By Paul DeGroot [bio]
Posted: Jun. 21, 2004

• Chart: Current Competencies
• Chart: What’s in a Competency
• Chart: Partner Program Tiers
• Chart: Winning Points

The following is the full text of an article published by Directions on Microsoft, an independent research firm focused exclusively on Microsoft strategy & technology. Each month we make one or more key articles available to non-subscribers.

An ambitious top-to-bottom overhaul of Microsoft’s partner program brings all of the company’s programmatic partner relationships under one umbrella and incorporates hundreds of thousands of small partners who were not in earlier programs. Large partners may not notice much change, but small partners should find that they have a much clearer path to engaging Microsoft. Several partner communities, notably ISVs, Microsoft Business Solutions partners, and training centers, will see significant changes in how Microsoft defines its relationship with them and rewards their performance.

The Need to Attract Partners

Microsoft estimates that 96% of its revenue comes through partners. The company sells few products directly and has a relatively small field sales force compared with most of its major competitors. Instead, a wide range of partners, including hardware vendors, resellers, ISVs, training centers, corporate developers, and system integrators, promote and resell Microsoft’s software.

A large force of partners reduces Microsoft’s sales costs, provides valuable intelligence about the marketplace, and can serve a large number of small customers that direct sales staff would not bother with. However, in an effort to reach small and mid-size companies, Microsoft’s competitors have begun to place more emphasis on their own partner and channel programs, placing competitive pressure on Microsoft to maintain and improve its relationship with partners. For example, IBM has revamped its partner program to better focus on particular vertical industries, and Oracle is promising to clarify the rules under which its direct sales force works in order to reduce conflicts with the company’s partners.

These competitive developments and weaknesses in its own partner relationships prompted Microsoft to announce revisions of its 10-year-old partner program in 2003. The old program had several faults, including the following:

Lack of reach. The Certified Partner program failed to reach tens of thousands of small partners who lacked the formal certifications required for the program or didn’t want to pay the fees.

Lack of quality. Those who did sign up often exaggerated their skills in the partner database, in which partners were free to list their talents as they pleased. This reduced the value of the database and irritated partners who were genuinely qualified but found themselves competing against less skilled firms in the race for customers. Microsoft had no mechanism to verify partner skills, however.

Lack of relevance. Partners complained of being deluged by irrelevant marketing material from Microsoft, much of which they never read or used. For example, a partner focused exclusively on Office development would nevertheless receive information on all Microsoft technologies.

Internal competition. The Certified Partner program was the most visible Microsoft partner program, but the company had dozens of other partner programs, some of them thinly disguised business relationships with only one "partner"; others that had no formal membership process but were assembled from firms already known to Microsoft management or field personnel. Managed by various teams and product groups, the quality and purposes of these programs lacked cohesion and the fractured partner landscape created unhappiness among firms that wanted to work more closely with Microsoft but were mystified about how to do it.

Program Overview

The new partner program, announced in Oct. 2003, attempts to solve many of these problems by implementing the following:

• A single program that encompasses the entire range of Microsoft partners
• Clear guidelines for measuring and rewarding partner competence with specific solutions
• Partner levels that distinguish the most experienced and capable partners from others
• Clear rules about how partners can gain additional benefits by working with Microsoft.

A Single Program

The new program brings most of Microsoft’s "programmatic" partner relationships—that is, those with formal membership criteria and active management—into a single program. While the Certified Partner program focused primarily on system integrators and consultants, the new program (called simply the Microsoft Partner Program) will also encompass hardware vendors, ISVs, Microsoft Business Solutions (MBS) partners, resellers, system builders, and training centers.

In addition, the new program is open to hundreds of thousands of small firms and individuals who would like additional support from Microsoft that could help them become more competent and successful. While the Certified Partner program had about 35,000 members, Microsoft projects that the new program could include 45,000 Certified and Gold Certified partners and 100,000 Registered partners by the end of the company's 2005 fiscal year.

