Microsoft gets the measure of reseller satisfaction

Has Microsoft finally realised that it must treat resellers as well as it would its customers?

Microsoft chief executive Steve Ballmer has shed light on the software giant's new strategy to get closer to its reseller partners and about future business growth and market conditions. Here he talks to vnunet.com's sister publication Computer Reseller News US.It seems there is now more of a push to get Microsoft thinking about partners in a more pervasive way. There also seems to be more measurement of partner and customer satisfaction. Is that true?
The real key is to try to get the guys who build the products to think much more about how they get taken to market, all the way to the customer through partners. There are lots of decisions to make in terms of the engineering, packaging, positioning and pricing.

Let me take one example that we're working on: the evolution of Software Assurance [Microsoft's software licensing programme]. If you don't get the people engineering the products to think about it, you actually miss the whole thing. So we have to re-engineer Software Assurance.

As we do that, a very big question is raised: what is the role of the channel in Software Assurance? We know we need a channel, but what is the value we want the channel to add? And is it consistent with the value the channel adds today?

When we signed the consent decree [in the antitrust case], there was a set of things in it about standard terms and licence conditions. All of that goes back to the product, the way it is engineered and the flexibility we give our downstream participants to customise change. We want our engineers to have a much more holistic view of the roles of the channel and the customer.

And what about satisfaction metrics? If we're going to do a good job bringing things to market, we have to do a good job all the way across the value chain. If we think we have engineered something well for the customer, but blow it with the partner and it never sees the light of day at the customer end, we've screwed that up.

For many customers, the partner is the customer. In the small and medium-sized enterprise [SME] space, people don't really make these IT decisions themselves. The partner acts as their outsourced IT department.

But when you think about how to make the customer happy, if his IT department is really a value-added provider, that [provider] is the customer. If that person is not happy, the end-user is not happy, and vice versa. We have absolutely told people we want to measure customer and partner satisfaction.

How is that being handled within the company?
It depends on the partner type. Some partners don't want to be pigeonholed; they do a couple of different things. But we need to get some degree of parallelism. If you put on a continuum Cap Gemini Ernst & Young and the small reseller, it is clear that what it takes to satisfy each of them is radically different.

So this is still an organisational work in progress?
I know how I think it's going to work. We have made the key decisions. The question is in the execution, in drawing up a framework. There is an engineering, strategy and go-to-market execution. Wouldn't it be nice to have everything in one organisation? But the truth is, it doesn't work in an organisation of this size.

If we have made an error in the past several years, it is that we have let too much talent in our company migrate out of the SME area and into the enterprise area. One of the key goals in the next year or two is to make sure we have strong talent on both sides of the fence. We make about 50-50 in revenue from SMEs versus enterprise.

Is this realignment a pretty radical change from when Microsoft had one channel champion, Sam Jadallah?
We have one channel champion today as much as we had one six years ago. If there is a class of partner, that's CRN's reader base. I may be wrong about this, but I'd say that it is certified service providers, affiliates and maybe some independent software vendors and system builders.

And if the question is: 'Is there a channel champion for all this?' the answer is yes. Rosa Garcia [former channel chief] had it. Allison Watson has it now. But we're not asking them to worry about SAP or handle how we go to market with the new Hewlett Packard. The go-to-market strategy with the big enterprise partners is quite different.

Earlier this year, Microsoft named IBM Global Services veteran Mike Sinneck to head its consulting arm as worldwide vice president of services. What led to that choice?
Mike is a smart, hard working, energetic, aggressive, caring and passionate person. If you read the company memo, as half the western world did, he fits in with what we want in our people. He has the experience that is relevant, he has run product support and services organisations, and I think he is a great addition to our management team. No, we're not trying to make our own IBM Global Services, but we need someone who understands how end customers want to be served.

What partnering insight does he bring to Microsoft?
We all have a chance to learn. There is not the same number of people here who understand partnering and how to manage the kind of support and services business that we have the same way that Mike understands it. If you bring in people from the outside, you bring in different expertise; something you don't already have. If you want someone who knows what you already know, you're better off promoting someone from the inside.

By the first or second week from Mike's mid-year review, he understood that we had messed up how our services policies and goals interacted with our partner network. Within one week, he laid down the law for services people: 'Thou shalt not go crosswise with your partners in the following ways, and here are some of the things we did that made you subconsciously take the wrong action.'

We had some of the wrong measures and goals in place, and hadn't responded well enough to change in the economic climate.

One of the problems Microsoft has had is that the product engineers never thought about the channel. Will this realignment correct that?
Yes. It will happen, or there will be new product guys. That's for sure. The only question is how long it will take. As soon as we told them: 'Look, you're now responsible for thinking end-to-end about your business', people's attention crept way up, believe me. We have just finished our business plan reviews, and everyone's saying: 'Wow, now we have to think about all of this stuff.'

I just came from a meeting about the future of BizTalk Server. We had two parts to the meeting. The first was basic positioning and packaging, and the second was how we'd go to market with our SME customer channel. BizTalk Server, I think we can all agree today, has higher-end positioning, not the kind of thing the average Microsoft channel partner will have the resources to deal with.

We needed different packaging, strategy and positioning. We had to do some things differently, and it has to start all the way back at the engineering level. If this had been a year ago, it would have been all about the enterprise. Then they walked through how we will package it and how the channel will deliver it.

How would you characterise Office XP and Windows XP sales through 2002?
Our numbers are public. Beauty is in the eye of the beholder. Compared with almost anything else in the IT market, it looks pretty good. But not compared with security products. I tell you, it's happy days at Network Associates and Symantec compared with what's going on at Sun.

The Office and Windows businesses aren't going to grow by 20 per cent each year. The only way to get to 20 per cent is if there was a major increase in piracy. Twenty per cent is an amazing number. Twenty per cent of our Office sales is bigger than sales at any other software company in the world, except for IBM. We'd have to grow a whole Oracle database business in a year to get a 20 per cent increase. These are very large numbers.

It doesn't mean we won't do a good job, get new franchises and have new growth. But people's benchmarks cannot be 20 or 25 per cent. It's not realistic.

Did resellers expect a bigger kick from Office XP?
It didn't have a big surge with the upgrade. There hasn't been a huge surge of upgrades since Office 95. People do upgrade. But the question is, do they do it in the first 60 days or the first two years of release?

More and more, this is not a surge business. If you look at the upgrade surge of Office 2000, it is very small - $40m worldwide. That's a drop in the bucket compared with the total size of the Office business. Windows upgrades have more of that surge characteristic; they are more consumer-oriented.

Do you see any signs of economic recovery or big deals in the pipeline?
The news here is not particularly better than anywhere else.

SUMMARY

• Microsoft is looking more closely at how its products are engineered to ensure that they offer partners flexibility.
• In the SME space especially, the company has realised that it must treat resellers as it would its customers.
• Ballmer admitted that too much emphasis has been placed on selling to corporates, rather than small companies.
• The reshuffle of Microsoft's channel bosses aims to make its channel strategy its number-one priority.