• Sidebar: Horizontal and Vertical Partner Segments

Microsoft leaves few things to chance when building alliances with ISVs. It thinks globally, engaging influential ISVs in every major market. It carefully segments ISVs to target its own resources most efficiently. By understanding how Microsoft engages the commercial development community, ISVs are in a better position to maximize their relationship with Microsoft and to understand both the benefits and the risks of a close alliance with the company.

This article focuses primarily on how Microsoft engages ISVs around the world. The company has a separate approach and a different organization for dealing with systems integrators, who develop relatively little commercial software.

Key Goals for ISV Relationships

Most Microsoft efforts in its 2005 fiscal year focus on three general goals: ensuring the loyalty of existing customers to Microsoft platforms, encouraging those customers to make even greater use of Microsoft products, and competing for new customers.

This is reflected in the company’s strategies for dealing with ISVs.

Building loyalty. Since the early 1990s, Microsoft has courted developers by providing them with extensive documentation, free SDKs, technical assistance, and other resources, while platform competitors, such as Apple and IBM, made such resources expensive or difficult to obtain. This level of support not only continues but has been expanded to include additional developer resources, access to free or deeply discounted consulting services, and named account managers for most ISV partners.

Encouraging platform adoption. As Microsoft’s products have matured, the company has created more and more platform-level functionality on which ISVs can build, sparing them the need to code low-level functions that offer little competitive advantage. The vastly increased functionality has taken its own toll on ISVs, some of whom once made money on browsers, network protocols, digital media software, financial management software, and messaging features (among others) that Microsoft has incorporated into its Windows platforms or product lines.

The ISVs that remain, however, can take advantage of Microsoft’s huge investment in Visual Studio and other development tools, as well as extensible servers, such as BizTalk and Microsoft Business Solutions products, to build products that add value at a higher level or that are tailored for a particular vertical market. Microsoft argues that "going vertical"—building on an existing Microsoft platform to target promising market niches where ISVs can achieve specialization that distinguishes them from competitors—is a wiser strategy than building their own solution from the ground up.

Finding new customers. Developer tools like the .NET Framework stemmed a potentially disastrous migration of developers from the Win32 API set to Java and other Internet-friendly languages and APIs. But the availability of tools means little to developers if customers aren’t buying. A large contingent of Partner Engagement Managers and Partner Account Managers supply partners with sales leads, potential opportunities to work with each other to win contracts, and marketing collateral (such as case studies) that highlight partner software. The company also puts ISVs front and center in the launch of new solutions. Partner products may be specified as part of a Solution Accelerator, which provides a blueprint for implementing particular types of solutions, such as business intelligence. Partner products also play an important role in Microsoft’s "go-to-market" campaigns. For example, products from Citrix and SAP are promoted through a campaign to improve customers' "operational efficiency."

Partner Management Teams

Relationships with major ISVs are managed by several groups at Microsoft. Technical and marketing relationships with these companies are managed at the company’s Redmond, WA, headquarters by Vice President Sanjay Parthasarathy’s Developer and Platform Evangelism Group, and specifically by the Worldwide ISV organization headed by General Manager Mark Young.

Microsoft’s field sales organization also plays a major role in grooming partners for better relationships with Microsoft, implementing marketing strategies, identifying potential partners, developing sales leads for partners, and working with partners to close sales. Larger partners are managed in the field by the Enterprise Partner Group (EPG); the Small and Midmarket Solutions and Partner Group (SMS&P) focuses on other partners.

Focusing on Top Partners

Keeping thousands of partners actively involved requires significant forethought and organization. Partners don’t want to waste their time competing with dozens of other Microsoft partners. Ideally, Microsoft will involve them in sales opportunities that leverage their strengths or sales priorities, spreading the wealth while maximizing their chance to succeed in any given sales engagement.

To target its resources and get the most out of its relationships with partners, Microsoft evaluates partners from two perspectives: first, their importance or influence in the market, and second, the level of commitment that they make to Microsoft platforms or technologies.

The results of these evaluations ensure that Microsoft allocates the appropriate resources to ISVs who reach many customers and to those whose products can generate collateral sales for Microsoft products.

Partner scope. A large ISV with a broad product line that does business in several geographic regions is higher on the scale than a small ISV with a limited product line or one that does business in only one region. However, very few firms fit that first category. Thus, Microsoft evaluates most of its global partners on their leadership in a horizontal, vertical, or geographic market.