Partner Competencies

To give Microsoft and partners themselves a clear standard for determining partner skills and experience, the company will define numerous competencies that correspond to major areas of IT focus.

Nine competencies, such as networking infrastructure and ISV solutions, have already been defined, with two more likely to appear by mid-2005, and additional competencies will be defined over time. (For a list of competencies as of June 2004, see the chart "Current Competencies".)

The competencies define broad types of IT solutions and are not limited to competency with particular Microsoft products, although skills in specific products are part of the criteria for obtaining a competency.

The criteria for each competency will be different: each is designed to measure the most relevant skills and experience in that particular field. However, several attributes appear in most or all of the competency requirements, including the following:

• A minimum number of employees with Microsoft certifications, such as Microsoft Certified Systems Engineers (MCSEs) or Microsoft Certified Database Administrators, or staff who have successfully completed exams relevant to a specific type of solution
• Three annual customer references (which will be verified by Microsoft) affirming satisfactory deployment of relevant solutions.

Particular competencies may have additional requirements. For example, the ISV competency requires that the applicant’s software has met one of several certification tests, and the learning solutions competency, aimed at training facilities, requires that each approved training site meet particular hardware requirements.

By organizing its partners around specific competencies (organizations can have multiple competencies), Microsoft can offer each partner benefits, such as free software, access to technical resources, promotions, a customized Web portal, and marketing collateral, that are specifically designed for their business and professional focus.

The competencies also give partners a clear way to differentiate themselves from competitors. In the new program, an organization can no longer claim formal competence in a particular solution area unless its staff have met specific training requirements and the company has satisfactorily deployed solutions with real customers.

(For an example of what is required for a specific competency, see the sidebar "What’s in a Competency?".)

Partner Tiers

Like many of the partner programs it replaces, the new program is organized into tiers that further distinguish levels of partner size and skill.

Partners in the top tier are Gold Certified partners, and typically have several competencies (although only one is required), larger staffs, more customer experience, and other attributes. The next tier down is for Certified partners, who must have at least once competency, a certified hardware or software product, or two Certified Professionals on staff. Participation in these tiers requires payment of an annual fee.

The lowest (and probably largest) tier is for Registered partners: these organizations generally have no formal skills, certifications, or competencies. No fee is required at this level.

The tiers determine the level of support a partner receives from Microsoft. While benefits vary slightly by region or country, the benefits generally break down as follows.

Gold Certified partners are listed in a Microsoft partner directory; have access to a Microsoft technical services coordinator; get better access to Microsoft executives and managers; get discounted training and marketing services from Microsoft; receive free customer satisfaction measurement; and are entitled to up to 100 free software licenses, additional discounted licenses, and Microsoft Developer Network (MSDN) subscriptions for internal use.

Certified partners are included in the Microsoft partner directory (accessible through a search page); get telephone-based account management; receive five free support incidents; get discounted training and marketing services; can talk to a TechNet concierge to track down answers to technical questions; can create a custom page at the partner Web portal; and receive up to 10 licenses for internal use software, a TechNet Plus subscription, five MSDN subscriptions, and additional discounted software.

Registered partners are not listed in the partner resource directory, but have access to online partner resources, such as product and solution tutorials, marketing material, partner newsgroups, and an electronic newsletter; they also get limited amounts of telephone and Web-based technical support. They do not get free software, but can purchase the inexpensive Action Pack Subscription, which includes internal-use versions of most Microsoft business software, for a small annual fee. (For more information about the three tiers, see the chart "Partner Program Tiers".)

In addition to these general benefits, getting a competency often confers the right to additional benefits relevant to that competency, such as access to relevant online labs and customer marketing material.

Partner Points

To move upward from one tier to the next, partners must accrue partner points. Participation at the Certified level requires 50 points, while Gold Certified partners must have 120 points. This approach gives partners a clear and measurable path toward higher partner levels and more benefits from Microsoft.

