Last August Microsoft handed Phil Sorgen the responsibility for running its channel operations worldwide and just a few months into that role he sat down with MicroScope to talk about cloud, transformation and the need for reseller ambition.
Q. How are things going just a few months in?
I have been in role six months but been at Microsoft over 18 years in various field sales and marketing roles in the company. Maybe more important is why I went into this job? At its core I have had 18 years of success at this company with and through partners, really participating with them and seeing the benefits and the power of partnering and I'm a deep believer, and right now Microsoft is in arguably one of our biggest transformations because the industry is in one of its biggest transformations and so are the partners. So what better time to come in and be the channel chief at a company that believes so deeply in the past in our ecosystem but equally believes that our future is going to be dependent on a rich ecosystem.”
The other belief I have is that in this role I have to work hard on balance on four pillars to be a great company to partner with:
The first is product. It is the $9.5bn we spend in R&D every single year. If we don't continue to innovate and continue to develop products that customers want and partners can build a business around the other three pillars won't matter because they will move to products that they can build their business around.
The second one is creating markets. It is not efficient for partners , and drives up their costs of doing business, if they have to go in and educate a customer on who it is and what it is. We have to go out into 152 countries and make sure there is awareness of our product and as we move towards the cloud all of a sudden customers are saying if I am going to move my data into the cloud is that a trusted brand? So having a company that customers trust and has a globally trusted brand is really important to partners.
The third is enabling partners and this is a whole set of things around skilling, training and sales and technical marketing materials so they don't have to build everything from scratch and making sure they have access to resources that make it more efficient to be a Microsoft partner.
The fourth one is that we know among this industry we are differentiated in the size of our field sales and market organisation and the fact we organise them by subsidiaries that allows us to not only to do business in the UK but we can be more tailored to the partners in this market and tailor to the needs of the country and we need to use that as an important accelerator as we transition.
Q. Are you seeing more partners wanting more support and training as they start to go through this industry transformation?
We have always seen great consumption of our training materials but what is different now is they are also looking for us to help them understand the ‘what and the how’ around the business model transformation. It is not just the technical or solution orientated training that has provided in the past. What has worked in the past might not work in the future.
If we take cloud, one of the biggest transformations going on right now, of the successful cloud companies growing the fastest what they sell looks different from what it did previously as they are doing more managed services and more IP related services and they are getting into repeatable methodologies and repeatable IP. They are finding they can expand their footprint geographically more readily than in the past so customer acquisition in the cloud can be faster. They are finding they can do more shared services that they can leverage across multiple customers. So they have to have their business look different to get the trues accelerated growth out of the cloud.
Q. Are you seeing a different type of partner emerge - the 'born in the cloud' new entrants - and what is your attitude to those sorts of people?
That notion of partner types in the past - I'm a reseller, an ISV, a systems integrator a service provider - they are blurring. More partners are participating in business models that they can pursue to grow their business. The technology enhancements and the cloud have enabled more companies to participate in different business models.
Our partner eco system is changing but born in the cloud partners have set up with their business just in the cloud but we have lots of good partners that were more traditional that have been re-born in the cloud because they have transformed their business and are now are participating in a greater mix of their business in the cloud. If you look at what we think the market opportunity is for the cloud it is going to take both. It is not just going to be on new partners that enter the market but also on the growth and transformation of many other partners that did business in other ways in the past.
Q. Is the blurring having an impact on the way you deal with the channel and reinvent how you talk to partners?
We are recognising that we can't channel our communications around the different business models to a specific audience because that's how they are registered. Registrations are a legacy point of view and we are actually expanding our megaphone in how we talk to the channel because we are finding more interest from partners in areas that they haven't traditionally been in business and they are asking for us to communicate that to them.
Every decision point we go through we are saying that you have to look at the partner ecosystem more broadly. You still have to tailor methods and you still need competencies and capabilities and customers want to know that at the end of the day when you get down to the last stage of the process, which is the implementation, they have the know how and the capability. But there is a lot of things around business communication and business model that we have to broaden.
Q. Is the new CEO Satya Nadella supportive of the channel?
He has been with Microsoft for a very long time and is pretty well known to the channel and has been a regular participant in our worldwide partner conferences, including our most recent one in July. He believes strongly that we are in a cloud first mobile first world and to be successful in that you have to create rich customer experiences and you need to have a broad partner ecosystem.
