By Paul DeGroot [bio]
Posted: Nov. 19, 2007

• Chart: What's in a Partner Solution Plan
• Illustration: PSP Planning Timeline

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 partner planning processes are raising the stakes for Microsoft's enterprise partners, as the company puts more emphasis on annual planning to identify the partners who best fit Microsoft's sales and marketing priorities. A partner selected by that exercise is assigned an account manager who helps the partner develop not only a Partner Business Plan, a longtime prerequisite for managed partners, but also one or more Partner Solution Plans that outline specific areas where Microsoft and the partner will work together. The plans play a role in Microsoft's endorsement of partner products and services in given markets.

Selecting Enterprise Partners

The Enterprise and Partner Group (EPG) manages about 8,000 partners and about 90 Alliance Partners, typically large development or integration partners who work in several geographic regions.

Most of these partners are also in the upper tier (Gold Certified) of the Microsoft Partner Program, but that alone does not ensure that they will be managed by EPG. Those decisions are made by an annual segmentation and selection process. EPG teams in each subsidiary review lists of Microsoft partners and decide, based on local customer needs, market opportunities, and a partner's track record, which partners will get an EPG partner account manager. Annual segment alignment workshops (SAWs), typically held in April, further refine the EPG partner list, based on the following criteria:

• Alignment between the partner's skills and commitments and Microsoft's own priorities and customer campaigns
• Commitment the partner makes to Microsoft platforms and solutions
• Engagement of a partner, through commitments of sales resources, funds, training, and planning, in Microsoft priorities.

Other factors include customer satisfaction, market share, influence in customer accounts, technical depth, a track record of business success, and sales expertise. A partner who has offices in different regions can be selected in one region but not in another, based on their relative strengths in those markets.

Managing Through Planning

Once the roster of managed enterprise partners has been determined, Microsoft assigns each a partner account manager (although the majority of enterprise partners will repeat from year to year with the same partner account manager or management team) and work begins on Partner Business Plans (PBPs) and Partner Solution Plans (PSPs).

PBPs, also used by Microsoft Partner Program partners who are managed by the Small and Midmarket Solutions and Partners Group, outline the type of services that partners and Microsoft provide for each other and how much revenue they generate for each other. In 2007, Microsoft added conditions of satisfaction for the partner—partner expectations that Microsoft must meet in order for the partner to consider the plan a success.

But PBPs do not address the full spectrum of the relationship. In addition to imposing an administrative burden on partners (who often felt that Microsoft never read their plans), the business plans lacked specific objectives, were often too broad to guide Microsoft in choosing or assisting partners, and did not always reflect what was happening in the marketplace beyond the customers that a partner already served.

In 2005, Microsoft added an additional type of plan, a PSP, that outlines specific financial goals and investments (such as marketing and training) for both Microsoft and the partner within a given solution area (such as portals or business intelligence) and region or country. A partner typically prepares only one PBP each year but can prepare many different PSPs.

A typical PSP includes "gives and gets"—what Microsoft and the partner will each contribute to the sales and marketing effort, and what each expects to get out of it—and specific targets and metrics.

For example, a PSP may call for Microsoft and the partner to develop proofs of concept for four customers and to achieve major sales wins in three accounts, outlining how much revenue Microsoft and the partner expect the plan to generate. It also describes the effort that each will put into the plan—for example, the partner might commit to train a given number of software engineers, or Microsoft might commit consultants, business incentive funds, or technical specialists.

PSPs can focus on a narrow market opportunity or on solutions that a partner is capable of delivering more broadly. To illustrate the range of possibilities, Microsoft cites the case of a partner in Israel (Netwise) that developed a Microsoft search solution that was incorporated into government portals. At the other end of the scale, Accenture, a Microsoft alliance partner, developed a PSP for a suite of workplace solutions that the company has since marketed in 24 countries.

(For a review of what a PSP contains, see the chart "What's in a Partner Solution Plan".)

The Planning Calendar

The enterprise partner planning calendar coincides with other planning exercises at Microsoft, all of which are timed to be largely complete at the start of each fiscal year on July 1.

Local subsidiaries work on partner selection in March and April, and the SAWs take place in April. Partners and their account managers then work on PBPs and PSPs, in concert with other planning processes at Microsoft that define the company's key product and marketing plans for the coming years.

Microsoft staff use a Partner Business Planning tool to formulate plans and negotiate their respective commitments. (The tool is also used throughout the year to track and report on the progress of each plan.)

Beginning in June, by which time Microsoft's priorities for the coming fiscal year have been defined, Microsoft partners flesh out PSPs with sales objectives, marketing efforts, training commitments, and other details. These plans may be reviewed and refined at the Worldwide Partner Conference in mid-July, where Microsoft partner account managers and partners can finalize the plans in face-to-face discussions. From August on, as the sales effort begins in earnest, PSPs will be periodically reviewed (and modified, if necessary) to ensure that they are meeting their targets.

(For a summary of the timeline, see the illustration "PSP Planning Timeline".)

