precious Time in Reading What You Read?
For the 35 years I spent running MSP and SI channel companies, 80-hour weeks were considered "part-time." I didn't have any "free" time, much less time to read. If I did read something, I read it because it held the promise of helping me build a bigger, better business. Back then, our business depended less and less every year on the profit realized from the sale of products, and more and more on sales of our own services. (I'm told that is still the case.)

Reading about which companies were acquiring others was not on my menu; I would hear about it in the course of conversation each day, anyway. The details weren't important to me until they were. When I entered leadership in a channel association, I started asking my peers what they read and what they wanted to see in our association newsletter. The answers were consistent: best practices, things that were working for my colleagues in the channel, strategies they were embracing that were really paying off, case studies that described how they overcame customer challenges to deliver excellent solutions.

What they were most interested in weren't stories about billionaires, but in stories about those who were just like them.

More Than Ever Before, It's All About You
As we look ahead into 2024, it has never been more important to fully embrace and appreciate what our customers are buying today. They can buy the same products anywhere and, even if they buy them from you, that doesn't mean much to your bottom line. Our own channel colleagues continue to discount so severely that product profit is, more often than not, basis points.

What customers buy from you is you. They buy into your expertise, your knowledge, your experience, your methodology and your professionalism. They buy from you instead of your competitors because they are impressed by the way you present yourself and the services you are proposing to provide. Assuming your services are superior, the more you invest in improving the way your people present those services, the more customers will choose you and the more customers you will add to your portfolio. Isn't that what you're in business to do?

It's a powerful word, one that we all want to apply to ourselves. Those who recognize the need to earn the right to call themselves professionals make the investments, put in the work and constantly strive to be recognized for their professionalism. In pursuit of that, they look to the industry publications they read to contribute to their efforts.

So, what can you do in 2024 to contribute to the effort to help the channel earn its reputation for being a community of professionals? Focus on your team. Evaluate how you present your practice and your offerings. Evaluate the quality of your collateral and promotional materials. Evaluate the content of your customer contact strategies.

How do you follow up on prospective customers? How do you follow up on project progress and completion? Are you building extraordinary customer experiences? Are your employees enjoying extraordinary experiences working on the team? Are you participating in activities that improve your professionalism and profitability? Are you consuming content that helps you improve?

One thing that has consistently contributed to my professional growth has been my participation in many of the great organizations, associations, societies and other groups that support the channel. I've learned much from members I've met in many of them. I've been proud to contribute my time, energy and talent to help grow some of them. Every investment has returned many times over.

"Marching Orders" was a series we published yearly back when this column was called "The Changing Channel." When the channel had changed completely enough, we shifted the focus to where it now belongs, to you the MSP. But this annual tradition hasn't changed. So, my "marching orders" for this year are simpler than ever before.

Focus on you. Your work must be totally focused on delivering value to your customer, but your ability to earn that business totally comes from you. Promote you. Show up at local and regional events to share your insights. Write for local publications to share your insight and let potential customers see it. Be very clear and specific about who you are, what you offer and why customers should choose you to help solve their IT challenges. You've carefully built your preferred stack of technologies that you include in your projects. When the makers of those products offer to co-market or co-sell with you, be sure there's as much emphasis on you and your services as there is on their products. It's all about what you do with those products, so make sure the messaging reflects that.

Learn more about the organizations that are out there to help and support you. Choose the ones that contribute most to your resolve to elevate your professionalism and your customers' perception of that professionalism.

Two things I'll ask you to do to get started. The first is to carefully and thoughtfully evaluate your own professional posture. Does your practice show up as professionally as you want it to? The second is to share your thoughts about this with me. I want to hear from you about how you're amping up your professional presence. What do you think about what I've said here. Let's launch a dialogue and get ready for an amazing new year.

Posted by Howard M. Cohen on January 09, 20240 comments

How Does Your Partner Practice Grow?

One of the most memorable quotes from legendary sales motivator Zig Ziglar is, "If you're doing what you've always done, you're probably getting what you've always gotten." But that's no longer true. Many channel resellers who continued to depend on product resale proved that to themselves very painfully. Each year, they were doing more than they had ever done and sold more products to more customers, but each year they actually got less than they had always gotten.

The current state of our channel now is better captured by Lewis Carroll in "Through the Looking-Glass," in which the Red Queen intones, "It takes all the running you can do to keep in the same place." This is mainly because customers are now asking the same question posed by fabled philosopher Janet Jackson: "What have you done for me lately?"

To Do and Earn More, You Need To Learn More
When the arrival of cloud computing totally disrupted the product sales opportunity for channel partners, many made the wise decision to become managed service providers (MSPs). No longer were their earning opportunities controlled by pricing competition; instead, they now could distinguish themselves through the quality of the services they delivered and the trust they earned from their customers by being true professionals.

However, some resellers started calling themselves MSPs but didn't really change their business practices much. As a result, the services they delivered were substandard and, in many cases, damaging to their customers. To know how bad the results of such behavior could be, you only need to look back as recently as January 2022, the U.S. Cybersecurity & Infrastructure Security Agency (CISA) issued an alert titled, "CISA Insights on Risk Considerations for Managed Service Provider Customers." Just the first paragraph is chilling to every member of our community:

To aid organizations in making informed Information Technology (IT) service decisions, the National Risk Management Center (NRMC) at the Department of Homeland Security's (DHS) Cybersecurity and Infrastructure Security Agency (CISA) developed this set of risk considerations for Managed Service Provider customers. This framework compiles information from CISA and IT and Communications Sector partners to provide organizations with a resource to make risk-informed decisions as they determine the best solution for their unique needs. Specifically, the framework provides organizations with considerations to incorporate into their IT management planning and best practices as well as tools to reduce overall risk.

The bolded text at the end is emphasis CISA's, not mine.

This damaging report was the direct result of a sizeable proportion of our channel colleagues deciding to "fake it" instead of "making it." Customers paid the price, and then the other proportion of our community suffered, too. (How many times have you heard a prospective customer say, "Oh, you're an MSP? No, thank you. We've been burned before by an MSP.")

Where Do We Go from Here?
I closed the very first post in this blog series by asking, "How are you growing your MSP practice?" I plan to keep asking that question over and over, always suggesting possibilities and hoping to hear from you about how you're growing your MSP business.

