By Paul DeGroot [bio]
Posted: Aug. 7, 2006

The following an excerpt of a Research Report published by Directions on Microsoft, an independent research firm focused exclusively on Microsoft strategy & technology. More samples of our content, as well as a list of upcoming articles and reports are also available.

Few large businesses can operate without partners of some kind. Automobile manufacturers partner with components suppliers before manufacturing a car, and with dealers after they manufacture it. Telephone companies may have cross-promotional relationships with handset manufacturers or retailers.

Many of these partnerships are merely transactional in nature: a manufacturer puts out bids for components or a telephone company spots a short-term opportunity and signs a contract with a potential marketer. In the software industry, however, longer-term partner relationships are common, primarily because no one vendor is usually in a position to provide all the products and services that customers want. A second reason is that software is usually highly configurable and flexible, which means that no two customers want to use it exactly the same way. That creates opportunities, even a necessity, for partners who understand their customers' businesses to help sell the software and to deploy, configure, manage, and integrate it with other hardware and software.

Thus, most large IT vendors rely heavily on partners. As with most IT vendors, Microsoft's partners attend annual conferences, get specialized training, receive discounted software, are notified of potential sales opportunities, can use the Microsoft logo, and receive other benefits that reward them for assisting Microsoft in its sales efforts. To get such benefits, however, the partner must seek out the vendor, sign up for a partner program, and meet certain requirements.

Microsoft estimates that about 700,000 companies promote, deploy, and manage its products. Of that number about half are formal members of its partner program. This makes Microsoft's partner program the largest in the IT industry. (Although the programs are not directly comparable, and numbers are not available for all programs, the next largest program may be IBM's PartnerWorld program, with about 16,000 members.) Note that many of Microsoft's partners, and probably most of its larger partners, also participate in other partner programs, such as those offered by IBM, Oracle, SAP, and Sun.