While “huge opportunities” will abound this coming year for solution providers that work with Microsoft, Channel Chief Gavriella Schuster said the company is limiting its channel changes right now as partners grapple with the difficult economic environment.
In an interview with CRN just ahead of Microsoft’s Inspire 2020 global partner conference, Schuster said her team has “tried to minimize” the types of changes that can be burdensome for partners.
“At this point we’ve said, let’s only do small changes—things that don’t require much on the part of the partner to participate in,” said Schuster, who is corporate vice president for Microsoft’s One Commercial Partner organization. “Even on our incentives, we tried to minimize the incentive changes year over year. Because it’s just a lot for a partner to take in—at a time when they’re just trying to keep the business going. We tried to just say, let’s focus on building business this year as opposed to changing things.”
Schuster discussed a range of topics in the interview with CRN, including what’s next for the partner opportunities in Teams, Windows Virtual Desktop and Azure. She also spoke about how Microsoft has overhauled its approach to instituting channel changes, after making the decision a year ago to stop providing partners with internal use rights on its products—an unpopular decision that was later rescinded.
Inspire 2020 will take place Tuesday and Wednesday in an online-only format, and is a central part of the kickoff for Microsoft’s new fiscal year, which began July 1.
What follows is an edited portion of the interview with Schuster.
Did the incident a year ago around internal use rights lead you to adjust your approach around channel program changes?
We did a fairly deep post-mortem of what happened, and what drove the changes, and how decisions were made. We first went to our Partner Advisory Councils to see what the partner feedback was from those councils, and how we incorporated that into the design, and did we then go revalidate. What I found was, I didn’t feel like we were expansive enough in the partners we were including [in discussions of major changes]. I think there are two things about Partner Advisory Councils—I love the partners, but we need to turn them over more frequently, because they get too close to us, and they are too much part of the process. Then they aren’t giving us the objective feedback we’re trying to get by having them. So we instituted a term limit on those. And then also, [we changed] the types of partners that we have—so we’re getting a really strong mix of partners.
That’s your phase one, but what’s your phase two and your phase three? How are you then going to go out and validate the kinds of changes that you want to make, and the value proposition around it, and the impact that it may have? How do you ‘ripple effect’ that testing before we say that something is even ready to go get vetted internally—that it’s even a good idea? So we instituted that. Internally, we brought in a very core governance team at a more senior level to oversee the changes. Then we also instituted a matrix that talks about those things I was mentioning—what is the upside, what is the downside, what is the potential impact, how big? How do you characterize how small, medium or big this impact is going to be? And then quantify for me the partners that will be impacted positively, and the partners that will be impacted negatively—so that we could then do the full risk analysis of it?
Then we bring that to a steering committee, where we look at that before anything is rolled out. And then we talk about what the communication plan is. If we think, well, this has to be done—like we did the Microsoft Partner Agreement, obviously we knew that had to be done. It’s a new agreement. But it does have change and change management. So, what’s the change management process that we’re going to do? And if a partner missed the change, how hard is it for them to come back in and re-sign that partner agreement? And can we automate that—can we make it just a click-through? How easy is it for them? So we just instituted a series of checkpoints so that we would not leave partners out in the cold.
Are there changes of that magnitude happening for channel partners in the coming year?
We have tried to minimize that. So at this point we’ve said, let’s only do small changes—things that don’t require much on the part of the partner to participate in. Even on our incentives, we tried to minimize the incentive changes year over year. Because it’s just a lot for a partner to take in—at a time when they’re just trying to keep the business going. We tried to just say, let’s focus on building business this year as opposed to changing things.
Are any incentives being increased?
We are putting more focus on usage, such as Teams usage. We did a campaign in [fiscal] Q4 around Teams usage, and then we just carried that through into the actual incentives for the year. Then we also introduced this concept of partner-delivered-to-customer ‘in a day’ workshops and solution assessments. We had some of those for security. We instituted some others with Teams and with Azure cloud migration. We put an incentive on the delivery of those. So those are the new things that we introduced. We tried to keep the CSP [Cloud Solution Provider] rates stable because that’s the thing that impacts the most partners.