One thing is for sure: The practices that are succeeding today have specialized. These partners have differentiated themselves by focusing on specific technologies and their corresponding specific business needs. Many have chosen to become managed security service providers (MSSPs), which makes tremendous sense since most customers need secure data and networks. There's plenty of opportunity there.

Microsoft, in particular, has encouraged many to become cloud solution providers (CSPs), mainly because Microsoft has truly gone "all-in" on the cloud, as former CEO Steve Ballmer loved to expound upon. In fact, a few years ago in this blog, I suggested some possible growth paths for today's MSPs to specialize and grow in. Check out what was at the top of my list:

  • The Cloud Services Provider (CSP)
  • The Data Scientist Service Provider (DSSP)
  • The Software-Defined Services Provider (SDSP)
  • The Automation Services Provider (AuSP)
  • The Artificial Intelligence Services Provider (AISP)
  • The Internet of Things Service Provider (IoTSP)
  • The Universal Communications Service Provider (UCSP)
  • The Vertical Services Provider (VSP) -- many flavors!

I'd be willing to bet that there are those of you out there now who are working on many of the others on this list. Some of us have started using the catch-all acronym ITSP to refer to all kinds of Information Technology Service Providers. The more we can grow the need for such a collective acronym, the more mature our industry becomes.

Have I missed any? Are you developing a specialty that I haven't mentioned in this list? We would all love to hear from you about it. You can always reach me directly at [email protected].

Posted by Howard M. Cohen on November 28, 20230 comments

Across Microsoft's Various Partner Program Changes, Nothing New Under the Sun

The first anniversary of the introduction of the Microsoft Cloud Partner Program (MCPP) replacing the Microsoft Partner Network (MPN) will be on Oct. 3, 2023. This occasion brought me back to the first year of the introduction of the Microsoft Partner Network, which replaced the Microsoft Partner Program (MSPP) in 2009.

Many things happened in 2009 that weren't readily apparent to partners. For one, Channel Chief Allison Watson and BMO VP Jon Roskill were each given the other's job, and both were congratulated on their promotion. That this all happened just before the Worldwide Partner Conference (WPC), the former name for the "Inspire" conference, hinted that major change was about to occur.

That something was the new MPN, which was presented as "something you're part of instead of something you just sign up for" or something markety like that. It was introduced with all the expected "landing gear" and "air cover," leaving some of us with the uneasy feeling there was another shoe waiting to drop.

We nicknamed the other shoe as "The Exclusivity Rule" and, though it sounded almost innocuous, it was anything but.

Let me preface by saying that, at the time, I was working for the No. 1 partner in the Partner Locator website, which was sorted by how many competencies a partner held. We held 30 of the 31 then-available competencies. The only exception was "white-box," which we simply didn't do. The remarkable thing is that we were, at that time, a company of only 17 people.

The Exclusivity Rule
To read it, the change seemed minor. Every competency was earned based on four technical people from a partner's organization taking training and passing tests for each of several topics. Now, in the new MPN, if you wanted to earn a Gold Competency, those four people had to be unique. You couldn't have the same people pass multiple tests. In other words, for each Gold Competency you wanted to earn, you had to have four more employees.

This meant that, under the new MPN, the little partner I worked for would have to grow from 17 employees to 120 to keep all of our competencies. As you can imagine, this was not well received.

What followed were negotiations. At that time, I served on the board of the International Association of Microsoft Channel Partners (IAMCP) and we quickly met with Roskill, who was still trying to "get into the saddle" of his new channel chief position. At first, Roskill asked us to be patient with him as he learned the new terrain. But by the end of the first meeting, it was Roskill who was listing off a variety of possible solutions.

In the end, we came to an agreement that enforcement of the exclusivity rule would be delayed by a year. This gave all partners the opportunity to determine which competencies they really wanted, or to drive themselves out of business by hiring too many new people at once. For many, it was that serious.

Remarkably, by the end of the first year of MPN, the dust had settled. Microsoft had demonstrated how serious they were about having all partners really declare their true expertise, and partners had actually come to understand the value of that to themselves. A new generation of proactive partner-to-partner (P2P) partnering began.

Back to the Future
Which brings us to today, a year after the introduction of MCPP.

It would seem that the big change Microsoft's marketing gremlins have snuck into the MCPP is that they now refer to it as the Microsoft AI Cloud Partner Program. No surprise there. A decade ago, everything got the label "cloud" slapped on it because it was cool and current; now everything is AI. In March 2022, during his brief tenure as Channel Chief, Rodney Clark posted a blog pre-announcing the impending change from MPN to MCPP. In it, he led by describing Microsoft's three major commitment areas:

  • Strengthening our digital capability
  • Deepening partner technical capabilities
  • Streamlining engagement between Microsoft and our partners

Just for perspective, I sold my very first Microsoft software license in 1981, years before there was any formal partner program. Those three priorities are identical to the priorities Microsoft had then.

They also re-spun the competencies as "capacities," and Clark talks about the new program focusing on proficiency in six solution areas:

  • Data & AI (Azure)
  • Infrastructure (Azure)
  • Digital & App Innovation (Azure)
  • Business Applications
  • Modern Work
  • Security

That said, Clark announces the new "partner capability score," which reminded me of the days of Kevin Turner and the wonderful "stack ranking" our Microsoft friends endured. Now it's the partners' turn.

Reading the Tea Leaves
It isn't popular, but my calculation -- based on all the conversations I have had with people throughout the Microsoft partner ecosystem -- is that the introduction of the Microsoft AI Cloud Partner Program is another round of rearranging the deck chairs. Beyond the nomenclature and some program processes, nothing much has really changed.

That said, I will repeat advice I have given previously in this column. Microsoft produces some wonderful services. Some of their specifications and controls start to resemble the complexity of the ancient days of mainframe operations, but that actually provides some additional justification for the role of partners.

As the programs age and rotate names, my advice has devolved into one simple suggestion: Treat Microsoft's partner programs with the same level of benign neglect that they treat you with. Focus more of your energy on banding together with other trustworthy, reliable Microsoft partners and others who can augment your offerings with their own and expand your available market. Find partner associations that serve your needs rather than Microsoft's. They're out there!

