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The Microsoft Virtual Academy kicked off a weekly webinar series aimed to help partners improve the profitability of their cloud businesses. Led by Jen Sieger, senior business strategy analyst of the Worldwide Partner Group, the online sessions promote best practices drawn from the Microsoft cloud partner community.
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Microsoft has urged its partners to align their business models with the vendor's cloud- and mobile-first strategy for about two years now. This webinar series, which is part of Microsoft's efforts to help its channel overcome transitional challenges, targets a variety of partners, Sieger said, including system integrators, value-added resellers, managed services providers, independent software vendors and some distributors.
"We have a robust ecosystem of partners … and many of those partners come to Microsoft for advice on how they can build a profitable [cloud] business. You see the challenges of shifting from that upfront sale that is a big cash event for them to a model where they need to build annuity business and build out that recurring revenue model," Sieger said.
"If you look at the other technology vendors, you really don't see [them] investing in this kind of [partner education]. But we feel very strongly that if it's a critical element of our strategy, we truly want to be a partner to our partner channel, provide them with advice and learning, and share the best practices and ways for the partners to be successful across our ecosystems," she said.
Key cloud business areas to address
In the first webinar of the series, "Build a profitable cloud business with Microsoft," Sieger made a case for adopting the recurring-revenue business model.
Project services typically drive a range of approximately 35% gross margin, she said, while managed services generate 45% to 55% gross margin on average, and packaged IP often exceeds 65%. With today's active mergers and acquisitions space, recurring revenue partners also make much more attractive acquisition targets. "The partners that have gravitated toward the recurring revenue lines and are realizing healthy growth are being presented with much higher valuations. This can have a dramatic increase in the cash event of a company and, overall, their shareholder value -- far higher than what a traditional partner who focuses on product and billable services can realize," she said.
Sieger discussed four key areas on which the Microsoft cloud partner community should focus its energies.
Pillar 1: Creating scale. "This [pillar] is all about building strong revenue growth through the development of a sales machine," Sieger said. She outlined Microsoft cloud partner strategies that have proven successful, including digital and thought-leadership marketing, a programmatic approach for sales teams, and the use of scalable tools and repeatable processes to deploy and drive adoption with customers. She also suggested recruiting other Microsoft partners to sell and deploy your offerings.
Pillar 2: Developing focus, creating a differentiated offering. Many Microsoft cloud partners struggle with differentiating themselves in the market. "One of the best ways in developing focus and differentiation into your business is to incorporate specialization and to target one to three verticals," she said. "Doing so enables you to increase your posture as a subject matter expert that adds value beyond the IT domain and justifies a higher price point."
She advised partners collect vertical- and industry-specific customer evidence to use as part of their pitches, invest into targeted thought-leadership marketing and dedicate areas of their website to their vertical or industry focus.
"In the early days of targeting a vertical, it's really important that you closely monitor your successes and failures, determine what is working and what's not, and share that information broadly across your team," she said.
Pillar 3: Maximizing wallet share with your customers. Sieger said Microsoft cloud partners can maximize the revenue of each customer by broadening their offerings. For example, a partner that sells Office 365 and wraps managed services around it may add complimentary Azure workloads.
Pillar 4: Creating stickiness with your customers. The final area for cloud partners to focus on is entrenching themselves within their customers and making it more costly for a customer to switch to another cloud services partner. Partners can create stickiness by "developing and deploying IP that becomes a part of the daily life of the customer," Sieger said.
The "Partner Profitability" series will run every Wednesday until Nov. 18, covering topics that include building intellectual property into your business model, increasing the valuation of your business and acquiring new cloud customers.
IT channel news roundup for the week of Sept. 28
Here's a look at the channel news highlights:
- AVG Technologies Inc. released its 2016 Business Edition software suite, which includes new versions of the company's AVG AntiVirus Business Edition and AVG Internet Security Business Edition. Channel partners will receive free upgrades to 2016 Business Edition with renewals of existing licenses, according to the company.
- Business continuity services vendor eFolder Inc., which sells through the IT channel, announced a new capability that lets partners provide cloud-based disaster recovery services for Veeam backup and replication software deployments in VMware vSphere.
- Continuum Managed Services added lights-out management (LOM) capabilities to its remote monitoring and management platform with an Intel vPro integration. New LOM features include remote power management, as well as keyboard, video and mouse control.
- Also this week, Continuum appointed Brian Herr as its new vice president of products. Herr will oversee the strategic direction of the company's managed services platform. He replaces Dee Zepf, who has been named vice president of partner success.
- Security vendor Tempered Networks Inc. is taking a 100% indirect route to market with the launch of the Cyber Guardian Partner Program. Using the Cyber Guardian program's online portal, partners can register opportunities, access sales and marketing tools, and take remote learning modules. Partners will also receive pre- and post-sales engineer support, as well as support from field sales directors. While the Cyber Guardian program doesn't currently feature membership levels, the company said it will expand to tiers based on competencies over time.
- Cloud-based communications vendor xMatters Inc. launched a global partner program. The program provides pre- and post-sales support, sales and technical training, access to xMatter products for testing and evaluation, and marketing development funds. The vendor also offers the xCelebrate Program, which rewards sales success with increased margins.
- Cloud security automation company Palerra Inc. bolstered its partner program with referral benefits. The new Palerra Referral Program rewards partners that recommend the company's Loric platform.
- Brother International Corp. introduced the Volume Print Program to the Brother Authorized Partner Program, allowing partners to combine their operating costs with customer support into one monthly invoice.
Additional reporting by John Moore.
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