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How Microsoft is Adopting an Ecosystem Management Approach to Unlock Trillions

300,000 Microsoft partners have a hand in 95% of Microsoft’s commercial revenue. Here's why alliance leaders should embrace structural changes in their ecosystems as their businesses transform, whether it's changing their partner ecosystem constituents or adopting new co-sell motions.

Transforming to a cloud-centric, partner-first company

After Satya Nadella became CEO of Microsoft in 2013, he led a fundamental transformation in Microsoft business from an on-premises company to a cloud services and subscription platform company. This shift is changing the character of Microsoft’s ecosystem, evolving from resellers to innovators and value-added services providers.

Microsoft is committed to growing their business but also lifting their partners with co-sell programs. Microsoft has grown its business by more than 80% since Nadella took over, and with this transformation, partner opportunity is forecast to bring in more than a trillion dollars of revenue by 2024. Now, 300,000 Microsoft partners have a hand in 95% of Microsoft’s commercial revenue.

“When you are going to a partner or when you’re going to a customer, you don’t want to talk about infrastructure independent of data, you don’t want to talk about data independent of the SaaS (Software as a Service) applications, because customers care about all of these things together in the context of their business process, business value. That’s the unique opportunity: That we are more comprehensive in scope, scale, depth, which then, in turn, translates into partner opportunity and customer value.” - Satya Nadella, CEO, Microsoft

The takeaway? Embrace structural changes as your business transforms, whether it is changing your partner ecosystem constituents or adopting new co-sell motions. And when they do, we're here to help you manage, measure, and optimize it.

How Microsoft became a partner-first company

Nadella has been absorbed in the company’s “partner-first” culture for almost 30 years. Every decision considers how partners are impacted. In an exclusive interview with CRN, Nadella mused, "One of the things that I want to design in our core is—whether it’s the move from license to consumption or license to subscriptions—what is the partner opportunity. We want to [know] from day one in any change we make—whether it’s a program change or business model change—what does it mean for partners?”

Shift to the cloud

Microsoft's shift away from on-premises software to the cloud and their cloud-first strategy was a major strategy pivot. Nadella’s move had helped make Azure the #2 cloud platform provider behind AWS and ahead of Google Cloud.

The shift had also greatly benefitted Microsoft partners. Dynamic Consulting, a Chicago-based Microsoft Gold partner specializing in implementations and management of Microsoft’s Dynamics 365, Power Platform and Modern Workplace solutions, considered the shift life-changing. Its President Jonathan Stypula said, “I first became a Microsoft partner under Ballmer, but it’s the direction Satya had taken Microsoft that has had a lasting impact. He and his team have changed our company trajectory – changed my life, really. Those early and bold decisions made the company what it is today.”

Nadella has transformed the Microsoft channel with his cloud-first model, driving massive growth and profitability for partners.

Shift away from resellers to value-added service providers

The next channel revolution is centered on driving more cloud consumption with partners leveraging the full depth and breadth of the complete Microsoft portfolio. About 30% of the Microsoft ecosystem has crossed the cloud chasm, and about 30% of them reshaped their business models. They have managed services, value-added services, unique intellectual property, and repeatable services, and are embracing the consumption economy. It's delivering value to customers and going beyond point product resale.

In 2017, Microsoft also launched a co-sell program. To date, partner have made $18.5 billion directly from co-selling their IP with Microsoft. In the current 2021 fiscal year, Microsoft’s sales organization has shared and closed more than 166,000 co-sell opportunities with partners. It's focusing more on co-selling with  small and midsize businesses this year.

“Microsoft wants to win business but does not have a win-at-all-costs mentality. Microsoft is more likely to invest in areas where a rising tide floats all boats, and Microsoft can execute its vision." - Hyoun Park, CEO & Principal Analyst, Amalgam Insights

Measurable success

The changes under Nadella seem to have paid off for Microsoft, partners, and investors.

  • Microsoft’s revenue has increased almost 84% under Nadella from $77.8 billion in fiscal year 2013 to just over $143 billion in the last fiscal year that ended on June 30, 2020.
  • Microsoft partners benefited at the same time. IDC estimated that they earned $9.58 for every $1.00 of Microsoft revenue generated in 2020, a total of $984 billion. The market research firm expects that to grow to $10.04 by 2024, representing a total of $1.2 trillion. By comparison, IDC estimated that Google Cloud partners earned $5.32 for each $1 of Google Cloud technology sold last year.
  • Microsoft stock has climbed 540% during Nadella's tenure as CEO.

Why is this important to Pronto and our customers?

Managing large, complex partner ecosystems requires a solution that is flexible, secure, and scalable. Different partner types, fast-moving co-innovation, and co-sell activities aren't usually supported on traditional PRMs, but rather on ecosystem management platforms like Pronto. Plus, measuring the impact of partnerships on revenue is incredibly hard to do without a purpose-built platform. Want to see how it works? We'd love to give you a demo.

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