Most important, focus on your own sustainable competitive differentiators. What proprietary intellectual property can you offer to customers? How much better are your services than your competitors', and why? You supply the leadership and let Microsoft supply the content. If you look deeper into what they do and ignore what they say, you'll see that they really want you to evolve this way, too. Just for different reasons.

Posted by Howard M. Cohen on September 25, 20230 comments

AI and the Evolving MSP: The CrushBank Case Study

Here at The Evolving MSP, we’ve been strongly advocating for the partner community to explore new, out-of-the-box ways to survive in the post-volume sales era. For Microsoft partners, that inevitably means finding a place in Microsoft's generative AI vision, whether that's through AIOps, AI-powered development with Power Platform or something else.

To help MSPs game-plan this transition, we're going to spotlight some partners that have made the AI evolution successfully -- starting with CrushBank.   

Countering with a Contract Creates CHIPS
Thirty years ago, in 1993, the IT department at Hofstra University engaged a recent graduate to help them with their internal ticketing system. He, in turn, reached out to a friend who had just graduated from the University of Michigan (go blue!).

When the university offered to hire them both to run the facility full-time, the two students, Evan Leonard and David Tan, faced a difficult decision: take the job or continue along the path they had already chosen, which was to operate their own business. Leonard and Tan proposed a different approach: that Hofstra contract with their new company, CHIPS Technology Group, to operate their IT systems for them. Hofstra agreed.

This would be the first of thousands of contracts over the next 30 years during which CHIPS established itself as a leading reseller, Microsoft partner, then managed services provider (MSP) in the IT channel. Redmond Channel Partner included CHIPS as one of the Top 350 US Microsoft Partners in March 2021.  Today, their mission statement is, "To make our clients' lives better by creating a secure and modern workplace."

The True Definition of an Evolving MSP
Leonard and Tan had always driven their business to be a leader in adoption of new technologies so they could bring them to clients faster and better than their competition. At first, they focused on guiding their clients to migrate from Novell's Netware to the new world of Microsoft Windows networking and servers.

When Microsoft Lync first emerged, CHIPS built its own Lync service to offer to clients rather than depend upon early cloud-based offerings.

When Teams was introduced, CHIPS raised the bar by ingeniously integrating it into their own IT Service Management methodology, creating a new team for every service ticket they opened. This kept all information about every ticket completely under control and instantly accessible at any time.

Artificial Intelligence Intellectual Property
When IBM introduced Watson, Leonard and Tan seized the opportunity to continue their path of applying the latest emerging technologies to their own operations, creating CrushBank in 2015 -- with Leonard as CEO and Tan as CTO -- to leverage Watson's machine learning (ML) and artificial intelligence (AI) services to optimize support delivery.

According to Tan, "Basically, what we do is ingest all the data across your organization into a back-end powered by Watson, IBM's AI platform, and we make it available quickly, efficiently, in real-time for your technicians when they're trying to resolve tickets. We also then leverage the same AI to optimize a bunch of other processes in your organization. Things like assigning type, subtype and item to a ticket, calculating budget hours, analyzing the concepts and entities with tickets that come in -- basically just making all that data available, unlocking it, enabling organizations to really supercharge their delivery."

Twenty-five years in the IT business informed every design decision Leonard and Tan made in developing CrushBank. "The whole idea," explained Leonard, "is that Level 1 techs don't have to spend as much time on Google to find the information they need quickly. They don't have to bother your best engineers with questions when the information is readily available to them from CrushBank."

"And that's one of the first impacts with CrushBank," he continued. "The client experiences fewer escalations and techs resolve tickets faster."

Putting CrushBank to Work in Your IT Practice
CrushBank describes its core product, CrushBank Resolve, as "the only application that uses Machine Learning and AI across multiple tools in the IT tech stack. CrushBank unlocks a firm's proprietary content and historical ticket notes to provide invaluable support information and then uses that same technology to categorize and classify client interactions for improved decision-making. Founded by industry leaders, CrushBank decreases escalations to Level 2, increasing productivity and customer satisfaction. CrushBank searches and categorizes more than 25,000 tickets every day."

In June 2021, Crushbank Resolve was integrated into ConnectWise Manage, making it available to firms using ConnectWise to run their ITSM businesses. CrushBank Resolve operates inside ConnectWise Manage to present the vetted and ranked answers from a rapid search of PSA/ ITSMs, document management systems, configuration management databases, SharePoint pages and publicly available information from Microsoft and Stack Exchange. As a result, Resolve compresses the entire user support process, improving the accuracy of IT support, boosting engineer efficiency and increasing user satisfaction.

In addition to improving IT engineers' productivity, CrushBank Resolve enables newly hired IT engineers to fast-track their value to the organization by:

  • Accessing dark data, such as customer support records, which accounts for 90% of most companies' information.
  • Presenting customer-specific support information proactively even before the engineer becomes intimately familiar with the client environment.
  • Learning from every interaction to store experiences and improve future responses.

CrushBank Resolve also reduces the high cost of technical turnover. Whenever an IT professional leaves, the former employer pays 100% to 150% of the departing employee's annual salary to replace the outgoing talent. CrushBank's Resolve archives each IT employee's institutional knowledge in real time, minimizing the "brain drain" inherent in every departure.

Posted by Howard M. Cohen on August 30, 20230 comments

Filling in the Blanks of Microsoft's AI Guidance for Partners

Based on this year's Microsoft Inspire conference, it seems that a cycle of predictions that started a dozen years ago has finally realized its full fruition. Back then, in 2011, Product Manager Bill Patterson did something no one else had done: He launched the 2011 version of Microsoft Dynamics CRM in the cloud before it was distributed on media. As then-Global Channel Chief Phil Sorgen explained to me, "Microsoft only has one job and that is to provide a platform that partners can run their solutions on." This, of course, presupposed that partners had their own solutions.

For his part, Patterson explained that we would someday see "an evolution of solution," suggesting that when solution providers refer to their "solution," they're referring to more infrastructure. "Customers demand business-relevant solutions," explained Patterson. But where would those come from?

Two years later, when he became corporate vice president of Small & Midmarket Solutions & Partners (SMS&P), David Willis implored partners to start thinking about creating their own intellectual property. He foresaw a time when, if you didn't offer your own IP, applications, data transfer methodologies, utilities and more, you'd miss the coming opportunity.

