Partnering with Microsoft This Page Intentionally Left Blank Partnering with Microsoft How to Make Money in Trusted Partnership with the Global Software Powerhouse Ted Dinsmore and Edward O’Connor ____■____ Contributing Editor, Paula Rooney San Francisco Published by CMP Books An imprint of CMP Media LLC Main office: CMP Books, 600 Harrison St., San Francisco, CA 94107 USA Phone: 415-947-6615; Fax: 415-947-6015 www.cmpbooks.com Email: [email protected] Copyright © 2005 Oengus Press LLC. All rights reserved. No part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written permission of the publisher. ISBN: 1-57820-317-1 For individual orders, and for information on special discounts for quantity orders, please contact: CMP Books Distribution Center, 6600 Silacci Way, Gilroy, CA 95020 Tel: 1-800-500-6875 or 408-848-3854; Fax: 408-848-5784 Email: [email protected]; Web: www.cmpbooks.com Distributed to the book trade in the U.S. by: Publishers Group West, 1700 Fourth Street, Berkeley, California 94710 Distributed in Canada by: Jaguar Book Group, 100 Armstrong Avenue, Georgetown, Ontario M6K 3E7 Canada Cover design by Cuvee Design Associates Cover Photo: Comstock Images Text design by Brad Greene Text composition by Greene Design Printed in the United States of America 05 06 07 08 09 5 4 3 2 1 “You all have to make money today . I don’t think we need to change, but get the pedal to the metal and keep accelerating.” ____■____ —Steve Ballmer, Microsoft CEO, addressing Microsoft’s partners at the Worldwide Partner Conference, Toronto, Ontario Canada, July 2004 This Page Intentionally Left Blank Contents Foreword xiii Introduction xv Chapter 1: Why Partner with Microsoft? 1 Microsoft: the Money Machine 1 Microsoft on the World Stage 4 What Does Microsoft’s Power Mean to Partners? 6 Why Partner At All? 7 Your Choice: Coming to Terms with Microsoft 10 Compete with Microsoft? 10 Out-Niche Microsoft? 13 Partner with Microsoft. 14 How to Partner with Microsoft 15 Common Myths About Partnering with Microsoft 15 Successes in All Categories of Microsoft Partner 22 Service Providers 22 Resellers 22 ISVs 23 Other Than Microsoft, with Whom Can You Partner? 24 The Culture: Why Microsoft’s “Right-Handedness” Is Better for Partners 25 What This Book Will Help You Do 28 vii PARTNERING WITH MICROSOFT Chapter 2: Microsoft’s Culture, Organization and Strategy—and its Partner Ecosystem 31 Microsoft’s Organization and Culture 32 Corporate and Field: Shared Sovereignty 34 Shared Sovereignty from the Top 46 Cultural Shifts 47 Culture-Driven Growth 51 The Microsoft Partner Ecosystem 55 History and Features of the Partner Program 60 Managed Partners 72 What Microsoft Wants from Partners 73 Chapter 3: Principles of Successful Partnering with Microsoft 77 Like Microsoft, You Must Be Product-Centric 78 Like Microsoft, You Must Be Customer-Focused 81 Drive! Or You Will Be Driven By Microsoft 83 Practical Principles of Partnering with Microsoft 86 Work and Grow your Microsoft Connections 86 Expand the Terrain of Shared Interests with Microsoft 99 Achieve Trusted Partnership with Microsoft 103 Extend the Scope of your Partnering Success 111 Chapter 4: ISV Tactics for Successful Partnership with Microsoft 117 Microsoft’s Historical Partnership with ISVs 118 ISV Success Stories 120 ISV Partnering Models: Tangential or Targeted? 123 Find the Competitive-Collaborative Balance: Innovation and Symbiosis 129 Target Microsoft Personnel: Quality and Quantity 134 viii Contents Align Locally, Extend Globally 134 Weigh Risks and Rewards 139 Remain Urgent and Flexible, but Always Firm 145 Marketing and the Power of the Microsoft Brand: How ISVs Can Apply It 151 Staying Present with Microsoft 153 Challenges of Aligning Locally 158 Connect Where You Can, Advance Microsoft’s Cause Globally 161 Symbiotic Innovation and Protecting Your Intellectual Property 162 Follow Microsoft’s Lead Toward Vertical Solutions, and Lead It There 170 Fold into and Stand out in the Microsoft Partner Ecosystem 178 Chapter 5: SP Tactics for Successful Partnership with Microsoft 183 Microsoft Needs Its Services Partners 184 SP Business Models 186 Partnering Is a Two-Way Street …There Is No One Way to Get Down It 191 Successful Services Partners Speak Microsoft’s Language 192 Craft and Constantly Deliver Your Message, and Value, to Microsoft 198 Score Points 199 Verticals: “Customer Categories” Are Red Hot 200 Build Bridges with Microsoft at Multiple Levels 203 Score Points By Aligning Your Priorities with Microsoft’s Top Priorities 211 Compete and Collaborate: Innovate, Negotiate, Advance Together 216 Target Microsoft Personnel, Factor in their Interests 219 Balance Risks and Rewards in Your Relationship with Microsoft 225 Calculate Risk and Reward: CPE vs PCE 230 Observe How You Handle Conflicts with Microsoft 231 Constantly Expand Opportunities with the Microsoft Brand 237 Maximize Connection Points 243 ix PARTNERING WITH MICROSOFT Chapter 6: Reseller Tactics for Successful Partnership with Microsoft 247 From a Product-Delivery to a Value-Delivery Model 247 Risks Accompany Rewards in Reselling for Microsoft 248 The Reseller Community 249 Who Are Microsoft’s Reseller-Partners? 