On Azure, do you still see Azure preference increasing in your partner base?
We do. At this point, so many customers are asking for Azure—especially as we’ve increased the technology portfolio. Windows Virtual Desktop has driven an Azure preference in a very big way. Customers find the need for it, especially now with remote work. And of course that is all on an Azure tenant. So once you get a customer moving down that path, it opens the door for a lot of other applications and modernization. We’ve seen an explosion in partners coming to the training for Azure—the number of people in their company that they’re sending through the Azure training, and then sending through Azure certification.
Overall how do you feel about how Azure is doing compared to competitors?
I feel very good about the growth of Azure. I think that cloud in general is getting a big boost, as customers are trying to figure out how they drive business continuity.
Are there ways you’re looking to make Azure more profitable for partners in the coming year?
I think the reason that Azure is more profitable for our partners is because there’s so much more they can build on it. One of the ways is the enhancements we’ve made to the Power Platform, and the business intelligence toolkit with data analytics. Both of those create huge opportunities for our partners to come in with additional services, customized applications, customized dashboards. That drives a lot higher level of profitability for them as they engage with the customer. What we’re trying to do is help them get past the commodity, IaaS layer with a customer, and move into value-added services.
What other areas are you emphasizing in the coming year?
We’re going big in security this year. We’ve definitely seen huge demand from our customers through COVID for more security solutions, as they’ve realized they don’t quite have all the security solutions that they need. ... Then you add on applications like Windows Virtual Desktops and Microsoft 365. And then on the side you bring in Power Platform, and you bring in security—and those are all of the wrappers that enable our partners to have that profitable business. So I think in this coming year, we’ll work with partners who are doing all of those things—to put together a playbook for partners to follow. Because at this point, our playbooks have been fairly solution-specific. What we need is this multi-solution [approach], but we haven’t had enough partners doing all these multi-solutions to be able to come together and help us build it.
What are you hoping to do next with partners around Teams?
A lot of the [recent] adoption has been about getting to remote work. Where we’ve seen real success is when the partners can come in, and do the adoption and change management around true collaboration—helping customers really understand how to share documents, how to do the white-boarding, how to more effectively engage on an ongoing basis—and go beyond meetings and chat. And then even some of the voice features coming in, some of the work we’re doing on Azure Edge Zones and 5G, to help customers replace a lot of their archaic infrastructure with cloud-based infrastructure.
Is there still a long way to go in terms of what partners can do with Teams?
Yes, absolutely. It’s definitely changed the way people work, but I think that they haven’t quite caught up to [all that it can do]. For instance, the thing that you would have stopped by and had a quick meeting with somebody about—you could actually do that without even doing a meeting. You could pop the document up, you can both work the document, you can connect with each other and chat through the document. I don’t know that enough people really get that, and have included that in their way of work. I don’t know if a lot of our customers have.
What’s ahead for Windows Virtual Desktop and partners? Where do you see that opportunity going next?
Well, this is a huge opportunity for the partners to move to managed services. When customers move into Windows Virtual Desktops, they don’t want to manage those. We just announced the partnership with Citrix, and we’re going to be doing some expanded tooling and migrations with them. We share a lot of the same partner ecosystem with them, so that’ll enable our partners to go in and be able to really do the hybrid environment for customers. I think that will also ease a lot of the return-to-work kind of exposure that our customers have, if they know that they’ve got secure desktops wherever the user is and they have some population at work, some population not, etc. And so that really gives them the opportunity to do this managed service. A lot of our partners have been putting off moving to managed services because the project services were still so profitable. And they were like, ‘My customer is going to pay me up front, do I really want to shift that to some sort of monthly thing?’ I think this is the push—because now the customers actually don’t want to pay up front, or can’t afford to pay up front. And the partners have learned that they can actually deliver a lot of value without going on-site, which I think a lot of their consultants and technicians had been afraid of. So I think this is a push that will really transform their business model too.
