Microsoft Aims to Use Its IT Partners to Bring in New Cloud Customers

  • Microsoft is overhauling its partner network with a new focus on the cloud.
  • But its 400,000 partners are at odds over the changes, with some worried it could hurt business.
  • The divide comes as Microsoft searches for a new leader for its partner ecosystem.

In mid-March, Microsoft announced a major revamp of its partner program, its long-standing network of over 400,000 independent resellers and consultants that help put the tech titan’s products in customers’ hands.

In October, when the changes go into effect, it will be redubbed the Microsoft Cloud Partner Program, reflecting the company’s increased focus on the Microsoft Azure cloud platform and other cloud-based products. The changes represent Microsoft’s most significant effort to date to deploy those partners in its cloud battles against Amazon Web Services and Google Cloud.

For partners, however, the most important element is a new scoring system. Microsoft will for the first time give them a “capability score” in specific product areas to rank them on how well they can help customers take advantage of its cloud services. The higher a partner’s score, the more deals and financial incentives Microsoft would pledge to throw their way.

Given their potential impact, the changes have been divisive in the Microsoft partner community. Some supporters say the changes are a long-overdue way to help them differentiate themselves within Microsoft’s growing partner ecosystem and could even weed out those that they think are exploiting program benefits.

The detractors haven’t been shy about their concerns. An online petition started by a partner in Australia in March called on partners to reject the changes so that Microsoft would roll them back; it has over 800 signatures. Partners who’ve signed the petition have described the changes as “shameful” and “onerous” and said the new requirements could put them out of business.

But while any major change to an established program can be daunting, for Microsoft it’s also a way to win favor with its top-performing partners. Those elite partners will prove key to Microsoft’s competitive push as it trails AWS, the frontrunner, in cloud market share and faces growing sales pressure from Google Cloud.

“Microsoft is coming off nine straight quarters of outgrowing its major competitor in the cloud, AWS, and it’s done that through a great relationship with the enterprise channel that it’s had for decades,” said Jay McBain, a chief analyst at the research firm Canalys.

However, the changes also risk squeezing out Microsoft partners below that top tier and could make it harder for other partners to compete.

This clash of values comes as Microsoft seeks a new head of channel sales to oversee its 400,000 partners, a position the company says will be filled by July. Rodney Clark, its former channel exec and a company veteran, is joining industrial conglomerate Johnson Controls as its chief commercial officer, leaving Microsoft with a leadership vacuum at the top of its partner organization.

“The next Microsoft channel chief will need to navigate at least one major hurdle,” said Joe Panettieri, the editorial director of ChannelE2E, a media site that covers Microsoft and the IT-service-provider ecosystem. “Partners are upset about partner-program changes that potentially make deal terms better for Microsoft — and worse for partners.”

Microsoft said in a statement that partners provided feedback while it was developing the changes and that it made the changes to “allow partners to further differentiate themselves in a dynamic buying environment and enable longer-term growth opportunities.”

“We also understand some partners have questions, and others may not immediately meet the new qualifying levels,” the statement continued. “The new program represents Microsoft’s investment in the cloud as a strategic lever for innovation and growth, and is a reflection of our continued commitment to partners.”

The end of a ‘land grab’

Under the current system, partners need to show only “static” evidence, such as Microsoft certifications and competency assessments, to prove to customers that they have the right credentials, said Neil Lomax, the head of sales at SoftwareONE, a 9,000-person IT partner that works with Microsoft’s, Google’s, and Amazon’s clouds.

Tony Guidi, a senior vice president at Core BTS, an IT partner in Indiana, told Insider that “the Microsoft partner network that is based on silver and gold competencies hasn’t really changed in the last 20 years.”

Those gold and silver designations are Microsoft’s way of demonstrating partner expertise to customers, but McBain described them as a vestige of partner programs from the early days.

Critics like Guidi say that system opened the door for some partners to stage a kind of “land grab,” tasking their employees with taking exams for as many of Microsoft’s 18 areas of competency as they could. They say that resulted in partners with the right skills on paper but no depth in any category.

“If you can get people to take enough tests, you can qualify for more competencies and have the appearance that you have more breadth in your team,” Guidi said.

The new system requires partners to show continued growth to earn a high score. Microsoft says partners will be graded on a scale of 1 to 100 in each area, earning points for the number of employees who’ve earned technical certifications, the number of new customers they’ve added in that line of business, and how much their existing customers have grown to use more Microsoft services. Only those who score a 70 earn the title of “partner” in that area.

That idea of ongoing assessment with points is being cheered by partners who felt like rivals may have misrepresented their credentials or otherwise taken advantage of the program.

“If other partners have been bending the system a little bit for financial gain, they’re going to get found out,” said Gordon McKenna, the chief technical officer of public cloud at Ensono, a Chicago IT partner with about 2,900 employees.

