Is Microsoft killing the small partners?

partner_backgroundCouple of days ago, a blog post from Alex Chow, a fellow blogger and an MVP, caught me off-guard. He blogged about his chat with an unnamed senior Microsoft executive at Directions 2010, about his concern of what’s going to happen to small partners after the changes in the Microsoft Partner Network get into effect soon.

It seems Microsoft is intentionally getting rid of small partners.

Is it really so? What is it that’s actually changing, and can (or will) Microsoft actually just get rid of the small partners?

I’d say no to most of the above. Let me first sum up what Alex has unofficially found out during his one-on-one chat with Microsoft.

According to Alex, there are three categories of partners Microsoft doesn’t like in their Dynamics backyard:

  1. Small newcomers who sell, but don’t execute – those companies that appear out of thin air, oversell, take the money, and run.
  2. Internal companies – those big companies that abuse the partnership program to get their own NAV license for free, and then never actually do any implementations.
  3. Lifestyle partners – partners that do some kind of business around Dynamics, but don’t actually send much revenue Microsoft way.

You won’t find this information anywhere in press releases, but from rumors here at Convergence in Prague, I can confirm that I’ve heard similar stories.

And I can’t say I’m blaming Microsoft. At least not when it is about the first two points above. Actually, there should be no companies in category 1 above, because those customers do damage to Microsoft, to existing partners and to the market.

About category 2, these are parasites. They don’t do any damage, but they don’t bring any value either. Should Microsoft Partner Network provide habitat for those kind of life-forms? I’m not sure, probably not. There should be no way to abuse benefits of a program which is intended to benefit the market, for one’s own benefit alone.

Finally, about category 3, my position is that Microsoft should care about those partners, how to preserve them, how to help them, and not how to get rid of them, because those companies are actually contributing to the market and to the revenue, although indirectly. Alex’s company is such company. My company is such company. And I know many more.

Why are such companies contributing? Because they increase the customer satisfaction. They spread the good news about NAV (and Dynamics in general). I’m looking at my company. I have no intentions to do any implementations for NAV. But I am currently involved with two customers, both of which are not purchasing licenses from me, but are surely going to spend more money on Microsoft Dynamics in the future because of my involvement there.

Does Microsoft need me, or companies like mine? Yes, and no. I would say, Microsoft is indifferent. They can’t count any money I indirectly send their way, so they don’t care much if I’ll be there or not.

But then again, are Microsoft Partner Network requirements going to make it impossible for me to do any business? No, absolutely not.

Actually, I like the changes. And here’s why.

First, differentiation. I totally agree to Microsoft, and Michael Park who delivered a keynote about those changes here yesterday, that differentiation is needed. About 90% of partner companies here at Convergence in Prague are Gold Certified. I’d say about 60% in the market are as well. Some companies that I know are abusing this status to get NAV business, even though their expertise in NAV is far from what could be described with the word gold. Of course Microsoft wants to introduce changes.

There are two issues that are making the new requirements difficult for small companies:

  • Revenue – it’s very difficult to send any money to Microsoft’s pockets if you are not selling licenses. There is a lot of money you need to send over to Redmond if you want the new Gold status.
  • Expertise – you need to have certain number of certified experts, which has increased. If you want Gold status, you can’t be a two-person shop.

About expertise – I totally agree. Gold should be gold. Gold should communicate that you are able to serve bigger customers, higher risk projects, and such. With two people, you can’t do that. Six is quite okay for Gold, more would still not be too many. I subscribe to the idea that not everyone should be Gold. Requirements for Silver are not that heavy, after all.

However, there are also good things about new rules. You can qualify as an ISV, or a pure service provider, and then you have completely different sets of requirements, so I am pretty sure companies can fit into the new model, if they want.

Yes, it is going to be more difficult to be Silver, or Gold, than it was before.

No, Microsoft won’t eliminate you because you are small. They may care less about you, but they won’t make it impossible or more difficult for you to conduct any business. You’ll still have access to all the tools and information you need, and most of it doesn’t depend on your Silver/Gold status anyway.

