A key focus area for Microsoft’s channel organization in the coming year will be on helping solution providers to drive sales and services that are “higher value” for customers, leading to greater profitability for partners, according to Microsoft Channel Chief Rodney Clark.
Clark, now a few months into the channel chief role, spoke with CRN this week in advance of Microsoft’s new fiscal year and Inspire 2021 partner conference next month. Microsoft’s fiscal 2022 begins July 1, and Inspire is scheduled as an all-digital event for July 14-15.
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A 23-year veteran of Microsoft, Clark became the company’s corporate vice president of global channel sales on April 1, succeeding Gavriella Schuster as channel chief. Most recently, Clark had served as corporate vice president for IoT and mixed reality sales at Microsoft.
In an interview with CRN, Clark outlined the priorities that Microsoft has for partners and how the company plans to invest to support profitable partner growth in its partner network over the next year. Areas of “significant” investment for Microsoft will include digital skilling and technical capabilities for solution providers, as well as added incentives in hot areas such as security, Clark said.
Specifically, one of the biggest priorities going forward is on helping more partners to achieve advanced specialization, as a way to enable them to meet customers’ digital transformation needs, he said.
“A lot of our customers are now coming to us with a digital path already charted,” Clark said. “And so now, what they’re looking for are solutions that snap into that—as opposed to, before they were looking for a partner organization to provide that digital path. So what that means for our ecosystem is, for them to drive the higher-value services and for them to drive the higher-value workloads—which translates to profitability—they need to focus on advanced specialization.”
Microsoft is also working to ensure that its internal salespeople are aware of the partners that have achieved advanced specialization, he said.
“What we want is our sellers to recognize who those partners are—because they are going to be deeper in industry, they’re going to be deeper in the specific solution areas,” Clark said. “Those partners who drive those specializations, we’re investing more heavily in go-to-market with them.”
When it comes to Microsoft’s internal use rights program, which provides free software licenses to partners, there are currently no plans for changes, he said. Microsoft reversed its decision to end the popular program in July 2019, but the past scrutiny of the costly program has raised concerns in the channel that it might still be cut in the future.
“We don’t have any specific plans for changing internal usage rights at this point,” Clark said. “And our commitment to the channel is if we do make changes to any of our programs, we’ll go out and get feedback on that.”
Ultimately, Clark says that his mission is to be “a leader who can help usher our partners in our ecosystem to this next wave of transformation—a lot of which is underpinned through tech intensity and tech transformation. It’s what our customers are investing in.”
What follows is an edited portion of CRN’s interview with Clark.
What are your priorities for your organization and for partners in the coming year?
The fact still remains that partners are more than 95 percent of our Microsoft commercial revenue and business. And for me, as I’ve leaned in, I’ve had to think about how we ensure that and maintain that as we move forward. My focus over the next few months and the year ahead is really around five things. One is digital engagement—how do I help our company accelerate this relationship that we have with our partners from a digital standpoint? That’s about progressing the engagement through the Microsoft Partner Network, as an example—how do we streamline that into things like Partner Center? So for that engagement piece, we want that to be digital over time for our long tail ecosystem. The second priority is streamlining our engagement. We rely quite a bit on inbound, co-sell engagements coming in—where partners grow and develop opportunities. And then we rely on outbound, where our sellers identify a partner for their capability and connect them to their customers. We need to streamline that engagement. The next two priorities are industry alignment and accelerating partner tech capability, which go hand in hand. We are making significant investments in our digital skilling and in developing deeper, richer technical capability for our partners.
The backdrop is that our customers are increasingly digital. They’re hiring more app devs in their own environments than most of our partner organizations are. So we help our partners through the skilling investments that we make. And we help them get more precise and more specific based on industry—either tapping into our industry clouds, or going through APIs and building and developing solutions. That will help us streamline our opportunity engagement.
The last one is overall partner profitability. There are a lot of changes that we can make, beyond things like our skilling investments, that will go towards helping our partners invest in more profitable engagements—to help them invest in the technical capability. We’ll have more dollars this year, from a year-over-year standpoint, in our investment profile than we’ve had in previous years. And that is going to go directly towards partner profitability.
How much emphasis are you putting on getting partners to sell across more of the Microsoft portfolio in the coming year?
I think this is another one of these cases where we have to match our customers’ tech intensity. A lot of our customers are now coming to us with a digital path already charted. That’s what hiring these app devs inside of these companies is providing. And so now, what they’re looking for are solutions that snap into that—as opposed to, before they were looking for a partner organization to provide that digital path. So what that means for our ecosystem is, for them to drive the higher-value services and for them to drive the higher-value workloads—which translates to profitability—they need to focus on advanced specialization. And that doesn’t mean that you are deep only in business applications [for instance]—but it does mean that if you are a business applications partner, you know how your broader solution ties into a legacy manufacturing solution at the same company. So there is the investment that we’re making with specialization to help bridge the reality that our customers are in—and ultimately that our partners need to snap to.
Are you changing the compensation or the metrics to encourage partners to go broader within the Microsoft portfolio?