My only question has remained the same for all these years: How did they know? It is sometimes startling how accurate these Microsoft partner execs' predictions were. As reselling products became more of a losing proposition, smart partners heeded the advice of these leaders. They started building, packaging and marketing apps. They focused on verticals, which made their targeting laser-like. They became familiar and then expert at providing once-considered unsellable services like consulting, systems design, project management, business process analysis, information architecture, governance and so much more.

I'm not sure we'll ever really see a repeat of such foresight. At this year's Inspire, Chief Partner Officer Nicole Dezen explained the "new" Microsoft AI Cloud Partner Program with the same glowing terms with which the earlier Microsoft Partner Network, the Microsoft Channel Partner Program and other iterations were introduced: "The next generation of the MCPP, one designed to put partners in position to benefit from the changing and increasingly complex demands of modern customers."

Then came the patriotic ultimatum, a clear echo of the past: "Partners who lean into this new economic opportunity are creating value for their customers, for their own company, and for the greater economy of their community or country."

A dozen years ago, Microsoft was talking about the cloud. Now, they're talking about AI. If he were still at Microsoft, Steve Ballmer would call this the latest "Big Bet."

Save the Mile-High Platitudes -- Where's the Beef?
Perhaps I'm suffering from six decades of listening to all this fluff, but I was looking for the guidance for partners to find where they fit in the new AI "opportunity." It may have been out there, but I don't think it made the main stage at Inspire.

When partners lost the income opportunity from selling servers, they wanted to know how they could replace all that lost revenue by selling cloud services. Sometime around 2006, now-departing Corporate Vice President of Business Applications Vahe Torossian explained to partners that if they didn't embrace the cloud, within four years they'd become irrelevant. Still, the only guidance we seemed to get at the time was that we'd have to sell twice as much to make similar money. (That fell flat, no surprise.)

Now we're all running around like Chicken Little saying, "The sky is falling," worried about whether AI will take away everyone's jobs. Very few partners have the experience, skills and maturity required to determine for themselves how they can best take advantage of the AI "opportunity." The overwhelming majority of partners are struggling to figure that out.

Those of you who remember the Microsoft Professional Certification program may also remember my skepticism at that time. Then I found out that the training was not professional, and didn't lead to any formal certification. I was dismayed, not shocked. The approach to the AI "opportunity" so far seems similar.

Potential Beef
If you possess significant levels of sophistication in high-level development, you're probably already at work on your own applications that integrate AI technology. Bravo. Otherwise, you're back where you were when server sales went away. If you don't do app dev, what do you do next?

The answer will sound familiar, but the reality of AI technology is that the real opportunity for most partners lies in application. AI and machine learning are being incorporated into everything from IT support to retail to transportation, manufacturing and much more. The available applications exist as tools meant to support the activities of human users. They require a veritable slew of additional fee-based services that you can provide, either yourself or through partners. These include user training and support, strategic consulting and planning, provisioning, monitoring, management, regular client meetings to discuss planned improvements, and much more -- limited only by your innovative imagination.

Perhaps the best news is that the providers of these AI/ML-based applications need deployment partners. They are looking for partners who can effectively present their solutions to potential customers, then influence and close project deals. Then they get the opportunity to perform as many of the deployment tasks as possible to earn substantial additional revenue, both one-time and recurring.

Microsoft Beef
I am totally confident that our partners at Microsoft will continue to bring out new AI/ML-based offerings for us to market to our customers. I'm also confident that these products will be excellent by their 3.0 or 4.0 versions. But for right now, here's what partners need to think about and start planning for.

The most direct path to AI/ML success is in the configuration, design and deployment of reliable software platforms and products that incorporate AI technologies. The extra bonus is that the software developer will be there to train, support and guide you. As always, you need to interview them, evaluate their program, research their success rate and reputation, and decide if they're the kind of company you feel comfortable partnering with.

As always, watch out for brash, new startups with no ballast or track record. You may find one diamond that makes all the digging worth it, but better to stick with the reliable partners you've always been comfortable with. They'll be measuring you for your ability to influence and bring in projects that pull through plenty of their licensing. They'll be recognizing that by helping you grow your company in all the right directions.

The Evolution Continues
The predecessor to this column was called "The Changing Channel." At a given point around 2017, we decided that the channel had changed; where there were once resellers, there stood MSPs, then CSPs. We launched "The Evolving MSP" to track the more gradual growth of those who made the transition in earnest.

There's no question that AI and ML are incredible fertilizers for the seeds that service providers have planted in their businesses. The trick is to not try to overshoot your own capabilities: Apply the technology for fun and profit.

Posted by Howard M. Cohen on August 01, 20230 comments

Power Platform as Survival Strategy for Microsoft Partners

There came a time when Microsoft and other channel partners realized their reseller business was going away. Cloud had burst onto the scene to intense, though mixed, reception. Resellers had serious concerns about security, privacy and reliability of cloud services, and they spared no effort making sure their customers were aware of this. After all, cloud replaced so much of what they were currently doing for those customers. It didn't really matter whether their concerns were well-founded or not, and many simply didn't make any effort to see for themselves.

Then their vendor-partners, foremost among them Microsoft, set about proving to customers that cloud was indeed the nirvana they were saying it was: very secure, very resilient, fully redundant and very reliable. Were you to ask senior executives at Microsoft at the time, they'd say that proving their cloud services to be trustworthy was an existential demand. And they warned partners that failure to embrace these cloud services would soon render them obsolete and irrelevant.

So Where Do We Go from Here?
Many Microsoft partners had long ago pinned their futures on reselling Microsoft and related products -- servers, storage, power conditioning, routers, switches and so much more. Now, suddenly, that list of salable products had been chopped to ribbons. No more servers, no more storage, fewer routers and switches.

Partners scrambled, seeking a way to shift their businesses to a model that would continue to grow into the future. Some embraced cloud mightily and began learning how to combine cloud services to build bigger, more profitable bundles for their clients. Some insisted that their traditional reseller business would serve them well into the future. Some realized the import of something then-Microsoft-channel-chief Phil Sorgen said to me back in 2011 when talking about how he saw cloud impacting partners: "Microsoft really has only one job. That is to provide an excellent platform that partners can run their solutions on."

