New Tools for Driving Partner Profits
A conversation with Microsoft VP Allison Watson.
- By Scott Bekker
One of Microsoft Corp.'s main initiatives for 2006 is an effort to raise profitability for the company's partners. In short, Microsoft commissioned and is releasing research into Key Performance Indicators (KPIs) that determine how profitably its partners operate.
Allison Watson, vice president of Microsoft's Worldwide Partner
Group & Worldwide Small Business Group, explained the thinking and
the methods behind the plan in a recent discussion with Scott Bekker,
editor in chief of Redmond Channel Partner.
On other topics, Watson raised the possibility of new customer
reference requirements, and she advised partners on Windows Vista
and Office 2007 planning. Following are some highlights from their
RCP: What is Microsoft doing that's new to
drive partner profitability?
Watson: While I can't commit to taking accountability for a
third-party company's profitability, what I can commit to doing
is understanding what are the levers that drive their profitability
and how [Microsoft investments] should be driving it. [I can] help
have a dialogue that's very driven about profitability so we can
be mutually beneficial in the marketplace.
We went out to research what are the real levers that drive profitability besides just the facts of "What is your contribution margin at the bottom of your profit statement and is it positive or negative? What are the levers that help you get positive numbers at the bottom?" We realize that in any complex business, it's never just one. In the channel partner business, there may have been a reliance in the early days, that still exists, on a margin-based relationship with a vendor that was
driving [just] one aspect of a partner's performance.
Sometimes a partner might measure a vendor and a vendor might measure
a partner on that alone. We're introducing some excellent framework thinking that says,
"Hey, these 14 KPIs that you see listed here all are relevant
and they interrelate to make up profitability."
[Click on image for larger view.]
|Microsoft's 14 key performance
indicators (KPIs) for profitability
Where did the data for those KPIs come from?
[IDC] conducted research [for us] across 830 channel partners
in Germany, the U.S. and the U.K. We did that to determine if there
were significant differences or not. And what we found was that
the KPIs are consistent. Not only are the KPIs consistent, but once
you get to the specificity of line of business, the actual business
results are similar. So we feel good that we've got a consistent
What are you doing with the results?
We're taking this model and applying it to our competencies.
We are introducing research that will show for an Advanced Infrastructure
competency and for an Information Worker competency, what are the
KPIs that partners in those competencies have against these dimensions.
[For example,] they'll see the average sales speed for business velocity for
Information Worker. So we will be launching for the first time the
data that not only shows that we have a profitable business opportunity,
but also creates a benchmark for partners to [measure] themselves
against on all of these KPIs.
We will also then take the data and publish guidelines and blueprints
that say, "If you want to get into a new market, here are the
things that you need to do to. Hire, build a practice and potentially
price, etc., to then put it into action so that you can achieve
these KPIs." So we're releasing, for example, in the Small
Business Specialist area, which ties up with our infrastructure
competency area, a set of six white papers -- [such as] how to build
a Small Business Server business for managed services. We walk through
what are the indicators of building all of that and what KPIs you
need to set up and you should expect, and how much you have to invest
and what your return should be over time. And we have six [sets
of] guidelines and best practices like that.
Microsoft is in the midst of re-enrolling
partners for the largest partner program in the
industry. Partner ranks continue to grow. Figures
were provided in February:
We are changing the industry with our approach to partner business
performance. We believe it requires understanding what the metrics
are in the market, understanding how our partners perform relative
to those, or could perform, and then helping create guidelines and
best practices for partners by competency and by area.
Microsoft recently added some specializations
and competencies to its Partner Program. How is the current mix
[Right now we have] 14 horizontal areas of focus. There
are specializations underneath it. So if you're looking for hosting,
or Exchange or CRM, they fit underneath these competencies. These
were designed to help partners tell us where they're focused, and
to help us drive our investments in a focused way. This was a very
mindful selection of competencies designed from partner feedback,
customer feedback and good research that we believe is meant to
last, but we also believe will change and grow over time as the
technology industry changes.
Partners do have a bar to be in the competencies and specializations.
That bar is unique in the industry in that it requires technical
competence as measured by certification of individuals, it requires
customer references in the specialty on an annual basis and it requires
a customer satisfaction index. So in addition to having a reference
customer, we ask for an index of the satisfaction of your base of
customers, which is handled by a third party. It's fairly industry
differentiating in this respect. It creates a higher bar, but it's
also based on the feedback that our partners gave us about how they
want the bar to be set.