There’s an internal and an external piece. The goal for us is to pull levers at the same time. When I talk about partner profitability, the way that I get to that is also by ensuring that our sellers are driven by the same goals as our ecosystem. Many times those things aren’t aligned. We are adding additional digital investments and skilling investments—we are adding incentives to support partners growing and developing in those areas. We will continue to also invest in broad competency. That doesn’t doesn’t go away—that’s still important. But we will be spending dollars and we will be holding more workshops and we will be investing more in those specializations. We will be providing a greater set of incentives for those specializations. We’re also fine-tuning our seller compensation so that it’s aligned to those things. We should close the year at about 1,100 advanced specializations achieved. What we want is our sellers to recognize who those partners are—because they are going to be deeper in industry, they’re going to be deeper in the specific solution areas. Those partners who drive those specializations, we’re investing more heavily in go-to-market with them. So it’s pulling those levers to accelerate the business and support that profitability.
Can you say anything about which incentives might be changing?
We’re maintaining our EA rebate and incentives—that’s flat year over year. And that’s something that a lot of our competitors aren’t able to do. We are adding incentives to areas where we want to grow and accelerate and drive the business. Security is one area that we’re adding more incentives, so that more partners can participate and drive repeatability. That’s really what specialization is all about. Advanced specialization says that you’re building a solution that is repeatable and is solving a specific customer need. Then on our large managed partner engagements, on average that incentive bucket is rising.
What stage are you at in terms of getting more partners involved with Azure?
I would say that I haven’t come across too many partners who aren’t sold on cloud. What I’m working through with our partners today, for the most part, is how and where do I direct them to the opportunities to build higher-value workloads on Azure. It’s not so much how to get started on Azure. Then it’s sharing the value of repeatable solutions, and the power that Azure brings when you’re going to address customer number two, three or four—and what that does for profitability. That’s more of the conversation on Azure today.
What does it mean for partners that the Open License program is being moved under the Cloud Solution Provider (CSP) program?
CSP is our hero licensing motion as we move forward in the future. There are a lot of benefits for customers in the ecosystem, as it relates to things like open [licensing] and some of those licensing mechanisms that we’ve had. But if you look at the way the cloud is transacted—and this isn’t a Microsoft statement, this is just the industry in general—it is definitely along the lines of modern commerce. And so in many ways, what we are doing is evolving, so that we also have an approach to modern commerce. And CSP has been that for us and will continue to be that for us as we move forward. The balance for us is to ensure that we are supporting those partners who have made a livelihood out of some of those more transactional mechanisms. Our customers, I think, are ready to move. And so we are always looking at ways that we’re supporting our ecosystem and things that we need to put in place, so that we can accelerate this push to CSP.
Can you provide an update on the plans for internal use rights? Could there be any changes on that program in Microsoft’s coming fiscal year?
Like any business, we have to be flexible and respond to changes in the market. We don’t have any specific plans for changing internal usage rights at this point. And our commitment to the channel is if we do make changes to any of our programs, we’ll go out and get feedback on that. We understand and know how important that is in growing and building and developing. And again, we want to be flexible in ensuring that we’re also looking at things in the future that will also be significant in helping partners build up that capability.
What are going to be some of the key themes at Inspire?
One is cloud innovation—we’re going to talk about what we’re doing as a company to continue to innovate across Microsoft cloud. It’s everything from Azure to edge integration to M365 and D365. The second theme is business growth—what we’re doing to accelerate co-sell, how we’re using and leveraging Partner Center, how we are engaging in our different industry clouds. Third is trust and security. We’re going to have heavy messaging around zero-trust, and why it’s so important to assume that companies will be breached at some point, and the process that you have to go through in order to prepare for that. So we’ll talk a lot about that as a guiding principle. And then another area that we’ll touch on is this inclusive economic environment that we’re in—how we’re enabling a more diverse ecosystem through investments, how we are driving sustainability goals and supporting them through deep rich partnerships. And then also, how we are supporting small businesses—a category that many of our partners fall into—through economic engagement and support.
Could you say more about what you’re looking to do with partners around zero-trust security?
As a company, we have been focused on this concept of zero-trust. We believe that any organization needs to embrace this to adapt to the complexity in today’s secure environment. It’s everything on the edge that could be secured with something like Azure Sphere, all the way to cloud and ultimately how information is gathered. We are committed to helping our customers by delivering these integrated security solutions. One of our specializations for partners is a security specialization, where we’re also investing in ensuring that they have the core building blocks that they need in order to build a secure solution—be it on a device, be it a specific SaaS solution that’s plugging into a specific environment. It’s the notion and concept that things will be breached at some point. There is no patch, per se, and no immediate fix. And so the message to partners is, because security is usually the No. 1 or the No. 2 area of investment for our customers, [partners] also need an approach to zero-trust. One of my keynotes at Inspire will be going deeper into the things that partners can do, and areas that they should be investing in, and how we’re supporting that through our digital initiatives and skilling efforts.