This presumed that the partners of that time actually had solutions. Bill Patterson, then Microsoft Dynamics CRM product manager, observed that when most partners referred to themselves as "solution providers," what they meant by the word "solution" was simply more infrastructure: Add more and more infrastructure to solve problems. Patterson went on to suggest that we would witness an "evolution of solution" with customers demanding far more business-relevant solutions.

Both Sorgen and Patterson were, of course, completely right. Microsoft partners who heeded these words from senior Microsoft executives began to plan how they would go about creating or otherwise obtaining solutions that would be business-relevant and would run well on Azure, or in conjunction with then-Office-365. Most frequently, the question arose, "How are we going to get into appdev?"

The Path to the Evolution of Solution
Over a decade later, many resellers have transformed themselves into managed service providers (MSP) or managed security service providers (MSSP) and have shifted their focus from product sales to service engagements. Some have made deep investments in training and qualified experts, while others have merely invested in having "MSP" crash-imprinted on their business cards. The former are flourishing, while the latter only serve to make it harder for everyone by repeatedly failing customers and giving the MSP role itself a bad name.

During the same period, talented developers realized that more people felt they should have more control over the software that runs their companies but couldn't imagine themselves learning how to code. They ended up in the same boat as the former resellers wanting to create applications but not wanting to learn how to code. These talented developers decided to apply the models that were successful in OS user interface design to coding of applications. They developed platforms that enabled any business user who was familiar with how processes worked in their company to convert that knowledge into applications that would automate those processes. The interfaces for these were point-and-click icons that could be dragged-and-dropped into the proper sequence to perform most any typical business function. By moving these icons into place, anyone could fashion a working application without writing a drop of code.

In just the past few years, these platforms have been christened with a name that was most recently validated by the assignment of its own acronym by Gartner: LCAP, which stands for "low-code/no-code application platforms." Low-code refers to scenarios in which the non-programmer or citizen developer would create an application that demonstrated the involved workflow, which they then provide to a professional developer who would add code to complete the application. No-code is just what it says it is: You build it, then you run it. No code at all; just icons dragged-and-dropped into place.

At the end of last year, Gartner validated everything by providing a Magic Quadrant for these platforms The evolution of solution had begun.

Microsoft Leads the Way
While Microsoft was neither farthest to the right for completeness of vision (the horizontal axis of the Gartner Magic Quadrants) nor highest up for their ability to execute (the vertical axis), it was high up and to the right in the "Leaders" quadrant. Some Microsoft partners were surprised to see it there and puzzled as to how it enabled LCAP application development, and with which Microsoft products.

They soon found out the answer was the Power Platform, which was designed as a low-code platform enabling anyone to build custom applications and automate workflows. Speaking in native Microsoft, the goal was to accelerate digital innovation and transformation to help everyone do more. Consistent with its larger strategy, Microsoft launched the ISV Connect program which would help ISV partners develop low-code/no-code solutions and publish them on the Microsoft Marketplace.

Microsoft's vision for the Power Platform is "to empower businesses to do more with less by making it easier than ever to securely scale low-code, increase organizational collaboration for accelerated innovation, and infuse AI and automation into all of your business processes."

Occupying 'The Middle Ground'
As with any new technology, the arrival of LCAPs delivers excellent opportunities to Microsoft partners to seize the middle ground, offering to build applications for their customers using Power Platform. The idea is to build your own engagement model to first assess the current state of the customer's IT environment, then apply your LCAP to develop and deliver relevant and impactful solutions with no sign of infrastructure in them. Instead, they're totally business-relevant applications provided by partners.

At any given time in the history of personal computing, there has been little that partners do that customers could not ultimately do themselves. Customers could, if they wished to, install and implement servers, storage, routers, switches and other infrastructure components -- but they preferred to have partners do it for a fee. Provisioning cloud services, security, high-availability and much more were all possible for an end-user to accomplish, but seldom attempted. Users value the services of partners and are more than happy to engage them.

The takeaway here is if you're looking for ways to expand your business to recover the lost reseller ground and then some, explore LCAPs. There are hundreds upon hundreds of them. Master any of them and create applications for your customers without ever learning to produce even one line of code. The catalyst for the dawning of the age of the evolution of solution is LCAPs, and they are here.

Posted by Howard M. Cohen on June 26, 20230 comments

For Proactive MSPs, Expansion Is the Key

One thing you can be certain that every MSP wants to do is to grow their practice. There are really only two ways to go about that: One is to go out and create new customers, and the other is to sell more to existing customers. That's it.

You're probably thinking about the countless times you've heard, "It's five times easier to sell more to an existing customer than it is to create a new one." That's true, but have you ever thought about why? You already know your existing customer, and they know you. They trust you and they respect your opinion so that they'll consider anything you suggest. This cuts the entire front end of the sales cycle, the part that typically takes the longest. You've already pursued the account, made them aware of you, encouraged them to consider meeting you, penetrated the account, qualified them and proven your value. Sales cycle slashed!

What Else Can You Sell to Them?
Portfolio expansion needs to be a constant mission. You don't have to create a new service to generate great profits selling it.

The first "MSP" I worked with was Pivot Technologies in 1997. I was EVP at MTM Technologies (originally Micros-to-Mainframes) and we had acquired Pivot to expand our offerings. The term "managed service provider" hadn't been coined yet, so ours was a "network monitoring and management service." Our service connected to a customer's network and monitored the Simple Network Management Protocol (SNMP) management information base (MIB) in every device on the customer's network that had one. When anything went beyond threshold or otherwise outside of acceptable performance parameters, we saw it. We then assessed the anomaly, determined a course of action and reached out to the assigned resources to resolve it.

Truth be told, very seldom did a MIB indicate a problem. The bulk of our alerts came from either carrier outages or power outages. Our greatest skill was in threatening notification of the consumer affairs authorities. We were totally reactive.