Fans of the changes say they finally put Microsoft and partners on the same page

For partners, working with Microsoft means getting access to its vast array of customers and resources including opportunities for joint marketing. But they say that getting attention from Microsoft, and distinguishing themselves to customers, is a tall order that has gotten even taller over time. Fans like McKenna say this new process will help the best partners stand out from the pack.

“A lot of partners put a lot of time and effort and skilling into being a Microsoft partner, and I don’t think they’ve been fully recognized,” he said. “I think this change is Microsoft recognizing those partners.”

McBain says the changes are Microsoft’s way of recognizing that some partners have put in that effort through marketing and technical expertise, for example, which isn’t recognized in the traditional reselling model where firms buy products from Microsoft and sell them to customers at a profit.

Several partners also told Insider they’re looking forward to a new, more straightforward chapter of working with the company where it’s clearer that the products they’re selling or providing services for are a priority for Microsoft.

McKenna said Microsoft’s new “solution areas,” which are focused on products like its cloud platform and business software, make it easier to match up Ensono’s sales team with Microsoft’s.

Critics say they’re just another way for Microsoft to push partners into doing more

Other partners say they’re frustrated by Microsoft’s new requirements to show they’re achieving the growth the tech titan is looking for. Lomax said the customer growth component of the assessment is bound to rub some the wrong way, seeing it as a subtle way for Microsoft to lean on its partners to do more for the company.

“The initial comments from a lot of partners is, ‘Oh, you want me to sell more?” Lomax said.

The partner petition opposing the changes described the sales requirements as “yet another attempt by Microsoft to eliminate their loyal 400,000 partners across the globe.”

“When you look at the upcoming requirements being placed on Microsoft Partners in October 2022 the emphasis has shifted into ‘sell, sell, sell’ at all costs,” it reads.

Even for companies that can prove their growth to Microsoft, the new requirements can be onerous. Constantin Klein, who oversees the Canadian IT partner Syntax’s Microsoft partnership, said Syntax would have to “put energy into the visibility of our customer growth and activity.”

Plus, some partners say the requirement to add customers will be harder to meet for partners who aren’t in the business of bringing on new clients often or who focus on one or two major ones. “You’re going to take a ding by the fact that you’re not going show customer growth, and now you’re going to have to go out and find smaller customers just to keep a number,” said Patrick Bingham, Syntax’s manager of operations for Microsoft customers.

McBain said that smaller partners without deep pockets and those who’ve long been reseller partners might turn to specialized consultants to help them reach those 70 points. “There’s no way an eight-person partner firm would have the wherewithal to spend enough time to figure out what the algorithm is,” he said.

Some say making the cut as a partner will be especially difficult for new firms looking to join the program, as they’d need to show customer momentum from the outset. One person who signed the petition said that “this ruins the opportunity for smaller IT to start a business.”

Partners have a choice

Over the past decade, the partnership model Microsoft helped pioneer has been imitated by its cloud rivals AWS and Google Cloud, which now have thriving partner programs of their own. Microsoft’s partner network is still by far the largest, however, with four times the number of firms as AWS’s program.

But those partners are increasingly working with all three major cloud providers, reflecting a trend of companies using cloud services from multiple providers.

McBain says Microsoft is the first tech vendor with a large legacy partner program to take the “unfortunate lead” in sorting through how to roll out significant changes. This latest change is part of a series of recent updates to Microsoft’s partner program, including a controversial increase in the cost of monthly subscriptions for its software and cloud platform.

“The idea of doing it all at once was too much for the channel, and that’s been the blowback,” McBain said.

So while Microsoft’s updates might keep a certain contingent of its partners happy, the ones who aren’t could jump to working with a competitor. In a comment on the petition, one person said Google was “starting to look pretty promising.” McBain added that Microsoft’s competitors are eyeing its mistakes to make their own program updates smoother and more attractive to disgruntled partners.

For partners sticking with Microsoft, however, the latest changes are simply another challenge to overcome — one of many they’re accustomed to expecting from Microsoft — that reflects how all the tech giants will structure their partner programs.

“As Microsoft sets up a kind of a flaming hoop, we’ve become very adept at jumping through those hoops and meeting the qualifications pretty quickly and staying at the top of our game,” Guidi said.

Full statement from Microsoft:

Microsoft is continually looking to support our partners and align to customer buying patterns. The changes we are making with the new Microsoft Cloud Partner Program will allow partners to further differentiate themselves in a dynamic buying environment and enable longer-term growth opportunities. The new program represents Microsoft’s investment in the cloud as a strategic lever for innovation and growth, and is a reflection of our continued commitment to partners. This evolution better reflects the ongoing transition of business operations to the cloud and aligns partners’ go-to-market motions with the way customers buy today. Our partners have provided us with valuable feedback throughout the process of developing this new program. We also understand some partners have questions, and others may not immediately meet the new qualifying levels. Microsoft is committed to helping partners identify priority business areas to focus on should they choose to pursue a solutions partner designation before changes take effect in October 2022.