Microsoft’s dramatically revamped model for selling with and through partners is gaining momentum.
Through the first six months of its 2019 fiscal year, which began last July, Microsoft’s “co-selling motion” has resulted in $8 billion dollars of partner revenue globally, according to Gavriella Schuster, corporate vice president of Microsoft’s One Commercial Partner group, in a “state of the channel” address to analysts and the media today.
“This is really just the beginning,” she said in a presentation that touched as well on upcoming revisions to Microsoft’s cloud marketplaces, the approaching end of support for SQL Server 2008 and Windows Server 2008, and the Azure managed services provider program Microsoft unveiled last summer.
Microsoft introduced the co-selling program, which allows Microsoft account representatives to apply sales of partner solutions against their quota obligations, at its Inspire partner conference in 2017. A year later at last year’s Inspire, several attendees indicated in conversations with ChannelPro that Microsoft had yet to fully bring its radical new vision to life.
According to Schuster, however, the co-sales initiative has begun gathering steam. Microsoft recorded 11,000 co-sell wins and 100,000 joint deals in all of its 2018 fiscal year, she noted today. Halfway through its current year, it’s already chalked up 9,000 wins and 78,000 joint deals.
Co-selling was one element of an even more sweeping overhaul of Microsoft’s partner program and go-to-market strategy unveiled at Inspire 2017. Schuster addressed the scale and significance of those changes today, noting that the company has dropped “transactional” channel relationships in which Microsoft makes products and partners sell or support them in favor of collaborative relationships in which Microsoft, developers, and integrators create, market, and profit from multi-faceted solutions together.
“We’ve moved from partnering to partnership,” Schuster said. “We’re focused as much on selling third-party solutions as our own.”
The new approach is paying off for everyone involved, she continued, noting that on average deals involving co-sell partners are nearly six times larger, close nearly three times faster, and drive six times as much Azure consumption as other sales.
Microsoft also used today’s presentation to announce that it will add new capabilities to its Azure Marketplace and AppSource digital storefronts next month that will let developers promote offerings to thousands of internal Microsoft salespeople, 17 million partner sellers, and 75 million customers though a single listing published in one place.
“Partners developing scalable SaaS solutions on Azure see about a 64 percent ROI on average, and they reach a gross profit margin of up to 70 percent on a recurring revenue basis,” Schuster said today. “That’s huge, and we want to make it easier for the entire ISV ecosystem to tap into that kind of profitability.”
The forthcoming marketplace enhancements will arm members of Microsoft’s Cloud Solution Provider (CSP) program to combine their own services with Microsoft and third-party software in customized end user solutions more easily as well, according to Schuster. Microsoft disclosed plans to list cloud-based partner solutions and services alongside its own offerings in the CSP product catalog during last year’s Inspire conference.
“Opening the marketplace up to the CSP channel is going to be a game-changer,” Schuster said today.
CSP partners can benefit from two approaching end-of-life milestones as well, she added. Security updates will no longer be available for SQL Server 2008 starting this July or for Windows Server 2008 starting next January.
“There are tens of millions of SQL and Windows Server instances out there waiting to be migrated to Azure, and we estimate the end of support opportunity for partners is around $50 billion when it comes to services and related business,” Schuster said.
That revenue will build on already strong growth for the CSP channel. According to Microsoft, the number of partners transacting through that program is up 31 percent in the last year, and the number of customers served by CSP members is up 51 percent over the same timeframe to more than 2 million.
Schuster also provided an update on Microsoft’s Azure Expert Managed Service Provider program during her presentation today. To qualify for that offering, partners must hold an active Gold Cloud Platform competency, have at least four Azure customer references, and complete a rigorous audit by an outside evaluator. So far, the 43 companies that have cleared that bar are racking up more than $100,000 of Azure consumption a month on average, and up to $2 million dollars a month in some cases.
Numbers like those contributed to the strong cloud revenue results Microsoft posted last week in its latest quarterly financial report, which showed sales for the company’s commercial cloud group up 48 percent on a year-over-basis to $9 billion.