Most of today's MSPs are in the midst of a journey across a continuum that began with "reseller" and ends with a complete transition to service provider. As they launch into this journey, they still have product sales to lean on, but the return on those sales keeps diminishing. The most successful MSPs have worked hard to reduce dependence on top-line lifting product sales. Some have eliminated product sales from their portfolio altogether, preferring to partner with a catalog house or other reseller to furnish products to their customers. They've realized that the slim margins available from product sales evaporate into logistics for moving those products and credit extended to customers during the acquisition cycle. They've decided to let those be someone else's problem.

Reactive monitoring and management services have become the base requirement for MSPs. What was our whole business at the end of last century is now the bar to entry. Many MSPs who began there soon found themselves uncompetitive. They needed to do more.

The most successful MSPs looked hard at their customers to figure out what more they could do for them, then sat down with their customers and directly asked them. What they learned is that the number of things customers need from them rises as the customer size gets smaller. The largest companies need them to extend and complement their own IT departments, providing additional skills during peak periods, and many of them have created great success by doing just that.

Midmarket and smaller companies need far more specific assistance, beginning with the administration of their IT estates. On any given day, a typical IT environment has many needs for adds, moves and changes. Users need to be onboarded and offboarded. Data sets need to be migrated. Security needs penetration testing or adjustments. These customers simply don't have the skills on-staff to perform these kinds of activities. They need someone knowledgeable to do that for them. And that person needs a backup. And the company often has no idea how to hire those people, nor do they have budget for more FTEs.

License management, optimization, backup assurance, failover testing -- the list goes on. The only limit to the services you can add to your portfolio is your own imagination and spirit of innovation.

There Be Tools Out There!
As there are many resellers who have been slow to transition to service providers, there are vendors that have been slow to realize the core change their partners have undergone. I first experienced this in the early part of this century when vendor representatives kept visiting me and extolling the enormous margins I could achieve selling their products. I would calmly explain to them that they were describing a fantasy, that there was no longer any substantial margin from product sales because our channel colleagues had discounted it all but completely out of existence. Logistics and credit swallowed the rest.

It's likely that many IT product vendors are still scratching their heads trying to figure out how to motivate their channel. Some are probably planning a return to direct sales. Others figured out the answer.

In the early days of the channel, there was something we called a "consultant's license." It gave the holder access to a software license not to sell to their customer, but to use on behalf of their customer. You needed to have a separate consultant's license for each customer you were using the software for. Having that license, you could charge your customer both for the availability of that software, and also for anything you did with that software. Software became a tool we could use to create new services to sell to our customers.

Citrix Systems saw this as a survival strategy at one point. They had just sold their core technology to Microsoft, which became the Terminal Server. Following the advice of some of their more astute partners, they became a forge for tools to manage virtual desktop infrastructure systems. They have remained among the foremost toolsmiths in the IT industry for several decades now.

Today, "toolsmith" has become the ball game. Smart vendors have re-imagined how they sell their products to enable channel partners to create and provide new services to their customers. The earliest of these, since the emergence of the cloud, has been software tools to facilitate migration from on-premises systems to cloud. Some have automated key processes, like running scripts, to make it easy for their partners to deliver new services. Others facilitate optimization of communications and other services.

Former BitTitan CEO Geeman Yip was another early IT toolsmith. "Especially with service providers, where margins are shrinking and it's getting more complex with fewer resources with which to do more," explained Yip, "one place you can lower costs is by eliminating all the mundane tasks. The things that are clearly documented standard operating procedures that don't require anyone to think about. We should be automating all that because that's going to allow us to be more efficient and more effective and more competitive."

BitTitan's MigrationWiz was one of the first great examples of how MSPs and other ITSPs can innovate new services based on new tools becoming available to them. As the channel moves further away from being a channel for the sale of products and toward being a community of professional service providers, those who apply their imagination to the innovation of new services and new offerings for existing customers are the ones who will grow their businesses most rapidly.

Posted by Howard M. Cohen on May 22, 20230 comments

AIOps Key to MSP Survival in the AI Revolution

P.E.B.K.A.C. If you're not familiar with this acronym, it refers to the part of the network that network engineers say is the hardest for them to manage: the user. Also known as "The Part Existing Between the Keyboard And the Chair." The user is considered hardest to manage because they're human. Unlike digital devices, they don't respond the same way to the same instruction given repeatedly. They have good and bad moods. They become distracted. They make mistakes. They are, simply, unpredictable. That's tough to manage.

As I look around at what my journalist colleagues and I are writing and presenting about current IT events, I find the pages filled with stories of artificial intelligence (AI) and its progeny, Microsoft Bing/Sydney, Google Bard, Copilot and many others. A plethora of platforms are incorporating virtual assistants to take notes for you, summarize meetings for you, call out action items to assign and more. As they do, more and more users are shaking in their boots, waiting for those AI assistants to take over for them, eliminating the need for them, replacing them with a consistent, reliable, manageable alternative. It seems everyone is starting to forget who is the programmer and who is the program.

Bringing relief to these users requires training. Ask yourself, who do you partner with today to provide end-user training? What are they suggesting your customers need? Is it enough? From the earliest days of "solution selling," we acknowledged that it was as important to identify and fill the need for training as it was to identify and fill the business operational needs. Without trained users, technology sits idle and returns nothing on the customer's investments. That hasn't changed.

Then, of course, there's Skynet. Every Terminator movie reminds us that the day will come when the machines take over. Programmed to protect the planet, they realize that the greatest threat to its continued existence is us, people. So, they commence the process of eliminating us. Lest you think the producers of this successful movie franchise are the only ones who hold serious existential concerns, I pulled back the following three quotes from an article I wrote in 2017. Important to note who is being quoted:

"I am in the camp that is concerned about super intelligence. First the machines will do a lot of jobs for us and not be super intelligent. That should be positive if we manage it well. A few decades after that, though, the intelligence is strong enough to be a concern. I agree with Elon Musk and some others on this and don't understand why some people are not concerned." --Bill Gates

"I hope we're not just the biological boot loader for digital superintelligence. Unfortunately, that is increasingly probable. AI is our biggest existential threat." --Elon Musk

"The development of full artificial intelligence could spell the end of the human race. It would take off on its own, and re-design itself at an ever-increasing rate. Humans, who are limited by slow biological evolution, couldn't compete, and would be superseded." --The late Dr. Stephen Hawking

Not exactly a trio of intellectual slouches. And these opinions were issued six years ago now. If these undeniable geniuses (at least one also a suspected madman) express such concerns, we are somewhat forced to share them.

