Few major technology vendors rely on partners as heavily as Microsoft does. The company sells few products directly to customers and maintains a relatively small field sales force of its own, relying on partner channels to deliver 96% of its revenue. OEMs that preinstall Windows on the PCs they sell account for about a third of Microsoft’s revenue and a larger percentage of its profits. Software developers create thousands of applications that drive sales of Microsoft platforms, such as Windows and SQL Server. Thousands of systems integrators and consultants recommend, deploy, customize, and manage Microsoft-based solutions for their customers. Training partners have taught, tested, and certified more than a million people at some level of expertise on Microsoft products. Software resellers distribute the company’s products worldwide and advise customers on volume licensing.

While partners often like to have exclusive relationships with vendors to help distinguish themselves from their competitors, it is in Microsoft’s interest to encourage as many companies as possible to promote and sell its products. Such competition can drive down prices for customers, making Microsoft solutions more attractive. However, this strategy has serious drawbacks, notably the likelihood that partners who rely on high-volume sales will drive out companies that provide ongoing services and high-quality advice to customers. A well-designed partner program must thus strike a careful balance between encouraging competition and rewarding distinguished service. It must also provide assurances for end customers that the advice they get from partners is accurate, relevant, and suited to the customer.

With so many different types of partners performing different roles in every market segment, Microsoft engages its partners in many ways to ensure a good balance between price and quality.

This report describes some of the types of Microsoft partnerships, what partners gain (and give) through those relationships, and eligibility requirements. Our main focus is the Microsoft Partner Program (MSPP), which embraces the largest number and the widest range of partners. This program has been in existence, in various forms and under various names, for more than a decade, and it was significantly changed in 2003.

What’s Ahead

The chapters that follow provide more detail about Microsoft’s partner relationships:

Microsoft Partner Benefits and Risks provides a high-level overview of Microsoft’s partner relationships and the benefits and risks of such relationships.

Managing Partner Relationships looks at how Microsoft segments partners by their size and strategic fit, how it organizes its own resources to get the maximum benefit from its relationships with partners, and what partners need to do to get more out of Microsoft.

The Microsoft Partner Program provides detailed information about the program, including partner tiers, competencies, points, benefits, and technical support. It also reviews some of the special transitions Microsoft has put in place for Microsoft Business Solutions partners who previously had a partner program of their own.

Other Initiatives for Partners describes other Microsoft initiatives that can be used by a variety of partners. Some require membership in the MSPP while others do not.

The Future of Microsoft Partners explores some of the factors that partners should evaluate when considering what they should invest in their relationship with Microsoft.

Resources contains links and pointers to additional material about Microsoft's partner programs.

Appendix: Microsoft Partner Management Teams contains organization charts for some of the Microsoft units that work specifically with partners, including the names and titles of key Microsoft personnel.