Partners have many ways to earn points. For example, 70 points are earned for maintaining a Microsoft-approved data hosting center, 60 points for achieving US$1M in Microsoft license revenue (the threshold for revenue points will vary by country), and 50 points for achieving an initial competency or certifying a software product for Windows Server. At the low end, partners earn three points for sending three staff to the Worldwide Partner Conference, and two points for additional customer references.

Points for most partners are aggregated across multiple sites within a country, allowing an organization with several small sites to apply competencies and customer references from all of their offices in a given country to raise the company’s partner status.

Microsoft certifications played a major role in determining a partner’s status in the Certified Partner program, but the new program places more emphasis on deployment experience and customer satisfaction: while competencies (which are based partly on certifications) are important, a partner cannot achieve Gold Certified status based on competencies alone. No points are awarded for competencies after the first two, which earn the partner a total of 75 points (of the 120 required for Gold Certification). Most partners will need business wins and good customer satisfaction scores in order to reach the top level.

(Obtaining additional competencies still has value for an organization: its competencies are listed in the partner resource directory, and organizations with more competencies will receive additional benefits, such as additional licenses for internal use software.)

Point achievements will be maintained online, eliminating the need for partners to track their own points. Below the Gold Certified level, partners will also receive guidance on the steps they can take to gain additional points and move up to the next level.

(To see how a partner can earn points and move to a new program level, see the chart "Winning Points".)

Transition Timeline

Because it radically changes many aspects of its partner program, Microsoft is taking its time in implementing all the features of the new program and is overlapping the new program with the old so partners can see how the changes will affect them.

The new program was announced in Oct. 2003, just before the Worldwide Partner Conference in New Orleans, and it officially began in Jan. 2004.

However, the main event in Jan. 2004 was that existing Certified and Gold Certified partners were grandfathered into the new program at their present levels. These partners will be able to see whether their present competencies and customer references will qualify them for similar or higher tiers in the new program, which won’t affect their partner status until 2005.

Microsoft is not expecting the new program to result in any dramatic changes in the number of Gold Certified and Certified partners—about 5,000 and 30,000 respectively. However, some existing Gold and Certified partners may find that they need to obtain additional staff certifications and achieve formal competency in some solution areas where they already do business to retain their current partner level in 2005.

In Apr. 2004, the company released initial details regarding competency requirements and point schedules. In succeeding months, the company will work on the infrastructure to verify competencies and track partner points so that later in the year partners will be able to view all their points online.

In July 2004, the company will move MBS partners into the new partner program, in effect consolidating the separate MBS and Certified partner programs. This transition comes at a date that the MBS partner year normally begins, and MBS partners will have until July 2005 before they must fully comply with the terms of the new program (described in more detail in the section "MBS Transition").

Microsoft will continue to define additional competencies during the remainder of the year. By the end of 2004, Microsoft expects the formal requirements for competencies such as OEMs, system builders, licensing, and resellers to be in place, in time for the full cutover to the new program for these partners in Jan. 2005.

Special Transitions

For many Microsoft partners, the new program will not require significant adjustments: most existing Gold Certified and Certified partners should make the transition to the new program easily, and most Registered partners have not had an opportunity for a formal relationship with Microsoft in the past.

However, three groups of Microsoft partners—Certified Training and Education Centers (CTECs, now placed into a Learning Solutions competency), ISVs, and MBS partners—face a more complex transition to the new rules.

CTEC Transition

Training organizations that have been part of the CTEC partner program are subject to several exceptions to the rules, including the following:

Site certification. While most organizations will be certified on a per-organization basis, Microsoft will certify CTECs on a per-site basis. The main reason for this difference is that the company needs to ensure that every training center has the proper network and hardware to train students at an acceptable level. The fact that several training sites are run by a single organization does not guarantee that they all meet the standard.

Site fees. Most organizations in the United States will need to pay a US$1,500 fee at the Gold Certified and Certified levels of the partner program. Training centers will need to pay a US$2,500 fee per site. (Fees will vary by country.)

Customer references. Rather than requiring three customer references, a training center needs to provide only one per site.