What Does This All Mean to MSPs?
Given that this column is called "The Evolving MSP" we need to examine all the potential paths our evolution might take, right?

We're also talking a lot lately about AIOps, the application of AI to help manage and support IT operations. Think of a network traffic monitor scrolling madly by on the display. To identify anomalies, you need to identify unusual patterns in the data, and do it in real time -- not possible for humans, but easy for digital devices, especially when they're equipped with machine learning (ML) and AI. So, we train the AI to recognize hazardous patterns and set it loose to find them. As it does, it learns more and more about the traffic and how to analyze it. In other words, it is constantly getting better at what it does.

I've never met any IT professional who will admit to enjoying watching network traffic scroll by on the display, nor any who will claim to be able to recognize anything going on in that data. So having AI and ML take this on for you solves many problems and frees you to focus higher up the challenge tree.

The Next Word You Must Focus On
Go to one the many IT glossaries and look up "managed service provider." Most of the definitions will sound reactive: MSPs monitor networks looking to identify problems and resolve them. It doesn't seem like they're expected to provide any ounce of prevention to prevent pounds of cure. But from my perspective, the next step in our evolution as MSPs -- or any kind of IT service provider -- is to become proactive.

Many of you are probably protesting that you're already proactive. Bravo to you! And still others are saying, "Hey, I left proactive behind long ago to be predictive." Sounds great!

I've often compared our evolution to that of the medical profession: We start out as generalists and eventually become specialists. Applying that analogy here, I'm called to think about sports medicine. There are many specialists who serve elite athletes by helping them recover from injuries promptly so they can return to competition. If you think about it, that's where our elite MSPs are today -- see the problem, fix the problem. Then there are specialists who focus on helping athletes maximize their abilities. They examine the patient to see where they can help make significant improvements, increase lung capacity, build more muscles precisely where they're needed, sculpt body musculature.

Given AIOps' ability to take care of the "grunt" work of monitoring and resolving incidents, the most forward-thinking MSPs start looking toward becoming more coach-like. They come into the datacenter or the MSP practice to identify ways to improve performance, increase revenue, drive better customer experiences and higher customer satisfaction achievements. They make customers' IT work better, faster and at lower cost.

Think about your customer's response were you to repeat what I just said to them. Implement AIOps so you can take your practice proactive, predictive and more profitable.

Posted by Howard M. Cohen on April 27, 20230 comments

The 'Influencer MSP' Approach to New Products

Smart MSPs no longer focus on promoting the sale of any specific product. In fact, some have abandoned product sales altogether, preferring to partner with someone to procure and provide products when needed. What they really need to do, however, is change the way they look at new product introductions. 

When we only think about a given product as a good that might earn a marginal profit if we sold it, we're quickly reminded just how slim that margin really is. It's just not worth the effort anymore. Even if we do eke out a small profit, that profit is eaten up by credit we extend to our customer and the operations it takes to order, receive and process each product.

But Some Products Bring Opportunities
Equip yourself with a quick filter for new product announcements. Start by reading the first paragraph or so of the announcement and ask yourself which of your services you could wrap around this product. Can you: 

  • Consult on it?
  • Design systems around it?
  • Configure it?
  • Prepare it?
  • Test it?
  • Install it?
  • Deploy it?
  • Network it?
  • Train users and administrators on it?
  • Provide ongoing support for it?

The more "yes" answers you come up with, the more opportunities this product offers you.

The simple fact is that most services MSPs offer to their customers involve or are attached to some product or products. The most fundamental service MSPs offer is monitoring. What do we monitor? Products -- servers, storage, routers, switches, modems and more. Similarly, we manage all those devices and more. Add software applications to that list, and that adds a substantial lift to our revenue, too. The bottom line is that MSPs do have an interest in products -- a deep interest.

Depending on whose numbers you're looking at, there are tens of thousands or perhaps even hundreds of thousands of Microsoft partners who know they're making less and less money selling Microsoft's products, including cloud services. But they remain partners. Why? Because they make so much money consulting, deploying and supporting those products and services.

The Correct Response to New Product Announcements
Once you've identified a new product that requires your services, the next step is to reach out to the vendor of that product. It may be a hardware manufacturer, a software developer or a services provider. Find your regional representative from that vendor. If all else fails, call the company's main number and find someone who can provide you with the name and contact details for that person.

Reach out to that representative to talk. Going into the conversation, keep in mind that channel representatives' lives have become much more difficult since the great rush from reseller to MSP. They have fewer active partners than before. Fewer of the remaining resellers are moving away from that model. As that happens, it becomes harder for channel managers to achieve their sales quotas. For them, a channel partner calling them is a gift, manna from heaven. They will greet you with open arms.

Whatever they may want to talk with you about, start by telling them about the services you feel you could wrap around their products. Ask them if you're missing anything. Are there other services you could be profiting from when you move their products for them? What do they think of your ideas? Can they punch any holes in them and help you improve upon them?

Press them to inform you about the value their channel program can provide to you. Market development funds sound great, but there are a few caveats you will want to insist upon: 

  • They cannot be based on sales volume. You're not planning to move any product in volume; you're planning to propose services and projects that include the product.
  • They'll need to be willing to work with you on collateral and marketing activities. If they're not willing to promote your services along with their products, that's a deal killer. Ideally, the marketing should be about the value of your services and why you include their product in the solution.
  • You'll want better access to their technical resources when necessary. That makes you more valuable to your customers. You used to get that access as a result of your sales volume; now you need it because you are an active proponent of using their products.

It's likely that any channel manager will approach you the same way they always have. For them, you can generate sales. They'll want you to know how much margin you can earn. You know better.

This Is Not a New Concept
For the vendor, this is the classic "influencer" model (but not the kind where someone on social media talks about how cool something is).

Probably the first vendor to recognize and reward partners for influencing sales was Citrix more than 30 years ago. Even if the customer bought the licenses elsewhere, Citrix would pay a healthy percentage of the cost to the partner who could prove they created the sales by influencing the customer to engage in a project. Influencer partners ended up having very low volume of sales. But, beyond payment, Citrix recognized these partners as full partners. They had access to all of the resources Citrix had.

