Microsoft’s new strategy: putting partners first

Over the last 12 months, the firm has reinvented the way it works with its partners – a move which has led to over US$8 billion in additional revenue. Gavriella Schuster, corporate vice president of Microsoft’s One Commercial Partner Group, tells us more

Microsoft’s new strategy: putting partners first

This article was originally published in the Summer 2019 issue of The Record. Subscribe for FREE here to get the next issue delivered directly to your inbox. 

Tell us about what’s happened since we spoke last year. Where have the last 12 months taken Microsoft?
I’m happy to say we’ve had an incredible year with our partners so far. In my 23 years with Microsoft, I can’t remember a time when there’s been this much excitement and energy around the technology and the innovation our partners are building for customers.  

We know that when Microsoft has a strong year or quarter, our partners are a huge reason why. It’s no secret that 95% of Microsoft’s commercial revenue is driven by partners and earlier this year Satya disclosed that our partner co-sell programme has driven US$8 billion in partner revenue – that is Microsoft acting as a channel, not Microsoft revenue – in the last several quarters. 

Also, our partner base is continuing to grow with more than 12,000 partners joining the Microsoft channel every month. We have seen some incredible momentum since Inspire last year.

We’re just over a year down the road from the launch of Microsoft’s One Commercial Partner strategy. Where have Microsoft and its partners seen the biggest wins?
The One Commercial Partner team was built to create pathways for success through partnership and to deliver on Microsoft’s mission to empower every person and organisation on the planet to achieve more. The truth is, partners make more possible and with that fundamental understanding, the One Commercial Partner model has modernised our approach to how we partner with our ecosystem. 

We have evolved from a model of ‘partnering’ to one of ‘partnership’. Our partners build on top of Microsoft’s products, adding value for customers and creating new revenue opportunities that weren’t possible before. When I travel around the world speaking to our partners, executives tell me they appreciate Microsoft more now because we’re laser-focused on true two-way partnerships – and on their success, not just ours. This means we’re just as invested in selling third-party partner solutions as we are our own. 

This approach has been really impactful and we’re seeing great momentum in our ecosystem. For example, our initial US$250 million investment in the intellectual property (IP) co-sell programme – which rewards Microsoft sellers for selling partner solutions – is already paying big dividends. We’ve found that when co-sell partners are involved, deals close nearly three times faster, projects are nearly six times larger and Azure consumption is eight times higher when a partner is involved. Already this fiscal year we’ve seen nearly 9,000 wins and 78,000 joint deals in our pipeline, compared with last year’s total 11,000 wins and 100,000 joint deals.  

Microsoft’s vision for digital transformation has evolved to become more about customer implementation than potential adoption. How has this changed the game-plan for you, and where do you see the big wins coming from over the next twelve months?
We are always innovating and updating our services with our customers in mind. For us this means taking a practical look at how best our products and services can help customers of all sizes succeed. Sometimes, this means encouraging changes and implementations that can be tough for customers to execute on their own. However, this also means a huge opportunity for partners to provide valuable migration services. 

For example, SQL Server 2008 is approaching end-of-support this coming July, along with Windows Server 2008 a year from now. Our services and IP partners are finding huge opportunity to help customers move their existing on-premises workloads to Azure and take advantage of all the benefits that Azure has to offer. It really starts the conversation with the customer and opens all sorts of opportunities for higher-level services which unlock customer commitment and growth.

We estimate there are roughly 24 million SQL and Windows Server instances out there waiting to be migrated to Azure and we estimate the migration opportunity for partners is more than US$50 billion when it comes to services and related business. 

Another huge opportunity is around Teams, which brings everything together for the user - chat, meetings, voice, documents and more. It’s the fastest growing business application in Microsoft history. Currently, half a million organisations around the world are using Teams and we expect the growth to skyrocket in the next 18 months, as more partners develop business solutions on the Teams platform. We believe Teams is where people will start their day and live their day on their desktop, laptop or mobile devices, from log-in to log-out.

There are elements of the Microsoft offering which have really come of age in the last year and are set to become de facto solutions as we move forward. Which product(s) do you feel lead the way here?
As I’m sure you know, we feel that the cloud is now an imperative to any business’ success, but I also believe there is an incredible future in business applications, data analytics, mixed reality, the internet of things (IoT) and artificial intelligence (AI). Gartner estimates the opportunity for business applications alone is expected to be US$133 billion this year and that independent software vendors (ISVs) will drive roughly 56% of the total business apps opportunity.  

We are making sure ISVs seize this opportunity by helping them innovate faster and differentiate themselves.  To do that, we’re making investments at the leading edge of AI, IoT and mixed reality so ISVs can quickly build differentiated capabilities into their products and services to address emerging scenarios. We’re also developing new, comprehensive learning resources for Azure, Dynamics 365, Microsoft 365, Microsoft Teams and the Power Platform to help our partners build their skills for each stage of their cloud journey. 

In your keynote address at last year’s Inspire you suggested that IDC’s prediction of growth in the digital transformation market, reaching US$4.5 trillion by 2023, ‘feels addressable’. Do you still stand by that estimated growth?
I do still stand by that estimate – particularly looking at the growth we’ve seen in the last few quarters. In addition to the statistics I’ve already shared, the number of partners transacting via our cloud service provider (CSP) programme has grown 31% in the past year. And, partners transacting in the CSP programme are serving more than two million customers, which is a 52% increase over the past 12 months. The cloud is more important to business success than ever before and customers are realising that. There is enormous potential for partners helping customers with the migration to and hosting of cloud services in the future. 

We’re also seeing many of our most successful partners building their own IP. One of the amazing things cloud computing has enabled is the ability to turn an idea into a real-life solution faster than ever before, without capital investment.  One of our biggest priorities is to make it even easier for IP builders to create solutions, their way – on a secure, trusted and complete cloud platform – and to get these solutions to market faster than ever before.  

Are there any insights you can share with us about this year’s Inspire event? What are you most looking forward to?
As always, I’m really looking forward to the opportunity to meet with our partners in person and hear their stories and feedback about their experience in Microsoft’s partner ecosystem. It’s one of my favourite opportunities to meet, connect and celebrate with our partners. I’m always so inspired by their stories and how they are innovating and quite literally, changing the world with their businesses. 

At this year’s event, partners can expect to network with thousands of partners from over 130 countries around the world. The chance to connect with, learn from and often partner with other partners is a tremendous opportunity. And with Inspire and Microsoft’s Ready event ­co-located the same week again this year, it’s a perfect opportunity for partners to meet with Microsoft teams for account planning so they can build a roadmap for success in the next financial year. To capitalise on the opportunity, this year we’ve revised the schedule to give partners more time to network and make connections. I’m really looking forward to Inspire this year. 

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