In addition, the CTEC brand will be phased out during 2004 and replaced with the Microsoft Partner for Learning Solutions brand. However, Microsoft says most CTECs will otherwise find that the requirements in the new partner program are not significantly different from those under the previous CTEC program.

ISV Partners

Microsoft has had a variety of programs for developers and ISVs in the past, but the new partner program provides a more general framework for ISVs. The following are the main areas of difference between ISVs and other partners:

Product certification. Many highly qualified developers do not have formal Microsoft certifications, such as the Microsoft Certified Software Developer certification. As a result, ISVs are not required to have certified staff. Instead, they must have at least one product that has met one of the tests for compatibility with Microsoft platforms, such as Certified, Designed, or Verified for Windows Server, or they must meet the requirements of a new Platform Test that places more emphasis on how well an application employs critical features of the Windows platform.

Advanced infrastructure expertise. ISVs should be skilled in integrating their own applications with major Microsoft platform components, such as Windows Server, SQL Server, Web services, Windows client, Office, or managed (.NET) code.

MBS Transition

The most critical transition for Microsoft will be melding of the MBS partner program with the new partner program.

MBS incorporates resellers, ISVs, and integrators who specialize in the Axapta, Great Plains, Navision, and Solomon product lines that Microsoft has acquired since 2001. A major reason that Microsoft acquired these products is that all of them were distinguished by strong, loyal sales and services partner channels, whose expertise with these complex enterprise resource planning (ERP) products gave them more cachet—and less fear of commoditization—than other types of Microsoft partners.

Incorporating these partners, who number less than 10,000, into a program for 800,000 partners, requires a delicate touch: if they feel that Microsoft is opening up the MBS product lines to the mass volume channel, Microsoft could lose much of the partner good will that it acquired along with the MBS product lines.

In an effort to bring MBS partners into the general program without losing the characteristics that made them valuable to Microsoft and the Microsoft relationship valuable to them, the company is taking the following steps:

Existing partners grandfathered for first year. Current MBS partners will automatically be enrolled with the MBS competency for the first year of MBS’s inclusion in the Microsoft Partner Program—that is, July 1, 2004, to June 30, 2005. Current Gold Certified MBS partners and Certified MBS partners will be given comparable status in the new program. However, after July 1, 2005, these partners will have to meet the MBS competency levels of the new program to remain MBS partners. These levels remain high so that the MBS market is not suddenly flooded with less-qualified partners (which is one of the main concerns of existing MBS partners).

No volume channel for ERP products. While customers can purchase some MBS products, such as Microsoft Customer Relationship Management (MSCRM), through the company’s standard volume purchase programs, Microsoft will not open the core ERP products—Axapta, Great Plains, Navision, and Solomon—for standard volume licensing for the time being. In other words, the only way customers will be able to buy the ERP products is through a Microsoft partner with an MBS competency.

Separating resellers from services. Under the new rules, partners are not required to join the Microsoft Partner Program or to have an MBS competency to sell authorized MBS products. Resellers will still have to meet the requirements of the MBS Solution Provider Agreement (SPA), which include certifications and training requirements for the products sold. However, resellers will not have to meet some requirements of the MBS competency, such as supplying customer references. Only MBS service providers will require an MBS services competency, which demonstrates skills in deploying, configuring, and maintaining products.

The new rules thus open sales of MBS products to a wider range of partners. Nevertheless, Microsoft says it expects most MBS resellers to join the program and seek an MBS competency, as partners who meet the SPA requirements are already well along toward getting the competency.

In spite of the difficulties involved in bringing MBS partners into the general partner fold, the effort will pay significant dividends for Microsoft. MBS rules—including rules for certification, reseller requirements, exams, and product discounts—were different in every region, and for every product. The new partner program gives Microsoft an opening to create a far simpler and more consistent worldwide partner program for MBS partners.

MBS partners will benefit as well. Among other things, sales of MBS products across national or regional boundaries (such as in the European Union) will be easier with a single set of rules and a single contract model.