This is the partnership you want to seek, and it starts with that first conversation. No, you're not going to sell volume, but you're going to include their product in your proposals and thereby pull through healthy sales. You'll be pleasantly surprised how many channel managers have already recognized how the world has changed.

Posted by Howard M. Cohen on April 17, 20230 comments

What the Channel Tea Leaves Say: The Era of Volume Sales Is Over

Let's read some tea leaves together, shall we? We're seeing sizable force reductions at many of our favorite partners' companies. We didn't really expect them, but still we don't really find ourselves surprised.

We also see very talented people in our channel suddenly seeking new opportunities. Some are high-ranking executives, but many are simply superb engineers and technologists. And some of those executives are superstar heroes of the channel. We wonder why anyone would ever let them leave.

This past summer we saw Microsoft split the channel chief role into three people. They say two, but few of us missed the fact that three people got new jobs. Many may have missed that the very top role in partner management went to someone, Nicole Dezen, who started out in device sales.

What To Watch Out For
If you're a very talented specialist at a large channel company, here are some other tea leaves worth reading. How much does your company still depend on product sales to achieve their profit goals? And don't confuse profit margin with profit; they're not the same thing. Margin refers to how much you get to keep out of every dollar you earn as a percentage of that dollar. If you achieve a whopping 50 percent margin on $10 in sales, you've still only made $5.

As they got to keep less and less of each dollar -- as their margins fell -- some companies made the shift to become IT service providers. They dramatically reduced their dependence on product sales and instead drove profits up by finding more and more engagements for their professional staff. Others focused their efforts in increasing the volume of their sales, reasoning, "If margins are cut in half, we have to double our sales to stay in the same place." Uh-huh.

I've written for both kinds of partners and it is incredibly easy for me to tell which one I'm dealing with. Those who believe product and licensing sales are their path to glory constantly had me write about how wonderful their partners' products were. Even when writing customer success stories, emphasis had to be on the vendor or vendors. In only some cases was that because the vendor was paying for the marketing in market development funds (MDFs) or other funds. For most of them, it was my observation that they really didn't understand their own value proposition, or how to promote it.

What the Tea Leaves Are Telling Us
Read your own company's marketing materials. If they're about what you do, you're most likely in a very, very good place. If, on the other hand, they're all about the manufacturers or developers of the products you integrate, your company is very likely on the track that ends up going over the cliff.

Here's why I say that. When our industry was very new, back in 1981, IBM first called us their "reseller channel." The "channel" went from manufacturer to distributor to reseller to customer. Channel partners made every effort to push products to their customers from manufacturers they had decided to partner with. Manufacturers pitched in to help, rewarding sales with MDFs in an incredibly backward strategy that offered funds to help promote sales, but only to those who had already sold. Potential was ignored.

Almost immediately, some "channel partners" saw discounting as their best (maybe only) available competitive strategy. Smarter partners who had invested heavily in servicing these products let them have those sales to hasten driving themselves out of the business. That worked extraordinarily well. When margins had cratered as completely as they possibly could, many "resellers" transformed themselves into "managed service providers" (MSP), an unfortunate label we'll deal with in another post. Some of those former "resellers" truly pursued a transformation. They hired people with new and better skills. They trained their existing people to provide more sophisticated services. They truly became providers of services.

The others had "MSP" printed on their business cards. This second group continues to make life difficult for those who took the change seriously. All too many customers fear "MSPs" because they've been burned by incompetence and unfulfilled promises. This second group also continues to believe that product sales will deliver sufficient profits to keep the lights on. This is why I say to read your own marketing and see where your company's emphasis really is.

Where Do We Go from Here?
When a specialist from a truly service-focused firm recommends a particular server, storage, router, switch or other product, they're no longer looking to "sell" those products to you. They're including them as part of their project recommendation.

In fact, a large and growing number of MSPs no longer sell products at all. Instead, they partner with another company to procure those products for their customers. They know that any profit margin that might be available on any given product sale will be eaten when they extend credit to the customer, or they run operations to order, receive, prepare and ship those products. It's a waste of their time with little or no return. At worst, it's a cost center to them.

If you're working for a company that promotes the products of their "partners," it's a good time to start looking at the marketing put out by other service providers.

There was a time when we had to drive volume sales to earn real partnership. Those days are gone. Today, smart partners create relationships with certain vendors around what they can do with their products. Vendors, in turn, look for those smart partners who drive excellent, and often large, projects that include their products. They look to partners to pull their products through in projects, rather than expect them to push them. Some even approach superior service providers with suggestions for new services they can wrap around their products. That speaks far louder to them than "margin" falsehoods.

Ask yourself why so many service providers no longer sell products at all. Do the math they did. See how much you actually lose when trying to resell products yourself.

You Cannot Successfully Do Both
There are still several companies making money selling products, but they have long ago abandoned trying to also provide the services that go along with them. They focus intently upon making product sales profitable for themselves by purposely not including "resellers" who would need a portion of the meager margins. They also continue to negotiate the back-end deals that have always enabled large distributors and catalog houses to keep their doors open.

Let them have that business. In fact, help them have that business. Help your customers buy from them. They may see fit to start referring services business to you in return. At the very least, they'll prevent you from reducing your own profits.

We started this column, The Evolving MSP, because we knew our readers couldn't stay still in one place for too long. You know you need to evolve. You need to focus. You need to specialize. Ultimately, "MSP" is pretty meaningless. You manage services, but what services do you manage?

As you accelerate your growth, we see you specializing in technologies you're great with. You're becoming known as the leader in your area of expertise. Much as medical doctors go from "primary care physician" to any of a large number of specialties, you're specializing, too. You will soon find yourself referring business to other partners with other specialties, and forming relationships with the generalist partners whose customers will ultimately need you.

You'll become cloud service providers, data service providers, artificial intelligence service providers, Internet of Things service providers, and many more. This is where we go from here. This is the way that's not only clear, but very exciting.

And we'll continue to suggest more new ways for you to grow here in The Evolving MSP. Perhaps you want to share some ideas with us for great growth directions that you'd love to see your companies move in. If they're RCP readers to begin with, there's a good chance they'll see your suggestions.

Posted by Howard M. Cohen on February 21, 20230 comments