Partner commitment. Microsoft does not insist that ISV partners rely entirely on Microsoft technologies or solely promote Microsoft solutions, but the company nevertheless places a higher value on partners who move quickly to integrate Microsoft products or technologies with the partners' sales efforts. Recommended partners can be counted on to dependably promote Microsoft solutions, have good track records for satisfied customers, train their staff on Microsoft technologies, and will be at the top of Microsoft’s list for a new sales lead or joint marketing campaign. Developing partners are not as tightly aligned with Microsoft technologies and may use or integrate with competing technologies in their products. Affiliated partners sell products that integrate with Microsoft products but might also be close partners with Microsoft competitors or compete directly with Microsoft in some markets.

These levels provide guidance for ISVs that want to be more closely involved with Microsoft and benefit from its largesse and customer leads: if they move quickly to incorporate the latest Microsoft technologies into their own products, limit their efforts on other platforms, and promote Microsoft solutions heavily, they may move more quickly into the recommended partner ranks.

The Partner Hierarchy

Depending on the above factors, Microsoft organizes major ISVs into a hierarchy that determines the resources the company devotes to each ISV and how it goes to market with them. The most important ISVs are categorized as Global Premier ISVs, Global Partners, and major regional ISVs.

Global Premier ISVs (unofficially, "The Big Three") are PeopleSoft, SAP, and Siebel. These are large ISVs with many enterprise customers and have significant investments in products that run on Microsoft platforms.

All of the Global Premier ISVs are major vendors whose products may influence a customer’s choice of a computing platform. They are not exclusively Microsoft vendors—all make software that runs on Unix and Linux platforms, and that works with competitor databases such as DB2, from IBM, and Oracle. Thus, the relationship between the Global Premier ISVs and Microsoft is more a matter of necessity than of unique opportunity: Microsoft must work with these firms to get its software into global enterprises, which often maintain multiple OS platforms and choose enterprise software independently of the platform that it runs on.

For their part, Global Premier ISVs benefit from a close relationship with Microsoft, which provides them with offices at its headquarters and typically dedicates several employees based in Redmond to manage its relationship with each Global Premier ISV. Software engineers from these ISVs have early input into new Microsoft products and maintain laboratories on its Redmond campus, and their senior executives meet regularly with their counterparts at Microsoft.

The Global Premier ISVs have large sales organizations of their own, which makes them less dependent on Microsoft’s own sales and marketing resources than smaller partners.

Global Partners are several hundred large or strategic ISVs that are focused either on one of seven horizontal software markets, such as business intelligence, customer relationship management (CRM), or security, or one of eight vertical industries, such as financial services, government, or healthcare. (For a complete list of these horizontal and vertical markets, see the sidebar "Horizontal and Vertical Partner Segments".)

In addition to the account managers assigned to each of these ISVs, each horizontal or vertical group (which typically contains between three and a dozen partners) has an overall manager who ensures that their products are explicitly associated with Microsoft marketing initiatives and are visible to the Microsoft sales organization.

Some of these ISVs are closely aligned with Microsoft—for example, they might have products that run only on Microsoft platforms. Others offer products that run on multiple OS and database platforms, but still generate significant sales of Microsoft products.

Global Partners work with Microsoft’s Enterprise and Partner Group (EPG) on sales efforts and are included in Microsoft go-to-market campaigns.

Major regional ISVs do not have the scope of the global ISVs, but have a significant presence in a particular region or vertical, such as government sales in the European Union or hardware manufacturing in Asia. These ISVs have close contact with regional SMS&P staff and are likely to be Gold Certified Partners, a fairly select group in the top tier of the Microsoft Partner Program (MSPP), which serves thousands of partners worldwide. They have preferred access to Microsoft’s regional managers, who can help them obtain additional technical or marketing resources from the company either through the MSPP or other channels. These partners can also participate in international or regional go-to-market campaigns. (Regional campaigns are developed by Microsoft subsidiaries to target promising local opportunities, needs, or competitive threats.)

Partner Benefits

The obvious, although not always simple, goal of Microsoft’s ISV partner management teams is to guide ISVs toward sales that will benefit Microsoft. Aware that many of its partners have an increasing array of choices, including Linux and thin-client solutions, Microsoft puts some "skin in the game" for its partners, providing sometimes costly technical and marketing benefits that, amortized over a large number of partners or applied strategically, benefit both partners and Microsoft.

Technical Benefits

Technical assistance is critical for ISVs, who are frequently working with early versions of Microsoft software or need access to deeply technical information in order to integrate their own products with Microsoft’s.

ISV partners automatically receive subscriptions to the Microsoft Developer Network (MSDN), can participate in managed newsgroups, have access to partner-only Web resources, and can participate in beta and even pre-beta programs, such as system design reviews, where they get an early look and an opportunity to provide feedback on software that is currently in the design and specification stage.

