Microsoft tweaks partner profitability strategies

Microsoft reviews response to their second cloud profitability eBook, which finished its ‘rolling thunder’ rollout at WPC, and looks at what’s ahead to assist with partner profitability.

Jen Sieger Microsoft

Jen Sieger, Senior Business Strategy Analyst, Partner Profitability, Worldwide Partner Group, Microsoft

TORONTO – At the Microsoft Worldwide Partner Conference here, Microsoft released the fifth and final instalment of an eBook series compiled in collaboration with IDC, designed to help partners make their cloud practices more profitable. The first installment was made available as a free download in March, with the others becoming available in the same way each month until now.

This was the second such effort with IDC, and has been revamped since that first effort.

“We have tweaked it,” said Jen Sieger, Senior Business Strategy Analyst, Partner Profitability, Worldwide Partner Group, at Microsoft. “People said the last eBook was too basic, so we tried to infuse more detailed content this time around. There is also evolution happening all the time in the channel, and we learn from our partners and modify content accordingly.”

As an example, Sieger said that the first eBook two years ago had talked a lot about customer lifetime value, but on a fairly general level.

“Now we get more sophisticated about imparting best practices about how to do it,” she said. “This includes hiring a customer success manager – which can be defined in multiple ways – and what they do. It also includes how to build a plan for adoption with the customer, to do things like measuring usage. That shows the customer that they aren’t using something much, and the partner can advise them how they can light that up.”

This year’s study identified four pillars of success. These are: differentiating the business by creating specialized intellectual property; modernizing sales and marketing with digital marketing and a scalable sales engine; how to optimize operations to get the most from people, process and tools; and how to deliver customer value.

“It’s for the whole range of people in a partner business, from the owner and C-level people down, and shows them how to stand out from the competition,” Sieger said. “They learn that customers now get online and research before they talk to a vendor, which they never used to do. They learn about the concept of social selling and leading with a real professional services approach. We tried to identify partners with a particularly impactful strategy across each of the four pillars.

“I have not met a partner who was in an optimized state across all four pillars,” Sieger stressed. “We have honed in on these four core pillars to give partners prescriptive guidance. We also just launched a tool in conjunction with this, which gives an assessment of a partner’s maturity across all four pillars.”

Partner reaction to the eBooks was good, Sieger said.

“We had over 75,000 downloads of the eBooks as of last Friday, and I’m sure that has gone up significantly with WPC,” she said.

The eBooks contain several data points that Microsoft is trying to impress on partners.

“Partners own $5.87 of their own attach for every one dollar of Microsoft services that they sell,” Sieger said, indicating that it would be interesting to see how that number fluctuates going forward. “Partners with more than 50 per cent of their revenue in the cloud have double the growth, 1.5 times the profit, and 1.8 times the recurring revenue of their less cloudy peers.”

Sieger also referenced the takeaway point from another study,

“This study with AMI Partners showed that Microsoft partners had 19 per cent higher margins than their nearest cloud platform competitors – Amazon, Salesforce and Google,” she said. Margins are higher because Microsoft partners have more attach opportunities, and thus more opportunities to attach services across the Microsoft stack.”

Sieger said that as the average Microsoft resell margin is 15 per cent, the company encourages partners to pursue these higher margin opportunities.

“We have also worked very hard over the last 18 months at educating our field people, to train them on the financial model,” she said. “We are investing very deeply in not just partner training, but in this internal training, so we can also be a business partner to our partners.”

As far as what’s coming down the pipe next, Sieger said that they will be working on helping partners leverage the new customer lifetime value tools that have just been created.

“We want to help partners understand from a financial modelling perspective how to think about lifetime customer value,” she said. “We want to give them more financial modelling tools. Some are available now on the Modern Partner page on MPN. This isn’t just education they can read up on, but the actual tools. The next round will be training on that kind of value.”

Sieger also indicated that Microsoft is in the process of a major update of their Profitability Scenario content for partners.

“This looks at the top 20 scenarios across Microsoft Cloud Services, and at the project services and other IP other partners are wrapping around them when they go to market,” she said. “It last had a major update about a year ago, and we will be refreshing that.”