So – my opinion is this: it’s good that Microsoft is differentiating the partner ecosystem, it’s good that they are actively trying to get rid of those who didn’t add value. It’s not good that they are also turning their back (slightly) to those partners who are not selling directly, but it’s not going to be impossible to work. A bit harder, yes, but achievable, and possible.

10 thoughts on “Is Microsoft killing the small partners?”

  1. Excellent writeup. I did get to know the strategy, as I am an aspiring Freelance Consultant, who is dreaming of becoming a Partner one day.

    Thanks for this article.

    Vaidy Mohan

    1. @Vaidy: you’re welcome, and nice to see you around here again 😉 If you decide to go the freelance way – I can definitely and absolutely recommend that. And good luck!

  2. Definitely killing!revenue is my pain since I renewed SPA..I am thinking to cancel partnership…how can I sell so many licence in the country which has no localized version, and no support almost in any aspect…maybe it’s achievable for the first year somehow…but to have conitinuity?I am bit sad and expose to use my ERP knowledge for some non MS products or not use it at all anymore…:((
    Differentiation is OK, but there has to be some exclusions!

    1. @Merana: that’s really a sad story you have, and I mean it. It really does seem that Microsoft either doesn’t understand, or intentionally doesn’t want to understand the specifics of certain markets. However, in emerging markets they still have lower revenue requirements – have you checked that? And also, I am sure there are models where you can continue providing services to customers, and sell licenses through somebody else – did you consider that? Please – don’t just abandon NAV because of that, there are definitely ways, and please get in touch with me to discuss what and how to do.

  3. There are several things to consider:

    Microsoft has very little footprnit in the top 100 companies in any country – SAP and Oracle are just better at global sales . For Microsft Business solutions are currently just small part of their revenue and they dont want to get into priming projects and taking the risks.

    Microsoft would also like to see upsell and cross sell into Sharepoint, Azure,Unified Messaging, Exchabnge server etc and this requires bigger, wider, deeper paractices.

    Such clients are more likely to pay for enhancment and support. Thye are also more likely to pay for all the highrevenue low risk services that Microsoft wants to sell direct e.g scoping, hardware specification, standard training courses, risk management, certifcation etc, rather than the nitty grtity of actually delivering.

    Such projects need a different size of team and calibre of consultant from the partner, Gold Partners in futre will need tp ay Microsoft $25k for partnerhsip, plus a prime support contract, plus a whole raft of annual certifications and training courses,

    They need big practices for this strategy.

    The problem is thta ina recession no-openm ants to turn down an oder and small partners who have na isde edge can often bring in one or two accounts, so thay have prolifierated because they think Ax is like any other product without realising it is a step change to do global projects. Runnuing a series of 2 man Nav or GP projects is a different practice from running Ax projects which may tie up 10 people or more for 6 months – or more – it is much harder to schedule and scale up and scale down unles you are a large practice

    This has created a vicious circle where partners who are inadequately resourced sell on price only, giving away margin and working with outsourced sub contractors, with inevitable problems of staffing continuity and post go live support. The Ax support desk gets overloaded , projects fail, no references , too much fire fighting and not enough new sales etc.

    So this is what underpins the new partner strategy and there is a need to address the issues . However, the strategy has a lot of flaws.

    Lets llok at a few:

    There is already insufficient capacity in the channel

    No vendor is going to turn down orders – and no partner will settle for a reseller fee – they will go to another product or have informal liaisons with other partners

    The Microsoft sales training clealry emphasis that a partner should be ‘out of the box’ or specialsie to customise to requirement but not mix both types – otheriwse you either have inadequate skills or overpriced ones – yet everything in the new strategy assumes a heavy customised delivery , that has to go through the totally inadequate SureStep methdology

    I don’t see that Micorsft should get involved in telling partners how to run their businesses or their proejcts, (a alrge cusaomter willhave hos own views) but some level of minimum QA standard has to be expected. In many cases however the process could be optional rather than mandatory e.g. those who get certifed in Sure Step can advertrise the factand those who don’t believe in deliver successful projects should not have to waste time and effort.

