Partnership Insights
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.

The Author
Features included in this post

Unlock the revenue potential of every partnership

Personalize partner experiences for maximum engagement

Trusted by tech companies around the world.
156 reviews
156 reviews
156 reviews