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By Paul DeGroot [bio]
The following is the full text of an article 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. New product support offerings and greater flexibility for customers that purchase Microsoft's most comprehensive support service, Premier, will enable the company to tailor the program to better suit customer requirements. However, the company has pulled back from some programs that engage partners in supporting customers, and partner-oriented programs that it has promised are taking a long time to emerge. Premier Overview Premier—Microsoft's support program for medium and large customers— includes the following four basic components:
A Premier support contract can be purchased to cover multiple sites, including an entire university or government department. Standard Premier agreements cover all entities within a particular Microsoft region. A Global Premier agreement can be purchased when a customer has offices in different regions of the world but wants to purchase support for all regions under one agreement. Organizations can name multiple contacts for one agreement so that different sites can contact Microsoft directly when they need support. Premier support contracts last for one year; services not used by the end of the year expire. In addition to Premier support for business and institutional customers, Microsoft has special support programs for OEMs (who provide first-tier support for Microsoft products that they ship with new computers but want to be able to escalate difficult problems to Microsoft) and for some types of ISV partners. Microsoft partners can also purchase Premier-level support for themselves or their customers through Microsoft Services Partner Advantage (MSPA) or Microsoft Support Essential Inside, which allows smaller partners to supplement the basic support they get through the Microsoft Partner Program with additional incidents and account management. Changing Premier Premier has undergone significant changes over the years as Microsoft has steadily increased prices to generate more revenue and pay for new features and begun to treat support more like a product, where pricing and features affect market share and profitability. Incidents to Hours Beginning in 2002, the company encouraged customers to shift away from buying support by the incident and toward buying support by the hour. Incident-based support is difficult for Microsoft to estimate because the company's costs are primarily time-based, but the time to resolve an incident can vary dramatically. Some customers also had problems with incidents: customers who purchased a small number of incidents tended to be careful about using incidents early in the year to avoid emergency purchases or additional incidents at the end of the year, but sometimes found themselves with a surplus of incidents that would expire at the end of their contract. The shift to hours gives customers more flexibility. As a rule of thumb, Microsoft considers the average incident to require four to five hours to resolve, but a customer may have a problem that can be resolved in two hours, meaning that the customer ends up with more remaining hours than they would have under the average incident-based scenario. In addition, incidents cannot be converted to other support services, but hourly break-fix support can be converted to hourly proactive support. Thus, a customer with many hours of support remaining as the end of its contract nears can use some of those remaining hours to purchase a technical workshop or development consulting. On the other hand, the change from incidents to hours shifts the burden for resolution of complex problems toward customers, who could consume many Premier hours resolving a serious problem that would otherwise have been just a single incident. More Emphasis on Proactive Support Microsoft is putting more emphasis on proactive support, creating services that can help IT personnel reduce vulnerabilities or weaknesses in infrastructure design or operations, to prevent problems before they occur. Formal health checks can be performed by Microsoft support personnel for certain products, including Exchange, Active Directory, SQL Server, Internet Information Server (IIS), and Systems Management Server (SMS). During a health check, Microsoft assesses the performance and configuration of production systems on which these products are deployed and identifies any potential problems or vulnerabilities that the customer should consider resolving. Risk assessment programs (RAPs) are more comprehensive checks that measure a system's configuration against the customer's performance goals and help customers determine what additional steps, such as operational changes that could reduce downtime, should be taken. RAPs are available for Active Directory, Exchange, and SQL Server, and are planned for other products. General proactive support has become more prominent as Microsoft's support plans have changed to include more of it and as the company has allowed customers to convert hourly incident support to proactive support hours. This time can be used to get advice from Microsoft technical and solution specialists on tuning their existing IT infrastructure, designing new IT initiatives, and other kinds of advice. Another type of proactive support is workshops—specialized training offered at Microsoft locations or a customer's site. Microsoft is trying to develop workshops that are so well-structured that it can provide customers with metrics on their effectiveness. For example, the company can tell customers that a given workshop will predictably deliver certain skills to their organization if a given proportion of system administrators attend the workshop and achieve a certain score in testing. Still in the planning stages are Premier support packages aimed at specific Microsoft technologies. Customers with a substantial investment in SQL Server, for example, could purchase a package that might escalate serious SQL Server—related problems to Microsoft rapidly, but would have to rely on other companies to provide desktop or network support, for example. By working with a technical account manager (TAM), a customer could tailor the support package to provide optimum SQL Server support. Latest Premier Offerings The Premier support program now contains four major offerings aimed at different customer segments. (For a graphical view of the customer segments served by Microsoft's support offerings, see "Support Offerings by Market Segment".) Premier offerings vary by depth of account management, the number of incidents or hours of preventive and break-fix support offered, and the breadth of information services they receive. Each of these services comes in several fixed bundles of services (e.g., Premier 0, Premier 1, Premier 2) to which packages of additional hours or services can be added. Essential, the most basic Premier offering, provides telephone- or e-mail-based account management, typically provided by a pool of technical account specialists (TASs); a certain number of hours of break-fix and proactive services; and access to Premier Online. Incidents are not offered in new Essential contracts. Essential is aimed at customers with 50 to 1,000 PCs and is available in two packages at prices of about US$8,000 and US$14,000. (Two higher-priced Essential packages were previously available, but they have been replaced by Premier Foundation.) Premier Foundation, a new offering aimed at accounts with approximately 500 to 2,000 PCs, includes a health check and one technical workshop intended to quickly address any urgent performance issues and knowledge gaps. These customers also get 10 or more hours of advisory services and access to Premier Online. The 30 to 60 hours of break-fix services in