    Verticalisation offers benefits to some partners, not all and it depends on the matruity of the vertical and the local competiton both in Ax and other solutions. Ax retial is going to have to compete with the estblished LS NAV retail for example

    It is just as logical a strategy for a partner to be a HR specialist or a BI speiclaist, or a mobility specialist, Advanced finance specialist with specilsit extensions or jst a rapdi implementaiton out fo the bpx specialist – there many gloabl comapnies that have relatively small simple outlets that require a core build and little developement or verticalisation. If all partners are encouraged to create in house developed packages then very few will then want to sell other partner’s solutions when they can keep all the revenue for in house devleopement for which they have an established team. Meanwhile dozens of partners are developing solutions for the same verticals in a totally uncoordinated way, with little hope of recovering their investment

    There is little incentive for partners to provide a support desk and to sell a Microsoft ennhancement plan – on the current margins- far better better many may think to sell outsourced services and to resell the software in 5 years at full margin – support revenue is the lifeblood of a software practice, and major part of its value on sale – just as much for the partner as the vendor and Micorsoft does not seem to realise this.

    Too justify a large practice partners need large sales – and less bureacracy – ie not having to deal with a PAM in every country each of which gives a different discount and disturbs the sale by introducing his local partners.

    A lot of partners have not yet realised they are being required to sign a statement that they, not Microsoft are liable for localisations complying with local GAAP etc – and they now have to sign such an agreement with every territory they want to sell into for a global deal.

    Looking ahead, rapid developement tools with on line apps stores offers up opportunities for some partners and closes off revenue for many others – elearning resoruces, hosted solutions, and Microsoft services with direct sell will all challenge the traditional partner revenue model.

    There is no doubt there is a need for Microsoft to change its partner strategy and that its partners need to be objective about what it takes to run a successful practice – but Microsoft also needs to look in house for changes and to ensure that if it expects partners to spend a $100k a year with Microsft that there will be enough margin left to make it worth the effort – otherwise it may lose the wrong partners.