Q. Where would you say most of your channel partners are in the transformation process? Are you pleased with their progress?
On cloud we are in the middle of a transition. If you look at it as a lifecycle there are partners that have a rich healthy business in the cloud and have matured their business practices in a new model and they are off growing. There is still plenty of room for growth there because not as many partners have made it to that. Then you have a middle group that is beyond their first. They have started to see that they can acquire customers faster in the cloud but they haven't built mature repeatable methodologies and the repeatable processes but they are in the process of building those. Then you have the third group, which is a quite large group, that have sold their first cloud opportunity and are starting now to build the business plans to see how they move further up that. I look at our ecosystem straddling those three places. Then there are still a lot of the partner ecosystem that hasn't participated in the cloud.
Q. What is your message to those partners that have not yet done anything in the cloud yet?
We take a strong point of view that we think there is a big opportunity and the fastest growth is happening in this category and shame on us if we don’t evangelise that position strongly because the market data and the success we are seeing in our sales is telling us that. It doesn't mean that tomorrow they will be out of business or that we don't appreciate the sales that they make and they serve an important need to our customers. Every customer's journey to the cloud is different but it's very rare that they can flick a switch and go from on-premise overnight to the cloud. So the capabilities and abilities of these partners not participating are still important and valuable but we think that at some point they are just not participating in the fastest growth segments. Getting them into that is important to the health of our partner ecosystem.
I think your traditional business grows with your cloud business but if you are not aggressive about change then you are going to have a hard time getting there. The notion of hybrid is a reality but if you are not taking from the leadership of the partner taking a point of view that we have to aggressively get there then you are not going to move as far as you need to.
There are three things that we have seen in those partners that have made the transition to the cloud. One is that they are acquiring customers faster and not necessarily going to their existing customer base with their first cloud sales. Secondly as they are acquiring customers outside their traditional customer base they are able to pull through additional business because those customers need a transitional path to the cloud. The third thing they are finding is the dream of system integrators has been repeatable methodologies because that is the key to high margin. When you have a predictable back end and an online service they are finding that they are really able to use repeatable IP and methodologies in ways beyond those they were able to in the past. So the deal margin is going up for them on cloud opportunities. The combination of those three things is pretty powerful but it requires the vision to say that we really have to change and have to move. It's different from just saying to your sales force that we are going to be hybrid. You have to have a bold ambition.
Q. Are you encouraging partners to get involved with mobility as well as cloud to take advantage of that growth area?
There are actually four megatrends that we are talking about: mobility, social, big data and cloud. we are investing a lot of R&D and programmes around those megatrends and we think a lot of customers are looking to grow their businesses and differentiate themselves are using those types of capabilities so there is a big opportunity for partners.
In mobility it spans a lot of different business models from application development, to systems management and identity management to building out the business processes. When you are trying to arm a mobile role it takes the right knowledge because everything they do is through that application. Mobility creates a huge opportunity beyond just resale.
Q. What does big data mean for the channel?
Nobody buys big data and nobody really sells big data. What customers want it answers to questions and they want to know where they get the best return on their marketing investment, who is the most logical customer based on propensity data. They want to really farm the data they have in their company to be an asset to be more agile, targeted and effective in whatever their business does. What partners have an opportunity to do is talk about the solution. If they are talking about big data they have probably lost and we are probably talking to the wrong buyer as the buyers are changing and the scenarios are changing. we are seeing some partners making a decision to focus on a vertical to be really deep understanding that vertical and build capabilities and set up the data in such a way that answers the type of questions those vertical customers are looking to solve.
Q. Is this year going to be a pivotal year for partners making the move to the cloud?
The speed of innovation in this industry is not slowing down. I think that every year that a partner is not taking a big step towards their ambition and where they think their future is they are falling even faster behind. It is happening and we see triple digit growth in unique partners participating in the cloud.
Q. Are you optimistic that the channel will get there and be going strong in five years’ time?
I am optimistic that we can achieve our ambition and realise the opportunity and market based on how big those opportunity represents. We don't just need newly-born partners to do that. I can't tell you that every channel partner is going to be successful in this transformation. But I do know that we are investing in and have a lot of confidence in the resilience and the capabilities of a large percentage of our partner ecosystem to make that transition. I took this job because I believe this partner ecosystem is the key to our success and we have to help this partner ecosystem transform in order to be successful.