The goal of Microsoft’s partner management teams is to make working with Microsoft as easy and profitable as possible, and to guide partners 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 partners at relatively low cost to Microsoft. In assessing these benefits, partners also need to understand what Microsoft wants from its partners, and they should be cognizant of some risks as well.

Technical Benefits

One of the secrets to Microsoft’s extraordinary success was the company’s early realization that it could drive demand for its products by creating a large community of third parties who build hardware and software for the company’s OSs and applications. By sharing technical data and other resources with its partners, Microsoft ensures that third-party products are developed easily and quickly, and meet their authors’ goals.

Depending on their relationship with Microsoft, partners might receive early releases of Microsoft OSs and applications, preferred access to Microsoft technical resources such as SDKs, and Microsoft templates (such as solution accelerators) that outline the software, services, and configurations partners should use to achieve positive results predictably and economically.

All partners have access to Microsoft communities, Microsoft-sponsored Web sites or newsgroups that permit Microsoft partners to communicate with each other, usually unfiltered by Microsoft staff. Such communities encourage partners to share problems and solutions, and can sometimes resolve problems faster than official Microsoft channels. Some communities, such as the developer community that grew around the long-running Microsoft Developer Network (MSDN), have been around for years; others have blossomed since 2003, as Microsoft follows the lead of the open-source movement, which, with no central authority, relies on community discussions and processes to improve its software.

Marketing Benefits

Many successful technology companies measure their customer base in the tens of thousands; Microsoft measures the customer base for many of its products in the tens and hundreds of millions. Its customers include both the mass consumer market and the entire range of business and institutional settings. As a result, the company can reach many of its customers with broad-based advertising and promotions which, while expensive, are less costly on a per-customer basis than more targeted advertising. Partners benefit from these campaigns without any direct expenditure on their part.

Other marketing benefits for partners include the following:

• The Windows Marketplace, which features more than 90,000 software and 50,000 hardware items made by and sold through Microsoft partners
• Marketing collateral and campaigns, produced by Microsoft but distributed through partners
• Solution and partner databases that let customers locate software or expertise and aid partners in finding other partners who can complement their offerings or open new markets
• Go-to-market campaigns, which identify specific market opportunities and organize and support partners in addressing them.

Risks for Partners

A close partnership with Microsoft can streamline a partner's product development and give the partner early access to new technologies. It can reduce marketing and sales costs while simultaneously exposing the partner’s products to customers that the partner was unlikely to identify on its own.

On the other hand, Microsoft’s embrace implies additional demands on partners, including the following:

Direct costs in the form of fees for program participation, and the cost of hiring, training, and certifying staff to meet partner program eligibility requirements.

Dependence on the Microsoft platform—for better (access to Microsoft’s broad customer base) or worse (missed opportunities due to delays in product releases or shortcomings of the products or platforms themselves).

Competitive risks that Microsoft might add features to its OSs or develop new products that compete with partner products. To their chagrin, some partners—particularly ISVs—have discovered their partner Microsoft suddenly becoming their competitor, with customer relationship management (CRM) software being a recent example.

Benefits for Microsoft

In spite of its central role in creating software, Microsoft’s expertise is thin in other domains of knowledge, such as most business sectors, operating a government or school system, or conducting scientific research.

The company’s product lines reflect this: most are broadly horizontal—that is, applicable to functions common to most enterprises, such as creating documents or connecting computing resources—rather than vertical solutions that can be deployed immediately for a particular business purpose, such as maintaining warehouse inventory.

As a result, Microsoft’s success in the market is a combination of its own merits—software that runs on almost every PC, preinstallation, intuitive interfaces, and low costs—and the ability of partners to translate those attributes into attractive packages or solutions that meet both common and specialized business requirements.

Microsoft benefits directly from this synergy: a large force of partners (more than 230,000 of whom have signed up for the Microsoft Partner Program) reduces Microsoft’s sales costs, provides valuable intelligence about the marketplace, and can serve a large number of small customers that Microsoft cannot serve efficiently itself.

Network effects—the phenomenon in which the value of a product or service increases as more people use it—play a very significant role in popularizing Microsoft’s products. For instance, a Microsoft partner who creates an electronic health records management solution on the Windows platform can easily find other partners whose software, also running on the Microsoft platform, ensures that records are properly backed up and secure from prying eyes. The more partners Microsoft has, the more likely that a partner will be available to fill a gap in Microsoft's expertise.