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January 24, 2004

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Annual Report Card
Marathon Training
Why steep investments in partner fitness are paying off for Microsoft
By Carolyn A. April
VARBusiness
- 11:23 AM EST Wed., Oct. 08, 2003

Warm and fuzzy is not something you often associate with Microsoft, but it is the feeling a good many business partners have toward the software giant these days. It seems that the world's largest software company has done something remarkable over the past year: It has recommitted its focus on the channel in such a personal way that comments like, "They really understand what I need" are rolling off solution providers' tongues. And it's not just talk.
Partners are rewarding Microsoft at the ballot box as well. In the 2003 VARBusiness Annual Report Card survey, solution providers catapulted Microsoft to the top of three major product categories--enterprise operating systems, Web apps and tools, and data management software--doling out winning scores in a range of areas from product innovation to partnership and support.
"The last year-and-a-half has been a rebirth for Microsoft's relationship with partners; it's back full circle," says George LaVenture, president and CEO at Trinity Consulting, a Microsoft partner based in Marlborough, Mass., who also heads the Boston chapter of the International Association of Microsoft Certified Partners. "We hear directly from the Microsoft people formulating programs before they have finalized them. And to their credit, they pick our brains to see how those plans will play in Peoria."
It's that simple act of listening that has a sizeable number of partners shouting from the rafters.
Alan Kahn is co-CEO of AKA Enterprises, a Microsoft Business Solutions (MBS) "inner circle" partner that specializes in selling and implementing the former Great Plains ERP package and Microsoft's CRM software. He, like many other Great Plains loyalists, fretted about how Microsoft would handle the MBS channel integration, which shifted into high gear in August, two years after the purchase of Great Plains. But he has been pleasantly surprised at the diligence Microsoft has given that effort, and at the respect paid MBS partners on most issues. He is especially jazzed at the shift away from the Fargo, N.D.-centered support team to now having local Microsoft reps working with him in the New York metro area to drive deals.
But more than anything, Kahn says he is basking in his primary vendor's newfound personal touch. Six months ago, he sat across the table from Microsoft CEO Steve Ballmer and 15 other solution providers at a "feedback" session in Chicago, exhilarated by Ballmer's willingness to share his $10 billion vision for MBS and at how he emphasized partners' roles in helping fulfill it. Six months before that meeting, Kahn received another surprise. He attended the annual inner circle retreat, where the top 1 percent of MBS partners--based on sales revenue--get face time with top Microsoft channel executives. There, during a breakout session, a group of partners suggested that the former Great Plains' Dynamics and Enterprise product lines, nearly redundant technically, should be sold under one brand.
"A few weeks later, in an amazing feat, Microsoft announced they were doing away with the separate product lines and making it one," he says. "And I knew that was based on our session at the inner circle. That's the kind of move that creates loyalty."
Loyalty Pays Off
Indeed, Microsoft's loyalty scores reflect that sentiment. The company ranked first or second in the subcategory against the likes of IBM, Macromedia, Novell, Oracle and Sun. Taken as a whole, the ARC results underscore the company's massive financial and organizational commitment to its channel, begun in earnest a year-and-a-half ago and hitting full stride this past July, says Allison Watson, vice president of worldwide partner sales and marketing at Microsoft.
"We are starting to feel like the investments that we are making are paying off," says Watson, who this month is celebrating her first anniversary in her current position. "Eighteen months ago, we realized that we had taken our eye off the ball with respect to our partner community. Since then, we have been putting partners back on the map."
