Microsoft plans partner population explosion

Microsoft plans to double its partner population in three to five years, sparking partner concerns about margins and viability.

Microsoft hopes to double the number of partners in its ecosystem in the next five years.

That news was apparently bandied about at the company's recent Microsoft Worldwide Partner Conference, albeit not publicly, and many partner attendees had no recollection of it.

A Microsoft exec confirmed the general plan this week, stressing that the term "partner" is broad and new members will include next-generation partner types such as Web agencies that will concentrate on Microsoft-hosted services.

But, seeing as how the company now claims nearly half a million partners -- ranging from mom-and-pop retail shops and consultancies to billion-dollar hardware OEMs and huge integrators -- that will be a very big number. And, that prospect greatly troubles many Microsoft partners, who see this aspiration as a threat to already dwindling margins.

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Several partners were outright incredulous.

"Who'll be left to actually buy stuff if they have a million partners?" joked one Microsoft Gold partner in the Northeast. He has long blamed an oversupply of Gold partners for devaluing that brand.

Mark Bakken, CEO of Bedrock Managed Services and Consulting, a Neenah, Wisc.-based Microsoft Gold solution provider, agreed: "Everybody already is a Microsoft partner. Every small business person everywhere seems to be one."

If Microsoft is going to attempt this level of partner growth, it needs to do "a couple of things," said Richard Warren, principal with North Carolina Technologies, a Wilson's Mills, N.C., Microsoft partner. "One is provide some stratification relief to help those in the channel who are trying to partner with Microsoft distinguish themselves in what has become an overpopulated top tier."

This a popular line of thinking among many Microsoft Gold partners who think the company needs to add another, higher, tier of partner -- a "Platinum" level.

Microsoft also needs to identify its target markets -- partner growth in places like China and South America is probably a good idea and might even help North American partners build alliances to internationalize their businesses, Warren said.

Julie Bennani, general manager of Microsoft's Worldwide Partner Program, acknowledged that the goal is to double Microsoft's partner population in three to five years. But she also stressed that there are no plans to drastically grow the number of top-level Gold partners. She said it was fair to say that Gold numbers will stay flat or grow slightly in the next few years.

Globally, Microsoft's partner population as of July was 404,500 with 14,450 Gold, 17,500 Certified and 372,550 registered partners. The U.S. fields 140,000 total partners including 4,000 Gold, 6,000 Certified and 130,000 Registered.

In some cases, the company may even tighten Gold qualifications in some critical areas, like security and unified communications (UC). In those areas, the partners affected "will have to adjust," Bennani told SearchITChannel.com. That is an interesting example, given that Microsoft is taking on Cisco and the relatively margin-rich Cisco channel in pushing UC to the masses.

Microsoft partner boom

The big partner boom will come in the lower Registered and Certified partnership ranks, Bennani said. Microsoft is working with partners and customers to get "better leverage" around the Certified brand.

"When we talk about growth opportunities we put in place, with new customer demand, we think the partner ecosystem needs to grow," Bennani said, citing in particular the company's push into search and advertising.

Some longtime partners are just not buying that rationale. "When you're not growing fast enough, the illogical conclusion is that to get more sales, you need more partners -- not better, more compelling products," said one mid-Atlantic Microsoft Gold partner.

"Obviously there will be some growth in partners for the new businesses, but you're not going to add 25,000 partners in advertising. That just won't happen. The fact is Microsoft needs better products, not more partners," this partner said.

Current Microsoft partners of all stripes are watching this development very closely, after company miscues around Vista and its slow ramp-up to Web services. In the latter area, Microsoft must contend with Google, Salesforce.com and other companies that do not field the partners and associated infrastructure that Microsoft has to consider.

Microsoft successfully parlayed the volume sales and wide distribution approach that entrenched Windows and Office into higher-value areas like databases and now virtualization. But now partners and other observers think the company may have hit the wall. They question whether Microsoft can grow its business -- including its "Live" Microsoft-hosted services -- in a way that can sustain a vibrant partner community on razor-thin margins.

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