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As Microsoft pushes partner transformation, a state of ‘channel inertia’ is emerging

As Microsoft pushes partner transformation, a state of ‘channel inertia’ is emerging

Ecosystem must become self-sufficient to survive

Desmond Russell (Partner Elevate)

Desmond Russell (Partner Elevate)

Credit: Partner Elevate

As custodians of the largest partner network on the planet, Microsoft’s attempt to turn its channel inside out, upside down and back-to-front in the pursuit of go-to-market transformation has been akin to changing a jet engine while in mid-flight.

Pivoting the priorities of value-added resellers, system integrators and managed service providers at a scale of tens of thousands is no easy task, complicated further by the internal overhaul required to keep industry pace.

Such a relentless modernisation campaign - kick-started upon the roll-out of One Commercial Partner in July 2017 - has on occasions, placed Redmond head-to-head with the ‘traditional’ supply chain upon which Redmond has once relied upon.

Whether it be a change in managed partner allocation, or increased media focus on the “next-generation breed” of specialists as opposed to the reliable revenue generators, vendors must constantly walk an ever thinning channel tightrope. This balancing act includes remaining relevant to the base while continually recruiting new players.

And in housing the largest global partner base - believed to be more than 160,000 providers across the world - it’s no surprise that Microsoft’s change of direction is more profound, and understandably, more challenging.

“On the one hand, Microsoft as a vendor is trying to deal with a capability challenge,” observed Desmond Russell, co-founder, coach and mentor of Partner Elevate. “They are questioning whether they have the right partner ecosystem capabilities to help customers deploy, use and consume their latest technology.

“On the other hand, there’s a capacity question. Does Microsoft have enough people to service the opportunity in the channel? This might be at workload, solution, customer or segment levels.”

In managing expanding capability and capacity issues, Russell - who spent more than six years in partner management roles at Microsoft - outlined that the technology giant has since come to the conclusion that to drive sustainable change, the ecosystem must take ownership of transformation.

“Now look at the partner side,” he added. “Partners know they need to act to grow their business but often focus is drawn to where Microsoft’s investment and transformation agenda is happening.”

For Russell, partners must instead assume control and decide whether to either follow Microsoft and the opportunity ahead, or assess alternative options to spearhead growth post-pandemic.

“We call this ‘channel inertia’ in that a vendor provides everything they possibly can - almost like a Christmas hamper - while partners are trying to make sense of what to take from the hamper,” he said. “Ultimately, these types of partners just don’t know how to connect the dots.”

In short, Russell is aligned to the belief that partner transformation is currently focused on the wrong areas, advocating a shift away from instant gratification to a more long-lasting success.

“It’s not an activity-based transformation such as receive training, improve marketing and learn how to be a better business,” he explained. “It's actually a process-based transformation, whereby businesses need to go through a logical phase of transformation. But to do that they first need to be in a position to transform.

“This needs to happen from the inside out. Vendors will continue to build programs and make resources available for the channel to utilise but the channel actually needs to be in a position to understand what resources need to be used, when they should be deployed and how they can be turned into profitable capabilities."

Overcoming barriers to growth

Russell is co-founder of Partner Elevate - launched alongside Ben Shapiro in 2020 - which operates as an Australian-based advisory firm specialising in helping Microsoft partners develop “scalable, growth-focused businesses”.

The newly launched model also helps vendors - such as Microsoft - and distributors strengthen channel return by increasing the “capability, capacity and go-to-market readiness” of resellers across Asia Pacific and beyond.

“While passionate about technology, many partner businesses fail to turn technical competency into profitable and scalable business capability, an unintended consequence of the partner enablement programs available today,” Russell said.

“We know that Microsoft loves winners and innovators, and that for many businesses this means developing focus and energy towards being prioritised. Therefore, our vision is to help them step out of the day-to-day running of their business and guide them in building great functional and scalable business models."