Through their partner manager, ISVs can gain access to additional technical resources and may be able to contact Microsoft development managers for assistance with advanced technical issues. They also receive (or can purchase) assistance from Microsoft Consulting Services, which will assist in architectural design, code review, scalability and interoperability testing, and other software development requirements.

Marketing Benefits

In spite of its huge customer base, Microsoft has a relatively small field sales force and relies heavily on partners to identify market opportunities. However, Microsoft has extensive marketing resources and develops sales programs that are leveraged across a large number of partners, reducing the cost for partners while providing better quality and more focused sales tools.

Market research helps partners understand the size of various market opportunities, which marketing messages will be most effective in reaching that market, and who in a customer’s organization is likely to make the decision on a particular software purchase. This research is often beyond the capability of many software vendors, but Microsoft shares some of its own extensive market research with partners.

Sales leads are generated through seminars, telemarketing, queries from customers directly to Microsoft or its subsidiaries, go-to-market campaigns, and partner databases that let partners find each other and let businesses locate a partner capable of deploying software or a particular solution, such as a CRM solution.

Consulting services from Microsoft Consulting Services include a variety of QuickStart programs that offer technical briefings for customers, proofs-of-concept (often at a steep discount), and fixed-price consulting that reduces customer risk—all benefits that can help ISV partners close sales. Microsoft Technical Centers can test interoperability and scalability and validate solution designs.

Partner-led campaigns throw Microsoft resources behind a marketing or sales opportunity identified by the partner. This can be especially useful for partners who can identify vertical market opportunities that might escape the attention of the general partner community, but allow a specialized partner to bring Microsoft into new territory.

Solution accelerators provide detailed guidance on how to use Microsoft products to achieve a particular solution, such as Solution Accelerator for Recruiting, which aims to make recruiting more efficient and can be enhanced by related products from ISV partners.

Sales collateral includes material (such as e-mail and brochures) that highlights the business case for solutions that include ISV software. In some cases, partners can modify the collateral to give their own brand prominence. Many ISV partners are eligible for Microsoft-generated case studies that highlight the partner’s software as part of a Microsoft-based solution.

Seminars and Webcasts, sponsored and promoted by Microsoft, frequently feature ISV partner products or partner executives. Microsoft will also provide partners with "event-in-a-box" materials, such as demo scenarios, case studies, and attendee giveaways, so they can run their own seminars.

Hands-on labs are typically used to give customers firsthand experience with Microsoft products, but can also be used by partners at conferences, seminars, or online to demonstrate partner software.

Battle cards and card decks provide partners with quick reference material that their sales teams can use to address common customer concerns and to highlight the advantages of Microsoft products over competitive platforms.

Calculators for total cost of ownership and Rapid Economic Justification (REJ) tools (which help quantify the financial benefits of a Microsoft solution) enable partners to input software costs, hardware and software savings, and operational improvements to compare the cost of Microsoft solutions against the competition, or to compare the cost of upgrading to the cost of remaining on an older product.

Trade-Offs

In evaluating the utility of a closer partner relationship with Microsoft, most partners will need to balance benefits and risks.

A close partnership with Microsoft can deliver exceptional value, streamlining an ISV’s product development and giving an ISV early access to new technologies. It can reduce marketing and sales costs while simultaneously exposing the ISV’s products to customers it was unlikely to identify on its own.

On the other hand, Microsoft’s embrace may demand significant loyalty to the company’s proprietary platforms (particularly for smaller partners that want to expand their relationship with Microsoft). This can set some limits on an ISV’s horizons. Furthermore, that loyalty is not always mutual: to their chagrin, some ISVs have discovered Microsoft their partner becoming Microsoft their competitor, as the company decides to enter markets (CRM being a recent example) that were previously owned by competitors and partners.

Nevertheless, in balancing the trade-offs, many ISVs discover that, in spite of its limits, a close relationship with Microsoft brings benefits that they would not be able to realize on their own.

Resources

A list of ISV business development, marketing, training, and other resources for partners is at members.microsoft.com/partner/usa/isv/isv.aspx. (This page is accessible to non-partners.)

The Microsoft Channel Builder program, which connects ISVs to other Microsoft partners, is described at members.microsoft.com/partner/competency/isvcomp/channelbuilder.aspx.

Partners interested in a Microsoft investment or other business relationship with Microsoft can make a proposal to Microsoft by using the tool at www.microsoft.com/mscorp/proposals/welcome.aspx.

Specific training in technical and marketing issues is described at www.msusapartnerreadiness.com.