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#WPC13 Microsoft Enterprise Services/Dynamics Partner Roundtable

On Thursday, Microsoft was kind enough to invite the some key partners to attend a briefing on how Microsoft Consulting services will approach CRM and AX in FY2014 and how MCS will work with Partners in the same year.

As expected, MCS is going to continue its focus (at least in the Dynamics space) to large, global AX deals and large CRM deals in order to provide an enterprise presence.  I’ve been pretty vocal about my dislike of MCS coming into our space so let me go on record as saying “I may have been a little wrong”.

The sales and services mgt teams made some commitments to the partner channel last year about how they would behave and how they would not encroach on partner businesses.  A year later, I can tell you that they held to their word and are approaching the channel with a very partner friendly face.  HOWEVER, they are also being pretty clear – they’ll work with us in deals and protect us if they are brought in, but we have to be operationally tight and good at what we do.  I think that’s fair.

I am fortunate to work for a company that has global mindshare in a vertical, so I am exposed to these guys a little more than most.  I am excited to deepen that relationship over the next year.

#wpc13 Massive Microsoft Reorg Announced

Read the following:  http://www.microsoft.com/en-us/news/Press/2013/Jul13/07-11OneMicrosoft.aspx

This is really big news. 

In addition to this, MS announced a major staff layoff of PAM and Existing Customer staff so as to focus more attention on the growth and revenue generating partners.  Essentially, they will nationalize and centralize the PAM roles and focus on fewer partners.  The lower tier will be managed by national TSEM’s (telephone based sales reps).  The lifestyle firms will be managed via a call center.

Both of these announcement are VERY good for Dynamics partners investing in customer add or revenue growth (assuming that growth ties to software revenue for MS).  They are not so good for partners that a solely growing revenue through VAR changes or are running a lifestyle business.

This is a continuation of MS aligning itself internally to match the exterrnal #oneMicrosoft message we’ve been hearing  about.

Dynamics AX and Enterprise Agreements–What Next?

September 4, 2012 2 comments

At WPC2012, Microsoft, to the thud of jaws dropping and the jackhammer staccato of CEO hearts, announced that Dynamics AX would be sold under Microsoft Enterprise Agreements.  In addition, any customer on an EA that already owns AX can place maintenance payments on the EA.  The program starts September 1 2012.

For those of you unfamiliar with EA’s, you can look here.  In essence, it’s a three year contract with MS to license large amounts of software at a rather significant discount.  Although technically sold by a partner (in this case a Large Area Reseller), the majority of the work in doing an EA is done direct by the Microsoft Enterprise sales team.

Given that much of the partner channel’s financial model is built off the sale of software directly to the client for a fairly decent slice of margin, this has two immediate effects:

  1. Panic, terror and riot
  2. An elimination of margin and replacement with a CSA fee, claimed from MS, payable (we assume) over the three year period in an amount much less than that one would get from selling directly to the client.

I’m not arguing whether the change is right or wrong.  Instead, I’ve been thinking about the possible outcomes of this in the next 12 to 24 months.  Here are some of my thoughts on such possibilities:

Will Microsoft truly sell direct to the Enterprise ERP customer?

To some degree.  However, let’s not forget that MS does not already have a competent group of direct ERP salespeople.  The have good some good technical specialists and some good channel sales people, but they have very few that can actually pursue a lead to closure.  To build that team, they’ll have to hire competitively against the partner channel and the main software competitors. And, they’ll have to pay out the wazoo to do so since these are scarce resources.  Given that, I assume they will focus their attention on the very largest of opportunities worldwide, rather than trying to close very deal.

If they sell direct, will they do all the demo work?

Good question.  One assumes that if they act like SAP, they would close the software deal and walk in a systems integrator.  But they are chronically short staffed in these areas.  So we have to assume they can’t serve the entire sales cycle for all Enterprise deals and will instead depend on partner relationships where a) the deal is off their critical radar or b) the deal is driven by a vertical solution the partner has tied up (like process mfg or distribution).  The fear here is that AX will be just like CRM – the partner still carries the majority burden of lead generation expenses and gets almost nothing in software margin in return.

If they sell direct, what happens to services?