This segmentation and selection process gives the partner a higher profile with Microsoft's enterprise sales force and frees up resources that Microsoft has committed as part of the PSP. For example, field sales staff whose salary incentives are based on server products, such as SQL Server, will work with partners whose PSPs focus on business intelligence, project management, data warehousing, and other solutions that are likely to drive SQL Server sales.

Benefits of PSPs

PSPs offer a number of advantages for both Microsoft and partners, including a better fit with partners' business models, greater partner visibility inside Microsoft, the ability to roll up data from PSPs for forecasting and reporting purposes, market localization, and clear commitments that ensure a sales initiative has the financial and other resources it needs to succeed.

Business model compatibility. Microsoft often divides its partners among ISVs, integrators, and resellers, and further categorizes their target markets as enterprise or small and midsize customers. These categories differentiate partners for Microsoft's purposes, but many partners don't fit neatly into Microsoft's pigeonholes. They may, for example, both sell and provide hosted versions of their own or Microsoft applications, or sell a proprietary software package that requires substantial integration with other Microsoft offerings. PSPs can reflect such complexities and can identify specific opportunities where a partner's approach is suitable.

Partner visibility. Endorsement of a partner's PSP puts it on someone's task list at Microsoft, unlike business plans that can be ignored because they lack specific metrics, contacts, and timelines. In addition, a partner's PSP often contains the names of other partners that can contribute to or may even be necessary to the PSP's success. As a result, PSPs increase the likelihood that Microsoft will engage a partner's services, and may promote partner solutions to field sales or account management teams who have compatible sales priorities.

Forecasting and reporting. Because PSPs follow a common format and the specific commitments that Microsoft makes in each PSP can be extracted for reporting purposes, a regional sales organization has a much clearer picture of how well it is progressing toward its goals.

Localization. Microsoft has given its subsidiaries considerable freedom to focus on the solutions that are most appropriate for their markets, permitting a subsidiary to commit its resources where they are most likely to have an impact, rather than funding campaigns that headquarters favors but that may face specific barriers in a given marketplace.

Clear commitments. Rather than couching joint initiatives in vague language, such as "both parties will work to ensure net new wins in storage management," a PSP requires both parties to identify how much money they expect to spend on and earn from the PSP, the amount of time Microsoft Consulting Services will commit, and specific milestones, such as development of marketing materials, customer seminars that will be offered, and exams that the partner's staff will complete. With executive sign-off on these commitments during the planning stage, field staff have greater confidence that the resources they expect to have will be available in the coming year.

Peter Boit, vice president of enterprise partner sales, distinguishes between an "opportunity model" for working with partners, in which Microsoft tries to generate demand and then finds partners who can meet it, and an "account model," in which Microsoft works with partners to identify the types and size of opportunities in a market and then make plans to capture them. Today, he says, the opportunity model drives about 70% of Microsoft's sales pipeline, but he would like to see the account model grow to 50% or more of Microsoft's partner-led sales efforts. PSPs are part of this transition: they place more emphasis on commitments that arise from a planning process, where the partners and Microsoft do research to identify prospects and design sales initiatives to win their business, rather than on ad hoc opportunities that may or may not appear.

Other PSP Considerations

Partners need to take several factors into consideration in assessing the value of PSPs.

Microsoft-focused. The goal of any PSP to which Microsoft commits is to sell Microsoft products and solutions, especially products that the company sees offering the greatest revenue opportunity or strategic benefit. In some cases, partners may find themselves taking sides in a competitive battle (e.g., against Adobe, Google, or Oracle) that offers strategic value to Microsoft but less economic incentive for partners. In other instances, Microsoft may put little emphasis on opportunities such as custom Web-based applications, where opportunities may be abundant but are of less interest to Microsoft.

Calendar mismatches. The planning cycle for PSPs is tailored to Microsoft's fiscal year. Many partners have different fiscal years, which can cause problems for planning. For example, if a partner's fiscal year is on a calendar year and it begins its primary planning each October, the partner must take into account commitments and plans for PSPs that were nailed down the previous July and that must be funded through the following March. (However, PSPs can be designed outside of the official planning cycle and are monitored and revised, if necessary, over the course of the year.)

In or out. Partners with a strong relationship with Microsoft may benefit the most, since PSPs are a subtle way of anointing the already-committed and of discounting partners who are new and untested, have complex business models, or who sell non-Microsoft products or platforms.

Most partners prefer to be part of a small club rather than part of a large crowd, where it can be more difficult to distinguish oneself and competition for work is greater (forcing price cuts that could lead to lower profits or quality). Microsoft is reluctant to say that the process is designed to weed out less-committed partners, but Boit admits that "for some partners we haven't found the white space where our field feels there's a specific opportunity." Between the lines: not every partner's business or solution is interesting to Microsoft.

Resources

The incentives and structure of Microsoft's sales organization are described in "Working with Microsoft's Field Sales Teams" on page 25 of the May 2007 Update.

Microsoft's partner programs are described in the Aug. 2006 Research Report, "2006 Guide to Microsoft Programs for Partners."

Partner Business Plans were described in "Partner Business Planning Streamlined" on page 23 of the Sept. 2005 Update.