In terms of Microsoft’s own Consulting Services, is Microsoft often bringing in partners in some way? Perhaps to do managed services or cloud migrations?
Our Microsoft Consulting Services—there’s a few things to know about it. One, it’s very small. Two, the primary objective is for them to take on riskier projects or new technologies, where it would be high risk for a partner to bank their business on something that wasn’t tried and true yet. And so obviously we backstop that with our own services to be able to get customers up and running and do flagship or marquee wins, and show the way, and build some of that reference architecture. So, that’s the primary reason why we have a consulting arm, to do a lot of that. But we don’t then stick around and manage the service and operate the customer’s environment. And so, where the customer chooses not to be the one to do that, we bring partners in to do that. We do a lot of subcontracting with partners in our own consulting services. The customer wants us to have skin in the game, but if there’s a partner that actually has more capability in specific areas, then we bring them in to deliver it. And then we actually do—with our customer success team, which is more free services—we do this free-to-fee kind of approach, or vision-to-value. It depends on the way you want to talk about it. But that’s where they’ll go in and they’ll get a customer started, and bring a partner in to go carry it forward.
How do you think partners should be evolving their businesses as a result of the customer environment right now?
The first thing is in managed services. We have instituted a number of things through Azure Lighthouse, through Azure Arc, through the dashboards for Windows Virtual Desktop—actually through a partnership with Nerdio, where Nerdio overlays onto Windows Virtual Desktop a managed service platform for partners. We’ve done things to make it easier for partners to get into that business without huge up-front investment themselves, so that they can get started and then they can take it forward. The other thing is this idea of how they can save some operational cost by doing more of this inside sales model. Because I think we’re going to be in this world for a while. And so, teaching their sellers how to do remote sales, remote demos, that sort of thing. Even remoting into a customer’s machine to help them install something or do something else. Those are some of the key ways that we’ve seen partners [change how they] work.
When it comes to the health of partner businesses, do you have concerns about the outlook that you see?
Everything is uncertain. I think it’s going to be uncertain for like 12 to 18 months. The liquidity of our partners worries me. A lot of them do go month-to-month. What we can do is continue to point them in the direction where we see the opportunity, where we see customer demand, and try to make that as easy as possible. I think we are going to continue to see more channel consolidation. There’s been a lot of acquisition activity, and I think we’re going to continue to see that this coming year. Those organizations that had deeper pockets or wealthier investors are going to be able to pick up some of the partners that are struggling. There is such a demand for good talent in the marketplace. The technical intensity has increased so much. Probably even more so now, customers themselves are taking this time to get more astute. And so, I don’t think that any of the people are going to be left behind. Anybody who’s capable will get scooped up somewhere—whether it’s because their company gets bought or they get enticed away. The cool thing about our ecosystem is that, it’s all about the people—the people show up in multiple places. The health of the people is good. The demand for the people is good. So that gives me comfort. But I do worry about some of the companies who are on that tight cash flow, and their ability to to manage through this.
How is your Inspire keynote this year going to be different from the keynote in past years?
Well, we are not talking about the success we’ve seen over the last year or big opportunities over the next year. We’re all just kind of like, ‘We’re getting by pretty good, and we want to help you. And this is what we’ve seen. And we don’t really know what to expect. And what can we anchor on?’ So, what are the things we know, what are the things we don’t know? How do we move forward with the things we know? And then how do we stay in close enough communication that we can build on the things we know? For sure, the tone [will be different]. Not just because of the pandemic—but in the U.S. and in many other countries, there’s a lot of both economic and social unrest, as well. And so it all comes together in a way that makes you feel like, ‘What can I be sure of?’ Our goal is to start identifying the things we can be sure of together, so that we can make it through together.