Are there any changes on the way in terms
of specializations and competencies?
Our industry and vertical approach thus far has been: "Tell
us what solution areas under a product or service you sell in the
marketplace, and we will help you market with that solution."
We do not have a bar in the program for these areas, with some exceptions
in that we are starting to ask for customer references as well.
So it's one thing to say, "I have customers that do Information
Worker," but if you really want to market Information Worker
into financial services, we'll ask you to [provide customer references
that match that combination]. It's not really a bar, but it's a
recommendation and we may make it a bar, I don't know. But we will
take feedback before we would do that.
Windows Vista and Office 2007 are scheduled
to ship later this year. What should partners be doing to get ready?
We will be very concrete at the Worldwide Partner Conference
with the set of assets in local languages to have training and development
We encourage our Gold and Certified partners, through our Partner Program membership, to participate directly in the [Community Technology Previews].
In the May-June time frame, we should have all of the readiness assets for broad partner sales, marketing and technical readiness available through our Partner Learning Center.
Because Vista and Office are so fundamental, I would anticipate
that a large percentage of every channel organization should go
through basic readiness of the products and we will have good online
ways to get them there. [The online resources] will be chunked down
to what I'd call manageable [blocks] of time. So in 20-minute segments,
or maybe for an hour at a time, everybody needs to do something
[online]. And then we'll have a plan that will bring levels of readiness
for your technical staff ... both IT pros and developers.
You mentioned that Microsoft is looking at
how many employees it has if you count the partner ecosystem. What
are you finding?
We could have as many as 20 million employees when you look
at everything from [partners] the size of Accenture all the way
down to the small businesses. We're going to refine and understand
better our employee population to our partners, because it's a really
interesting thing about the dynamics of the marketplace. So we end
up with our program, if you will, or the relationship Microsoft
has in the economy, [which not only involves] hundreds of thousands
of companies, but also impacts the lives of many, many individuals.
We're kind of proud of that, and we also realize we have to be concerned
SAP Makes a Hosted Thrust, Salesforce.com Seeks
By Lee Pender
Another giant has entered the software as a service
Enterprise software developer SAP AG jumped into
the SaaS arena in February with its announcement
of its SAP CRM on-demand offering. SAP, which
brings IBM Corp. in as its hosting services partner,
joins Oracle Corp., with its Siebel CRM OnDemand
line, and Salesforce.com in the growing market
for hosted enterprise applications. (As RCP
reported in March,
Microsoft, too, is on the SaaS bandwagon.)
SAP's first hosted application is the SAP Sales on-demand offering, a sales force automation and
analytics package available now. The German juggernaut plans to roll out other elements of the full CRM suite throughout 2006.
Like other SaaS offerings, SAP's will let companies implement
CRM technology without large investments, Robert Bois, research director at Boston-based AMR Research, noted in a recent "AMR Alert Highlight." However, he wrote, SAP isn't necessarily aiming for Salesforce.com's target market of midsize companies. In fact, Bois said, SAP is shooting for larger companies and current SAP ERP customers that haven't yet implemented CRM.
The IDC eXchange blog asked whether SAP will
equip its hosted offering with full CRM functionality
or hold back some features to prevent cannibalizing
its traditional offering. Framingham, Mass.-based
IDC recommended that SAP go all out: "If SAP holds
back, it risks badly damaging its standing in
this expanding model of software [and business
service] delivery," Frank Gens, IDC's senior vice
president for research, warned in the blog entry.
the San Francisco-based CRM provider, has been busy soothing frustrated clients.
Last fall, the company completely overhauled
its hardware and software stack just before releasing
a new version for winter 2006, says Bruce Francis,
the company's vice president for corporate strategy.
The upgrade and release led to some well-publicized
system outages in December and January. In February,
in an effort to reassure nervous customers, the
company launched a Web
site providing system status updates. "We
realized they needed more information both when
[the system] is great and not so great," Francis
says. The site provides users access to current
and historical performance information and updates,
incident reports and maintenance schedules. A
color-coded system categorizes service status:
for instance, yellow dots denote "issues that
last longer than 10 minutes" while red indicates
"disruptions that last longer than 30 minutes."