In case you missed it, Microsoft Consulting services is enjoying yet another rebirth in ERP (and in CRM).  They are focused on building massive amounts of staff in ERP and CRM, most of the ERP staff being AX.  The SSP’s in the region have a good size commission in their plan for bringing in MCS, so I assume they will.  However, like the sale side of the house, MSC can’t get to every deal, so I think they’ll focus on the top global opportunities.  Where they don’t have vertical expertise, given my past experience with them, they’ll either fake it and fail or find a partner to provide staff but project manage everything under their paper.    The big problem here is the SSP’s – with them being comp’d on bringing in MCS, they, quite rightly, will probably introduce every deal to them.  Hopefully, MCS will pick and choose and the SSP will then take it to a partner, but, again based on past experience, I think it more likely that MCS will talk to them, set expectations and then the partner will get involved.  The customer will be confused, the partner will feel pressure to match whatever MCS said, then MCS will want to manage the deal sub-contracting work to the partner under their paper.  This way, the claim the top line revenue and expand their reach, but don’t really have to fight the hard battle of hiring qualified staff.

Are we going to lose maintenance dollars?

Yeah, probably, for any customer that is already on EA and owns AX.

Is all we have left small deals?

Hell no.  There is plenty of moving room in the market for everyone.  However, I do think it will be easier to fly under the MS radar or outside their flight path than to try and compete in the same market.  Specifically, if you have defendable space in a vertical, have your own IP, and/or service a geographic territory in which MS isn’t interested, you have a better chance of being unaffected.

Is MS really serious about this and about selling direct?

To answer the first, yes.  They aren’t turning back. To answer the second, we’ll see.  My fear is that someone up the executive chain had this conversation – “Look guys, we did the same thing with CRM.  The partner channel bitched about the margin cut, but still went on absorbing the majority of the direct sales expense via SE’s and Pre-sales demo resources.  They’ll do the same thing with AX, we’ll just have to suck up maybe a quarter of confusion.  Frankly, the partner’s are so addicted to the business model that they don’t have a choice.  So, don’t worry about this. Things will be fine, we’ll give away less margin, and our sales will continue climbing.”

I can’t claim that conversation happened.  I just fear it did and this is the mindset underlying the strategy.

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Overall, if my guesses are right, here’s what I recommend:

  1. Clean up your sales and marketing expense, specifically your cost to acquire new accounts.  If you can’t cut it in half, you are going to be in trouble.
  2. Be profitable on professional services – for the entire company.  Make software margin the nice whip cream on top but make certain you keep the company running and viable solely on services.
  3. To that end, find and establish space in a vertical and start looking at IP.
  4. Scale up or sell out.  If you are not large, merge with another partner.  If you are an ISV, this probably doesn’t matter quite as much.  Same with a  very unique niche player.  For the rest of us, we better get bigger or risk being left behind.
  5. Spend time making certain the SSP’s in your market know and trust you.  Don’t worry about MS national – focus local.  Do it consistently. The first time MCS burns an SSP (and they will) you need to be there ready to pick it up.
  6. And, most importantly, I think its time to diversify the revenue base away from ERP software and consulting.  I’ll probably write more on this later, but if you’ve already spent a ton of money to acquire a customer, don’t re-spend it on a new one.  Find more services (like BI and Sharepoint) to sell to existing customers.

WPC2012 Day 1 – Keynote

July 9, 2012 1 comment

#WPC12:  Just finished with the keynote.   A predictable event chock full of Ballmer energy, weak marketing-run corporate humor (was it really funny that Roskill came in on a bike?), and introduced by a well executed but astonishingly random Cirque du Soleil performance (fire and drums as a metaphor for MS commitment to partners?).

Looking past that, the content was solid. Here’s what I picked out:
1. Office 365 Open licensing: We can now resell on our own invoice O365. Not certain if CRM is included in this (it should be), but this is a big step.
2. Social Enterprise and Office 15. They are hanging a lot of hopes on both, esp Yammer and Sharepoint. As a big fan of SP and new adoptee of Yammer, I think this is well guided.
3. Windows 8: Tami Reller did a fantastic hands on overview, with surprisingly good detail, on feature set and new hardware devices. GA is Oct – color me smitten.
4. MS = Hardware: Ballmer announced the acquisition of Perceptive Pixel, a cutting edge large format, touch screen hardware vendor. Think Surface on steroids on a wall. It is just flat out AWESOME.

More later.

WPC 2012

July 9, 2012 1 comment

I’m in Toronto at WPC 2012 to find out what new delights Microsoft has in store for us (lower margins? MCS competing against us in AX deals?  Another cut in partner benefits?). The keynote starts in 15 min, but a few thousand aren’t going to make it –  MS only setup about 10 registration lines at Air Canada Centre to service the 20,000 attendees.

