The case of how Microsoft is adopting an Ecosystem Management approach is unlocking trillion dollars in partner opportunity

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“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,” Nadella said. “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

Executive Summary
300,000 Microsoft partners have a hand in 95% of Microsoft’s commercial revenue. Since 2013, when Satya Nadella became CEO of Microsoft, 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 advising them to evolve from resellers to innovators and value-added services providers. Microsoft is committed to growing their business but also lift their partners as well with co-sell programs. Microsoft has grown their business by more than 80% since Nadella took over, and with this transformation, partner opportunity is forecast to derive more than a trillion dollars of revenue by 2024. 

The lesson we want to share with Ecosystem leaders and professionals is to embrace structural changes in their ecosystems as their businesses transform, whether it is changing their partner ecosystem constituents or adopting new co-sell motions. And when they do, Pronto’s Ecosystem Management platform can help evolve their ecosystem management capabilities while creating exponential value to all constituents of the ecosystem.

Microsoft – a Partner first company
Microsoft CEO Satya 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 change. Nadella’s move had helped make Azure the number 2 cloud platform provider behind AWS (Amazon Web Services) and ahead of Google Cloud. The shift had also been life-changing for Microsoft partners. 

For example, Dynamic Consulting, a Chicago-based Microsoft Gold partner specializing in implementations and management of Microsoft’s Dynamics 365, Power Platform and Modern Workplace solutions sees the shift as life-changing. 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, have value added services, have unique intellectual property, and repeatable services and are embracing the consumption economy.

They are delivering value to their customers. They are working with Microsoft to provide value-added services and not just point product resale.

In 2017, Microsoft also launched a co-sell program under which partners, to date, have made $18.5 billion directly from co-selling their intellectual property (IP) with Microsoft. In the current fiscal year, Microsoft’s sales organization has shared and closed more than 166,000 co-sell opportunities with partners. It is increasing its co-selling focus on small and midsize businesses this year.

Hyoun Park, CEO and principal analyst at Amalgam Insights, a Berkeley, Calif., technology consulting firm talked about Microsoft shared approach to success. “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 “

Measurable success

The changes under Nadella 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 30th, 2020.
  • Microsoft partners benefited at the same time. IDC (International Data Corporation) 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 require secure, flexible, and scalable management platforms. As ecosystems up-level to solution providers and value-added service providers, an Ecosystem Management platform must be able to manage different partner constituents, dramatic innovation, and transformational co-sell activities. Finally, tracking and measuring partner and ecosystem performance requires a data-driven platform that can capture performance metrics for real time tracking and reporting across diverse types of initiatives.

Pronto’s Ecosystem Management platform provides a flexible collaborative platform that helps ecosystem professionals plan, manage, and report on value created as their ecosystem evolves in reaction to disruptive business transformation.

Ready to learn more?
If you are interested in learning more about Pronto and our Ecosystem Management platform, please contact us at [email protected] and we would be glad to assist you.