The Seattle chapter of IAMCP (International Association of Microsoft Channel Partners) welcomed Phil Sorgen (@phil_sorgen), Microsoft Channel Chief, to today’s monthly meeting, where he provided a preview of some of the topics he’ll cover in his vision keynote next month at Microsoft’s Worldwide Partner Conference (#WPC15) taking place in Orlando, Florida. This was Phil’s second visit to the IAMCP Seattle chapter, providing a WPC preview last year, as well. (That’s one of the huge perks of being located a stone’s throw away from the Redmond campus, I suppose.)
Although Sorgen talked about changes coming to the Microsoft partner program over the next year (details to be shared at WPC), much of what he covered is not really new – but invaluable to partners trying to understand how they need to be evolving their business models. One of the first messages he delivered when he moved into the role over 20 months ago was the change happening across the partner landscape – specifically, that partners who were evolving their businesses toward Microsoft’s cloud-first, mobile-first model were seeing the most growth and revenue within their businesses. He left one slide up for a good portion of his presentation, sharing that businesses that have 50% or more of their business in the cloud – and especially those offering some kind of IP on top of those cloud services – have 5 to 14x EBITDA (earnings before interest, taxes, depreciation, and amortization), with 1.5x gross profit % and 1.8x revenue growth.
Sorgen talked about the current state of the four primary business models: resale, project-based services (traditional solution integrators), managed services, and IP creators – and how resellers and traditional SIs were finding it increasingly difficult to grow, as much of their business has been commoditized. He said that organization that were growing the fastest were creating managed services and unique intellectual property (IP) on top of Microsoft’s platforms, specifically around Office 365 and Azure. He provided a bit more detail in his slides, highlighting where Microsoft is seeing the most partner success:
- Business focus shifts away from resale, toward IP based business models
- Marketing shifts to digital
- Business activities focus on creating differentiation
- Major buyer shifts toward line of business
- Sales options move from one time to recurring
- While total addressable market grows & sources of competition diversify
He talked about some of the common questions he hears from partners, and offered some advice – including questions he suggests partners ask of themselves:
- Where am I in the standpoint of building 1st party IP? Do we have a culture where we develop this IP, where we create unique value?
- How good is my organization at digital marketing? Am I satisfied with my company's profile? What is the digital profile of a company that does well, and where does my company fit against that baseline?
- What is my customer acquisition strategy to expand my total addressable market? Am I focused on one tiny subset of the market, or is there sufficient opportunity for me to grow?
- What are my KPIs and compensation model? What are we measuring our success on? On what metrics does our leadership base their forward-looking plans? Have we changed our compensation plans to align with this new strategy and offerings?
One of the most enlightening things Sorgen shared, in my opinion, was the framework through which he filters each new plan or idea coming from within his organization. As proposals are made, he asks three key questions:
- Does it increase the value of being a Microsoft partner?
- Does it lower the cost of partnering with Microsoft?
- Does it make it easier to partner with Microsoft?
As always, we appreciate the time and effort made by Phil, our Microsoft sponsor Robyn Schutz, and their teams in supporting the Seattle IAMCP, and the partner community at large. I’m looking forward to participating in my 6th WPC next month and learning more about the evolving partner channel. See you in Orlando!