In assessing the current state of the Microsoft channel - one which continues to evolve at pace due to a monthly influx of newly recruited providers into the ecosystem - Russell cited three core challenges preventing partner transformation at speed and scale; go-to-market, FOMO (fear of missing out) and differentiation.

“The biggest challenge we see is the ability for partners to create or execute a go-to-market strategy,” he said. “The one area that actually drives revenue for business - i.e. sales - is an area which houses the greatest lack of capability.”

For Russell however, this should not be confused with sales or marketing challenges - the problem is much simpler than that.

“The challenge is around partners taking something to market which actually wins them customers,” he said. “Partners take offers to market which are not aligned to their target or highest priority clients, nor internal skills and capabilities. Going after as many opportunities as possible to grow the business creates a focus challenge and unfortunately, lots of partners struggle to organise themselves in the early sales phase.”

With sales and marketing efforts hampered, Russell also acknowledged the impact of FOMO on the local channel, another key contributor in partners aimlessly chasing too many opportunities.

“Fear is derived from the fact that there is always a new priority that vendors are driving across every quarter, every year and even every month,” he outlined. “In partner conversations, vendor strategies are put forward with opportunities to invest and participate in programs which gain access to resources and marketing funds. This access is to help drive vendor and distributor priorities.

“The challenge for partners then becomes in trying to identify which strategies to align with to avoid impeding business focus.”

For example, if a go-to-market program specific to a new Microsoft 365 or Azure specialisation or capability is available, partners typically put themselves forward to participate. Yet the majority of providers lack a clear idea with regards to go-to-market strategy and execution which naturally impacts revenue generation activities in the long-run.

“This fear of missing out makes partners take on projects which don’t always align to where they want to focus time, energy, attention and investments,” he added. “Partners also spend too much time trying to differentiate themselves in a market they’re not really aligned to or shouldn’t be operating in."

Path to self-sufficiency

Despite the wave of challenges impeding transformation progress, Russell advised partners to leverage Microsoft as a vendor to become “self-reliant and self-sufficient” in the months and years ahead.

Investments in co-sell programs and marketplace initiatives present significant opportunities for the channel to maximise, he added, providing a platform for partners to build out differentiated services and solutions on top.

“There’s only a few vendors across the world which provides the breadth and depth of technical capability that Microsoft does to solve a number of challenges and hearing of those opportunities in real-time is significant for partners,” Russell acknowledged.

One such example is Redmond’s recent announcement to deepen industry vertical cloud play expertise by launching three new industry-specific cloud offerings: Microsoft Cloud for Financial Services, Microsoft Cloud for Manufacturing and Microsoft Cloud for Nonprofit.

“How partners show up in terms of having the business ability to execute in each industry to going to determine how the channel takes advantage of this opportunity,” Russell stated.

Another key element of becoming self-sufficient, according to Russell, is centred around building deep connections within distribution to tap into third-party support while maintaining a strong sense of vendor alignment.

“We’re starting to see distributors move away from traditional channel enablement activities or incentives to drive specific sales and more towards taking an increasingly direct role and interest in helping partner businesses grow,” Russell said. “Partners must be very clear with a distributor about what it is they want however, whether this is specific enablement activities or programs to support development.”

For example, Russell outlined a scenario in which partners can better engage with distribution.

“In this case, ‘I’m working with Ingram Micro and my goal this year is to grow revenue from $20,000 to $30,000 per month. My plan is to grow in these two or three areas. To achieve this, I need this type of skill and enablement and some marketing resources. If I get this, the result that I can deliver will be this’.”

The aim is to create a more strategic alliance which helps cut through wasted time, energy and resources on both sides of the equation, added Russell.

“No partner wants to be placed onto every single program and equally, no distributor wants every single partner to be working through all of the programs on offer,” he said. "If you delve inside Microsoft's partner network, there are businesses that have been around for as long as, if not longer than Microsoft. While some are successful, others have been stagnant for the last 5-10 years - either not growing, or growing sporadically, typically by no fault of their own."


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