The partner epiphany followed a three-year period at Microsoft where feedback on partner satisfaction surveys was largely negative--a real "wake-up call," Watson admits. That prompted Ballmer's January 2002 directive to launch a reorganization that, among other things, spawned the current brain trust of channel executives that includes Watson, Orlando Ayala, Kevin Wueste, Margo Day, Doug Burnum and Don Nelson. New this fiscal year (July 2003 to June 2004), compensation packages for all Microsoft executives will be tied directly to partner satisfaction. And then there's the money: $1.5 billion committed to channel-related initiatives this fiscal year, with that figure expected to increase annually, Watson says. Major areas of investment include headcount to ensure that Microsoft's 30,000 U.S. certified partners (plus an additional 6,000 U.S. noncertified Microsoft Business Consulting partners) get more individual attention; presales, postsales and marketing support; exhaustive and accessible technical training; and channel research and development.
The results of this capital outlay have been fairly astounding. Take the ARC category of data management software, where Microsoft's SQL Server 7 went up against the database elite of IBM's DB2 and related products and Oracle's 9i offering. Several years ago, it was a joke that Microsoft could compete in this department. This year, partners ranked it tops in a wide swath of criteria, including technical innovation, compatibility and ease of integration, and quality of technical support, as well as overall partner loyalty.
In the Web apps and tools category, which pitted the .Net Framework, Visual Studio. Net and other tools against developer offerings from BEA, IBM, Macromedia and Oracle, Microsoft ranked No. 1 in all 11 partner- and support-related criteria. Interpret that as a high level of satisfaction among ISVs and other developers. Microsoft is in a drag-out battle for ISVs' affections with many of the Java-based platform players, most notably IBM. One weapon deployed this past year is Microsoft's multichannel ISV Empower Program, which has been credited with improving communication between the company and its developer partners.
Not Quite There
Yet for all the positives, not all of Microsoft's broad palette of partners are enamored of the changes--or, for that matter, even notice them.
"To be honest, I think Microsoft has become so large and has so many layers in their org chart that it's hard to figure out who to go to [for] what," says Andrew Levi, president of Aztec Systems, a Dallas-based ASP and managed-services provider of Microsoft solutions. One of Levi's pet peeves is Microsoft's new online complaint tool for partners to provide feedback on the company. "They are automating something that should be personal," he says. "It's like dumping issues into a black hole."
Microsoft officials are quick to agree that they still have a lot of work to do, particularly in areas such as account management and lead distribution, where they believe their rivals have been doing a better job. But it can't be denied that things are moving in the right direction. Many factors are at work, among them the company's persistence and willingness to learn from its mistakes, according to one industry analyst.
"Too often, Microsoft doesn't get the respect they deserve for playing in the jungle," says Steve McHale, vice president of research for software business strategies at IDC. "But they live in the channel and take a lot of heat. They make mistakes, like on licensing and services, but they fix them. They are in it for the long haul, whereas lots of companies who come and go from the channel don't do well."
So what puts Microsoft a cut above the rest? Partners repeatedly point to several attributes, among them the availability and quality of technical training, Microsoft's informed focus on the SMB market's needs, partner representative responsiveness on both sales and technical matters, its promotion of alliances between partners, and the fact that it has resolved many of its channel and services conflicts.
Ken Winell, president and CEO of Totowa, N.J.-based Econium, can attest to big changes in the operations of Microsoft Consulting Services (MCS), which in the past has been accused of competing with partners on services engagements. To underscore how things have improved, Winell cites a recent deal in which Microsoft recommended his company to build a software solution for a large pharmaceutical company. While MCS then acted as the prime contractor, getting its share of consulting dollars along the way, it did not step on Econium's toes, he says. Econium operated largely independently on the project, able to charge its own rates and, at the same time, benefiting in the customer's eyes from the clout that comes with Microsoft's backing.
"Our challenge in years before was competition with MCS, where you had too much of a fiefdom of favored partners getting leads," Winell says. "But MCS has taken a much more subservient role now. They are maintaining their niche, but also handing off to partners."
Focusing On the SMB
Indeed, Microsoft is winning favor in the SMB space. Partners whose bread-and-butter consists of small and midsize customers are quick to credit their vendor with understanding the market and building products and programs that play well there.