Premier Foundation include faster response times than Essential for the most serious problems (one hour or less), an onsite engineer if required to resolve a problem, and Critical Situation ("critsit") escalation to senior support engineers, product groups, and senior Microsoft executives in the event that a serious situation cannot be resolved quickly. (Some of these features were previously available in Essential Support but they are now available only through Premier Foundation and higher-level Premier offerings.) Premier Foundation starts at about US$30,000. Premier support includes a designated (but shared or "pooled") TAM who ensures that Microsoft has an accurate profile of the customer's infrastructure and business requirements and who manages escalation of incidents. The exact amount of the four major types of support is defined by the customer's Premier contract. Customers can purchase as many hours of problem resolution and proactive services as they need, and a TAM will periodically visit the customer for consultations about support requirements. Premier customers also get the fastest response times (including time-based escalation, in which a problem is automatically escalated to the next stage if it is not resolved within a specific time), critsit processes, and multiple TechNet, MSDN, and Premier Online accounts. The minimum Premier Support contract starts at about US$50,000 a year. At that level (Premier 0), the customer gets about 120 hours of problem-resolution support, 120 hours of account management, and 40 hours of proactive support. Premier Plus offers customers a bigger set of Premier services, including a dedicated TAM, access to dedicated support specialists (such as an Exchange specialist who can provide ongoing support for Exchange deployments), more onsite visits from the TAM and other support specialists, custom reports, and other services. Premier Plus is the only Premier offering in which customers can still purchase incident support. Premier Plus contracts start at about US$110,000 a year. Microsoft also announced in fall 2005 that customers who get support incidents through Enterprise Agreements (EAs) or Software Assurance (SA), the company's upgrade rights program, can convert those incidents to Premier support incidents or hours (assuming those customers have a Premier support contract). This change has made incidents obtained through SA far more useful, and adds features available only through Premier, such as critsit escalation and the fastest response times, to SA entitlements. Reconsidering Partner-Provided Support In the past, Microsoft has often called on partners to provide support services to customers through programs such as the Gold Certified for Support Services (GCSS) partner program and the Microsoft Authorized Premier Support (MAPS) program. (These were not outsourcing arrangements for Microsoft, but allowed partners who were properly certified to support the Microsoft technologies that their own customers use.) Under these programs, partners could develop help desks that would provide lower-tier support for Microsoft products, with the option to escalate problems to Microsoft. The partners received a discount on escalated services, enabling them to make a profit on them if they wanted to. However, as Microsoft rolled out its revised partner program and MSPA support program for partners, it decided to cancel GCSS and MAPS. Now, customers can purchase support directly from Microsoft, or partners can purchase MSPA and offer support to their own customers through that program. The company plans to revisit support services offered through partners, however, by creating "Microsoft-proven" packages of very specific support services on which partners can be trained and certified. Many of the health checks and proactive services are currently offered by field engineers employed by the Microsoft Premier organization, and sometimes by engineers from Microsoft Consulting Services, but the company wants to offer these services more widely. Specific services packages, known for lack of a better term during their development phase as "support SKUs" (stock-keeping units, a term commonly applied to retail products), will be offered on a stand-alone basis or combined into a service delivery solution (SDS). For example, a company anticipating an Exchange upgrade could purchase an SDS from a partner for planning the upgrade, including capacity planning, timing, administrator training, and other features, as well as purchasing actual deployment and configuration services. The customer could also choose SKUs that focused on day-to-day operations, spam and virus filtering, and other aspects of Exchange. Changes Still Likely Microsoft's plans and pricing for Premier are likely to change further, since several uncertainties remain, including how Microsoft plans to generate additional revenues from support and how partners will actually be involved. Support as a profit center. Many of Microsoft's competitors make a high proportion of their total revenue from support and maintenance. Although less profitable than licensing in many cases, hourly support can provide a dependable revenue stream. Some competitors, such as those who sell solutions based on free, open-source software (such as Linux), make almost all their revenue from support, since they are unable to charge high fees for software licenses. The fact that Microsoft makes most of its money from licensing does not mean it cannot also derive substantial revenue from services, particularly since its major products for enterprise customers often cost less than those from competitors such as IBM and Oracle. Microsoft has also increasingly emphasized support services as a prime reason to purchase Software Assurance (SA), which began as an upgrade-licensing offering but has been redefined as a software-maintenance offering. To the extent that support benefits make SA more attractive, support services could generate additional licensing revenue for Microsoft. Partner participation. Microsoft has made several moves in recent years that have reduced the role of partners in support, cancelling MAPS and GCSS and directly entering the market for managed desktops for companies such as Energizer Holdings and XL Capital. Although Microsoft has said that it cannot meet all of its customers' support needs without substantial involvement of partners, and has frequently promised to outline support services that partners will be able to offer, the company has not shown any progress on this front. This delay has created uncertainty for partners about whether Microsoft will compete or cooperate with them. In addition, Microsoft has yet to suggest what the business model for partners will look like. Will support SKUs be simply a Microsoft-branded set of services delivered entirely by partners, who can price them independently, or will Microsoft dictate pricing and the terms of service and require partners to share some of the revenue? Resources General support services from Microsoft are described at www.microsoft.com/services/microsoftservices/supp.mspx. Partner support offerings, including MSPA, are described in "Partner Program Adds New Support Services" on page 31 of the Sept. 2004 Update. The Microsoft Partner Program is described at members.microsoft.com/partner/default.aspx. The program is also described in the Apr. 2005 Research Report, "2005 Guide to Microsoft Programs for Partners." Termination of MAPS and the Gold Certified for Support Services partner program were described in "Partner Program Absorbs Certified Support" on page 29 of the Jan. 2005 Update. Software Assurance changes related to Premier support are described in "New Software Assurance Benefits Rolled Out" on page 28 of the May 2006 Update.
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