  4. Updated – with typing mistakes removed
    ———-

    There are several things to consider:
    Microsoft has very little footprint in the top 100 companies in any country – SAP and Oracle are just better at global sales . For Microsoft, Business Solutions are currently just small part of their revenue and they don’t want to get into priming projects and taking the risks.
    Microsoft would also like to see upsell and cross sell into SharePoint, Azure, Unified Messaging, Exchange server etc and this requires bigger, wider, deeper practices.
    Such clients are more likely to pay for enhancement and support. They are also more likely to pay for all the high revenue low risk services that Microsoft wants to sell direct e.g. scoping, hardware specification, standard training courses, risk management, certification etc, rather than the nitty gritty of actually delivering.
    Such projects need a different size of team and calibre of consultant from the partner, Gold Partners in future will need tp ay Microsoft $25k for partnership, plus a prime support contract, plus a whole raft of annual certifications and training courses,
    They need big practices for this strategy.
    The problem is that in a recession no-open wants to turn down an order and small partners who have an inside edge can often bring in one or two accounts, so they have proliferated because they think Ax is like any other product without realising that it is a step change to do global projects. Running a series of 2 man Nav, or GP projects is a different practice from running a few large Ax projects which may tie up 10 people or more for 6 months – or more – it is much harder to schedule and scale up and scale down unless you are a large practice
    This has created a vicious circle where partners who are inadequately resourced sell on price only, giving away margin and working with outsourced sub contractors, with inevitable problems of staffing continuity, quality and post go live support. The Ax support desk gets over-loaded , projects fail, no references , too much fire fighting and not enough new sales etc.
    So this is what underpins the new partner strategy and there is a need to address the issues . However, the strategy has a lot of flaws.
    Lets look at a few:
    There is already insufficient capacity in the channel
    No vendor is going to turn down orders – and no partner will settle for a reseller fee – they will go to another product or have informal liaisons with other partners
    The Microsoft sales training clearly emphasis that a partner should be ‘out of the box’ or specialise to customise to requirement but not mix both types – otherwise you either have inadequate skills or overpriced ones – yet everything in the new strategy assumes a heavy customised delivery , that has to go through the totally inadequate Sure Step methodology
    I don’t see that Microsoft should get involved in telling partners how to run their businesses or their projects, (a large customer will have his own views on project methodology ) but some level of minimum QA standard has to be expected. In many cases however the process could be optional rather than mandatory e.g. those who get certified in Sure Step can advertise the fact, and those who don’t find it useful to deliver successful projects should not have to waste time and effort.
    Verticalisation offers benefits to some partners, not all and it depends on the maturity of the vertical and the local competition both in Ax and other solutions. Ax Retail is going to have to compete with the established LS NAV retail for example
    It is just as logical a strategy for a partner to be a HR specialist or a BI specialist, or a mobility specialist, Advanced finance specialist with specialist extensions or just a rapid implementation out of the box specialist – there many global companies that have relatively small simple outlets that require a core build and little development or verticalisation. If all partners are encouraged to create in house developed packages then very few will then want to sell other partner’s solutions when they can keep all the revenue for in house development for which they have an established team. Meanwhile dozens of partners are developing solutions for the same verticals in a totally uncoordinated way, with little hope of recovering their investment
    There is little incentive for partners to provide a support desk and to sell a Microsoft enhancement plan – on the current margins- far better, many may think to sell outsourced services and to resell the software in 5 years at full margin – support revenue is the lifeblood of a software practice, and major part of its value on sale – just as much for the partner as the vendor and Microsoft does not seem to realise this.
    Too justify a large practice partners need large sales – and less bureaucracy – i.e. not having to deal with a PAM in every country each of which gives a different discount and disturbs the sale by introducing his local partners.
    A lot of partners have not yet realised they are being required to sign a statement that they, not Microsoft are liable for localisations complying with local GAAP etc – and they now have to sign such an agreement with every territory they want to sell into for a global deal.
    Looking ahead, rapid development tools with on line apps stores offers up opportunities for some partners and closes off revenue for many others – elearning resources, hosted solutions, and Microsoft services with direct sell will all challenge the traditional partner revenue model.
    There is no doubt there is a need for Microsoft to change its partner strategy and that its partners need to be objective about what it takes to run a successful practice – but Microsoft also needs to look in house for changes and to ensure that if it expects partners to spend a $100k a year with Microsoft that there will be enough margin left to make it worth the effort – otherwise it may lose the wrong partners.

  5. I partially agree with the writing..
    Its so nerdily written to say the least. You can not call just sellers “the parasites”, have some decency. Microsoft is not the only game in the town. We are microsoft shop but i’m almost 99% sure that we’ll NOT advise Ms saas offering this time around simply because there is not much for us in it. Google will be something we’ll cosider as we take home enough with it and dont have to keep up with rediculous MS tactics.. Sorry MS, you are finally fired!

  6. We are one of the small VAR’s who will be put out of business by the new MPN requirements. We exist in small market and we I cannot afford to hire someone just to have another useless shingle on the wall. We have been selling GP and only GP since the late 1980’s and now for MS to come along and tell me you need to hire another person or you cannot sell GP anymore is unacceptable. Sure I can spend time studying and passing yet another SQL exam but I need to another person who has passed the implementation exam plus the foundation exam. We will most likely get this done but the strain this is causing is exhausting. There are plenty of other accounting packages out there and now may be the time to jump ship since it is obvious that MS couldn’t care less about the little companies that got them where they are today.

    1. It only takes two people to have the certifications. And I firmly believe people should be certified and keep the certifications current. We charge good money for our services and investing time and money into our competences is hardly a strain, our customers deserve that we are good, well ramped up and that we know our products.

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