Partners will also see lower costs. The high annual fees that characterized earlier MBS partner programs have been replaced with lower Microsoft Partner Program fees. In addition, MBS partners in the past were given, as part of their fees, a large package of support services from Microsoft. Microsoft is now separating support services from the partner fee: partners will be able to purchase several different support packages, including a la carte support incidents, separately from their enrollment in the partner program. This will enable partners to more closely match Microsoft’s support services with their own requirements.

The Fine Print

The careful rollout of the new partner program and the attention to detail in its design improve the odds that Microsoft will succeed in meeting two contradictory goals—eliminating a plethora of uneven partner programs in favor of One Big Program, while still ensuring that partners experience a program tailored to their particular business model and specific IT skills.

However, no one should assume that the end result is simple. Building features and exceptions into the program to meet such diverse requirements makes the overall program complex, and those for whom the program offers the greatest opportunities—small companies that have not been able to easily partner with Microsoft in the past—will need to study it.

Fortunately, the competency-based design of the program will substantially reduce the scope of comprehension required. A partner that wants to move up the partner ladder can focus on a few key competencies, and their special requirements, and ignore the rest.

Although the intent of the program is clear, it remains to be seen how well Microsoft can execute on managing it. Among the open issues are staff certifications, the degree of specialization imposed on partners by the program, and certain qualifications that require value judgments, such as customer satisfaction.

Certification gaps. Some competencies, such as business intelligence and Information Worker, have no parallel certification program at Microsoft, and certifications such as the MCSE are no guarantee of competence in those areas. The company says it is working on this shortcoming and at minimum will develop exams that, while short of a more comprehensive certification, will test an applicant’s competency in these areas. Some competencies will also not be available until later in 2004.

Influence points. Another open area is how partners will receive credit for software purchases that they influence. The company plans to credit partners with points for influencing the purchase of Microsoft software, but has not yet determined how it will do so.

Some specialization required. Small partners often take on a wide variety of roles for their customers, and while they may not have advanced skills, basic skills are often enough for customers with basic requirements. A small organization that wants to be recognized as a Microsoft partner in more than one competency will face some barriers, however.

For example, a single certified individual, such as an MCSE held by one individual, cannot be applied to more than one competency, which limits the number of competencies that a very small organization, with perhaps a half-dozen IT professionals, could apply for. Nevertheless, only two certifications are required for most competencies, and a single competency will get a partner to the Certified partner level, at which partners enjoy substantial benefits. The networking infrastructure competency, for example, requires two certifications and three annual customer references for projects involving Windows Server and Windows Small Business Server—two products which most small IT firms should be familiar with.

Judgment required. In spite of efforts to create requirements that are easily quantified, such as a number of certifications and customer references, Microsoft will still need to make some value judgments. For example, partners can get additional points by providing Microsoft with additional customer references that can be used to measure customer satisfaction, and if they fall within the top 25%, 10%, or 5% of the participating partners in their region, they get bonus points. Microsoft says customer satisfaction will be measured by a third party, using "industry-proven methodology," but this new approach, measured by new metrics, could be controversial. Customer satisfaction statistics will be most reliable in regions with lots of partners and customers, and for competencies for which customer satisfaction can be most easily measured. Satisfaction scores in other regions and for other competencies could prove uneven.

Resources

The partner program site is at members.microsoft.com/partner. Links at that page provide detailed information about the new partner program and do not require membership in the partner program to access them.

Important pages at that site include the current list of defined competencies at members.microsoft.com/partner/program/competencies; a (downloadable) list of benefits, by program tier, at members.microsoft.com/partner/program/benefits/benefitsdata.aspx; and a description of partner points at members.microsoft.com/partner/program/partnerpoints.

A general overview, in PDF format, can be downloaded from members.microsoft.com/partner/program/programguide.aspx.

The basic strategy behind the new partner program is described in "Partner Program Gets Major Redesign" on page 23 of the Dec. 2003 Update.

The Worldwide Partner Conference (July 11 to 13, 2004) agenda can be viewed at members.microsoft.com/partner/events/wwpc.aspx. This page requires partner registration.