250 OEMs and Systems Builders 250 Software Resellers 251 Not Just a Volume Business Anymore 253 The Enterprise Resellers: OEMs and LARs 254 Microsoft’s Direct/Indirect Model, and the Impact on Resellers 256 Product Distribution Is Guided by Market Forces 257 Consolidation Impacts the Reseller Market 260 Deliver Value Is the Imperative to Survive and Thrive 262 Reseller Partner Points: Licensing Competency 262 Enterprise Software Agent (ESA) Model 265 Mass Customization Model: The Next Evolution 266 The SMB Resellers: Systems Builders and VARs 268 Windows Mobile/Embedded OEMs and IHVs 276 Other Resellers 281 Reselling Remains an Opportunity 281 Distributors Evolve to Serve Customers’ Needs 282 Direct Marketers / Retailers Evolve, As Well 284 Network Service Providers: Software as a Service 286 Reseller Partnering Tactics in a Volatile Market 287 Chapter 7: Extend the Opportunity Focus: Partnering with Other Microsoft Partners 293 See the Benefits of Partnering from Your Customers’ Perspective 294 Keep Your Eyes Open: Partnering Is Promising but It Can Also Be Perilous 295 x Contents How to Find and Land Complementary Partners 297 IAMCP 298 Short-listing Prospective Partners—Measurably 300 Generating Interest from Other Partners 301 How Do You Make Those Relationships Work? 302 How Long Do You Carry Someone’s Water Before You Drop It? 303 Common Pitfalls of Partnering with Other Microsoft Partners 304 New Partnering Models Emerging in the Microsoft Partner Ecosystem 312 Simple Collaboration 312 Co-Optation: Collaborate Against the Competition 313 Partner Channel Builder and Circles of Trust 314 Aggregate Contractor Model 317 Membership Organizational Model 318 Your Partnering Potential, Your Destination 320 Index 325 xi This Page Intentionally Left Blank Foreword There may no better example of a love-hate relationship than that of a high-tech vendor and the solution providers that take that vendor’s products, add a host of services and other technologies, and deliver a problem-solving solution to the end user. When the two are in sync, it makes the sound of a beautiful opera. When they are at odds, it sounds more like a bad tryout for “American Idol.” The love comes when there is lots of communication and the solution provider understands how to get the most out of the relationship. The hate part comes when the vendor doesn’t communicate to its partners and deploys policies that cause chan- nel conflict and margin degradation. Successful vendors and solution providers understand the importance of the rela- tionship. The trouble is, understanding its importance isn’t enough. You have to be able to truly work it to your advantage. That requires a focused effort that spans beyond a single deal. A business partnership is a lot like a modern-day marriage. One-third of them will end in divorce; one-third will limp along but not amount to a whole lot, and the remaining one-third will be a partnership in which both parties really work at it, producing a wonderful experience that never stops growing. Unfortunately, most solution providers fall into the under-$10-million-in-sales range and don’t have the resources to dedicate even a single individual to maneu- ver the partner programs of the vendors they work with. And while there are some books out there that talk about the theory of partner- ships and building “win-win relationships,” none focus on a single vendor in high- tech and how a solution provider can work with it. In addition, theory is a whole lot different than selling a solution that comprises on average four different technologies and more than 40 different products that tie into a legacy system. xiii PARTNERING WITH MICROSOFT As we all know, the devil is in the details and those theoretical business trend hard-covers don’t get into the details. That's why I was so excited when I first heard about this book and, more impor- tantly, that it would be written based on real practical experience of running a solu- tion provider business and dealing with a host of vendors and customers worldwide. Working with Microsoft as a reseller, service provider, or ISV brings with it all sorts of challenges and rewards. Let’s face it, being a $5 million or $10 million solu- tion provider and trying to work with a $40 billion company can sometimes feel like trying to make the ocean rise by throwing a cup of water into it. Thankfully, Microsoft is a company that has always focused on selling its prod- ucts through the indirect channel. While Microsoft certainly wants to do more busi- ness through partners, it doesn’t mean the hundreds of thousands of solution providers out there don’t need some help in understanding how to work with the vendor.