Sales and marketing guru Cindy Bates outlines some of Microsoft’s SMB partner offerings for VARs inside and outside the cloud, and acknowledges there’s room for both in the house that Gates built.
A year ago, Microsoft brought together six teams in various internal organizations to create what Cindy Bates calls an “end-to-end, SMB-focused organization—customer, partner, sales, marketing, technical.” Bates, Microsoft’s 
vice president, U.S. small and medium sized businesses, says that since then, the company has experienced “phenomenal growth” in SMB, among other market segments.
As the person responsible for Microsoft’s end-to-end SMB sales and marketing efforts— including strategy, business development, regional field sales and national distribution sales, channel marketing, and customer marketing—Bates knows SMB and shared with ChannelPro-SMB the programs she and her team have developed to help drive SMB partner success, as well as her thoughts on Microsoft and cloud services.
ChannelPro-SMB: How has Microsoft fared this past year?
Bates: †We had phenomenal growth—30 percent in our Open business in SMB [at] our main pricing level. And we’re seeing that growth across all of our solution areas—everything from SQL to BI [business intelligence]. We see System Center and the whole virtualization opportunity as a huge untapped opportunity in SMB. SMBs are looking for the same infrastructure optimization and data backup and recovery benefits from virtualization [as the enterprise].
So we’re coming off a great year in our traditional business with Open and the products there, but we’re also seeing SMB as really the sweet spot for growth around the cloud. We had over 10,000 SMB customers adopt BPOS this year. As we move to Office 365, we see the power of enterprise solutions now available to small businesses.
ChannelPro-SMB: So what is your charter for SMB partners going forward?
Bates: We are investing in a variety of different programs. About 18 months ago we launched a program for those VARs that have $100,000 or more in Open revenue in SMB. We provide engagement with the partner territory managers on my team that are spread out in the different regions, [and] additional incentives, marketing dollars, and engagement on marketing plans.
The [newly announced] VAR program is kind of the next level in the pyramid, where we provide TPAM [telephone partner account manager] coverage through our distributors. So we have moved to a model where, for that middle level of our partners, we have the support through distributors. And we see great synergies there because not only is the TPAM able to talk to them about the Microsoft programs, but they can then quote them directly. We’re really seeing that help accelerate the business.
We are investing on the marketing side and helping partners drive demand through things like our Ready-to-Go [Marketing] engines. It’s technology to help partners drive campaigns, syndicate content from Microsoft onto their Web site, create events. And we have our Microsoft Community Connections to help partners connect to Chambers [of Commerce], diversity organizations, and industry groups. This past year, with that program, 1,200 partners were involved, and we generated 470,000 leads.
ChannelPro-SMB: What are the opportunities for partners? What trends are you seeing?
Bates: Cloud is no longer a buzzword. Cloud is going to be how SMBs do business—we’re seeing it become mainstream. We are seeing partners adopt it. I talked about our VAR Champions Club that we launched 18 months ago. This past September, we launched a Cloud Champions Club, kind of building off the success of our more traditional Open-focused partners. So our Cloud Champions Club, we now have almost 300 partners in that program.
Even as we continue to increase the [requirements] to get into the Cloud Champions program—this year it was three deals with 75 seats as the base for tier, and we’re raising that to six ongoing customers, 150 seats—we anticipate that the program will continue to accelerate and grow, and that more partners will be part of it.
ChannelPro-SMB: How many Microsoft partners are now selling cloud services, and how do you see those services expanding?
Bates: We have 4,000 partners selling cloud today in the U.S.—that have been selling BPOS [Business Productivity Online Services] and are moving to Office 365 in SMB—and thousands of ISVs on Azure. So there’s strong momentum.
I talked about VAR Champs; I talked about Cloud Champs. Over time, we see those integrating, merging, so there are not two separate groups, but [rather] a partner serving their customers end-to-end with the power of choice that Microsoft offers. That is something unique about us vs. some of the competition, where it’s in the cloud or you’re out of luck.
With us, [you can] have the on-premise server asset that you need, but out of the box, that server integrates into the cloud. So you can leverage it for storage or other aspects that you might [otherwise] use SBS for. But the whole productivity side of it? You don’t need the Exchange part of it. You don’t need the SharePoint part of it. That’s all in the cloud, and the connect points, the APIs, are out of the box.
So again, that’s an example of Microsoft providing choice, and I think that puts the partners in an even more powerful position to be able to talk about the range of choice the customers have, and being that trusted adviser as they help them through those decisions.
ChannelPro-SMB: What partners have been successful in the cloud, and what options do partners have who have not yet embraced the technology?
Bates: The guys who are successful are the ones who recognize that the 18 and 6 [percent margins—18 the first year and 6 each year thereafter] that Microsoft pays, over time, with a lot of customers, builds up to a very, very healthy business. We also see [lots of potential] for services in the cloud.
So [partners are] not only providing migration services to move an on-premise mail solution, for example, but particularly now with Office 365, because it’s extensible, they are seeing their services opportunity expand exponentially around that baseline product. Office 365 in the door, Intune potentially in the door as that base for a managed services practice, and then building services around that.
I think for some of the guys who may not see it yet, it’s a shift in how you think about your business, seeing what the opportunity is, and continuing to evolve. Still, I don’t think it will all be in the cloud. I talked about 30 percent growth in Open. We are going to continue to see the traditional business [make] solidly double-digit growth going forward. Partners that are building adjunct cloud practices and learning and figuring out how to perfect that with their model are ultimately going to be the ones that are successful and able to [meld] the on-premise and the cloud together successfully.