Bill Blum, president of Alpine Business Systems in Somerville, N.J., focuses his Microsoft practice on hundreds of small companies, in many cases effectively serving as his customers' IT staff. With its Great Plains acquisition and own CRM development, Microsoft "has made a serious commitment to the SMB market with its business applications," Blum says. Notably, he says, Microsoft has put together a product set that appeals to the SMB company's dual imperatives of affordability and simplicity. By that, he means end-to-end software solutions that work well together out of the box and include all the pieces: word processors, accounting applications, operating systems, e-mail and other workgroup apps. Competitors such as Best Software have great products, he says, but there are too many of them, and they are hard to integrate.
It should be noted that Best Software happens to be a Microsoft ISV partner, one of many that are now competing directly against Microsoft in the business-applications marketplace. It's a constituency that hasn't been as pleased with Microsoft as other partner groups this year.
In July, Best Software president and CEO Ron Verni told VARBusiness that Microsoft had sworn to him several years back that it would not enter the business-applications market, only to turn around and do exactly that. But Verni says Best Software isn't dejected; he says he can deal with the formidable rival--as long as Redmond plays fair.
"We prefer they not be in our space, obviously, but we also believe anybody should be able to compete," Verni says. "Where we draw the line is if they start using their operating system and database monopolies for any unfair competition."
Blum's advice to ISV partners trapped in this channel conflict? If you can't beat 'em, join 'em.
"Hey, there are not many ISVs that can put out a great accounting package [like Microsoft] and, frankly, I think a lot of the stuff that is out there now should be driven from the marketplace," he says. Instead of trying to outsell Microsoft, Blum says ISVs should focus on building custom software that sits on top of Microsoft's core business applications and extends its functionality with vertical capabilities.
Benefits of Training
If there's universal praise for any of Microsoft's partner moves this year, it would be in the area of training. Of the millions of dollars earmarked for programs and staff, training is high among the company's priorities, according to Margo Day, vice president of the U.S. partner group at Microsoft. Education runs the gamut from highly technical in-person sessions to Web-based, e-learning programs, and tends to be focused around the rollout of new products, including Small Business Server 2003, Visual Studio.Net 2003 and Office System 2003.
"At a deep level last year, we trained 43,000 partners at three- and five-day boot camps on various technologies," Day says. "And we wanted to know the value of that experience, so we asked [partners], and we got high scores."
Day says the current uptake around Windows Server 2003 has a lot to do with how well-prepared partners were to both sell and implement it. The company also trained 160,000 partners on its licensing programs, such as Software Assurance, over the past year, and implemented a program called "Ready, Set, Go," where partners earn points for prizes based on the training they complete.
Microsoft also has stepped up its partner outreach, proactively inviting partners to educational sessions of all flavors: in-person or Web. In contrast, says Trinity Consulting's LaVenture, few other vendors pick up the phone to call him about anything. "I have never received a call from a [Hewlett-Packard] rep in any capacity, despite being a Gold partner," he says. "And I have gotten maybe one phone call from IBM. They aren't interested in me."
So it seems that Microsoft has found the love. Can it keep it? Most agree that it can if the team stays the course and remains true to the new tenet of touch. Bumps along the way include finding the most effective way to get partners selling Software Assurance and determining how best to execute on the new maintenance-heavy licensing model, IDC's McHale says. "It's like making the move from hunters to nurturers for some partners; the channel rules will have to evolve to find the most effective way to go to market," he says.
Watson says Microsoft is up to the challenge. One constant in her group is channel research and development, with Microsoft surveying the best sales opportunities and business models--and synching that up with partners.
"We talk to our partners, who deeply understand where the money is being made across different models," she says. "We say to them, 'Here are our ideas, now give us what you think.'"
Judging by the ARC results, partners are happy to be heard.

Copyright 2001 CMP Media LLC.

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Copyright 2004 CMP Media LLC. All rights reserved. Do not duplicate or redistribute in any form.