More later.

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The New Gold: How is the New MPN Affecting You?

January 24, 2011 2 comments

As part of my responsibilities as COO of IBIS, I manage our competency requirements with Microsoft.  So, together with Andy Vabulas, the owner of IBIS and Bill Forsyth, the President, I was right in the thick of the recent changes to the Partner Network. 

We moved from something like 10 competencies to 3 (with one more planned before end of Q1) and also received our Manufacturing and Distribution industry badges.  I’m proud we can do this in a sustainable way, mostly because we are only a 65 person firm so having that kind of depth is a testament to the focus our team has on continuing education and development.

Here are my thoughts on the changes:

  1. I believed that the “old” Gold was relatively meaningless, so I am happy to see the new “beefier” Gold requirements.  If we spend time with clients helping them understand the effort it takes to hit the requirement, we have a good chance of making it meaningful in the sales cycle.
  2. I’m happy to see that MS is finally requiring certifications from the selling side of the channel.  I think seeing pre-sales and sales staff spend a little time in training and testing will help overall quality, at least with respect product knowledge.
  3. I loved the inclusion of SureStep (pardon me, “methodology”) as part of the certification.  I’m a fan of SureStep (because I no longer have to maintain a custom written methodology) so getting this in the cert set is good for me.
  4. I wish they had set the revenue commits higher AND created a better “Associate” or “Referral” program to better create an incentive for smaller and larger partners to work together.  Ideally, I would have like to see encouragement of LifeStyle partners to align with a reselling partner just like systems integrators buy from LARs. Today, instead, I am seeing large consolidators come into existence whose only role in the life is to create conglomerates of small partners.  Selfishly, I would have liked to see IBIS as one of these but perhaps allowing non-selling consolidators to, in essence, be a LAR is better than having large partners (who are trying to please clients) distracted by such a role.
  5. The site transition, despite all the prep work they did, was really rough.  We got through it okay, but it took at extraordinary amount of my time to push everything through on deadline.
  6. Lastly, I really, really wish they had kept the consulting certs simpler.

To the last point, for both CRM and ERP (using AX as an example) you have multiple cert tracks (application, configuration, installation).  MS required six separate people, used in no other competency, to pass the required exams in each track but did not require, say, 6 full blown MCTIPs, 2 in each area.  The latter, for me, would have been easier to manage and, in fact, what we did was just ask everyone to get their MCITP on the most recent version and then make certain we had all the various tracks covered.

In summary, for us it was a good, but time consuming change. It will be interesting to look back in a couple of years and see what unintended changes this creates in the partner channel.

Vertical focus only makes sense for Microsoft

August 19, 2009 12 comments

Author:  Curtis Beebe

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Microsoft’s “verticalization” of their Dynamics channel makes all the sense in the world from a Microsoft channel management perspective.    The designation of vertical specialties gives Microsoft an objective approach to resolving channel conflict, assigning leads, and providing sales & marketing support.    At first glance, this is one of those “blinding flashes of the obvious” that will enable partners to sell better, reduce sales cycle time, reduce the cost of sales, and stay focused in a specific area of expertise.

 The problem is that it doesn’t work.  The first issue is that the Dynamics products, just like all of the Microsoft products, are horizontal by nature and design.  Sure there are some ISV’s that provide a bit of industry specialization, but ERP and CRM solutions are inherently NOT vertical solutions.  They are designed to provide processes and functionality across a range of business types.

 That brings us to the second problem.  Because they’ve been selling horizontal products, most partners have grown their businesses horizontally.   Some of the savvy partners have developed industry specific knowledge and terminology to help them sell, but the solutions remain fundamentally horizontal.   As a result of the horizontal approach, partners tend to look at their customer’s businesses based upon the business process groups that are being automated: process manufacturing, discrete manufacturing, professional services, wholesale distribution, depot management, etc.   

The big disconnect is that Microsoft is trying to define the customer’s business based upon SIC codes.   The SIC codes are focused on the type of product being manufactured, sold, or distributed, rather than the general business process group:  one business process could map to dozens of different SIC codes.  The result is that partners are trying to manipulate the lead distribution system by selecting all of the hot, unassigned SIC codes within their geographies rather than truly focusing their business.

This effort is doomed to become just lip service that partners pay to Microsoft in order to ensure they get their share of distributed leads.

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