40

Partner interviews

19

Different Countries

15

Deep dive cases

250

Pages of content

Book Overview

What is Microsoft´s Strategy?

Understand where Microsoft has come from, where Microsoft is going and how it is going to get there.

Understand in depth the Microsoft Business Model changes

Go deep on the Microsoft business model, the financial results and what you should know as a Partner.

How does Microsoft Compete?

Understand the competition history and the different approaches under Gates, Ballmer and Nadella.

The Microsoft Organization

Understand the how and why of the Microsoft organization and the changes for fiscal year 2018 and how they impact you as a Partner.

Microsoft´s Culture

Understand the changes that Satya Nadella is implementing at Microsoft and how this impacts you as a Partner.

Microsoft´s Partner Strategy

Understand the long term Microsoft Partner strategy.

Partner Survey Results

How are the partner business models changing?

Deep Dive Partner Cases

Partner Business Characteristics Model and 15 deep dive cases

The Basics

Get a grip on Microsoft Licensing, the Partner network benefits, CSP and how to work with Microsoft Services.

Define and Operationalize Your Strategy

What am I going to be? Where am I going to play? What will be my value add and differentiation? How do I get there? At what cost?

Best Practices

What r some of the best practices and challenges in working with Microsoft?

Free Samples

Free sample pages from the book

you can scroll through the content of the tablet frame


Content

Content
List of tables 8
List of figures. 9
Acknowledgements 10
Introduction 11
Why the title of the book? 13
How the book is organized 14
Methodology 16
Chapter 1. Vision, Mission & Strategy 17
The Bill Gates era 17
The Steve Ballmer era 17
The Satya Nadella era: Worldview and mission 17
Satya Nadella putting his mark on Microsoft 21
July 2015 – June 2016: Organizing the financial reporting around the Three Ambitions. 22
July 2016 – June 2017: Consolidation & Refinement 26
July 2017 – Microsoft´s Paradigm Shift 27
Windows becoming the edge of the cloud: 28
The Four Platforms 29
In summary for fiscal year 2018 30
Beyond the Cloud 30
Conclusions 31
Lessons for Partners 31
Chapter 2. Microsoft’s Business Model Changes. 33
Ballmer Era I: Selling Software 33
Ballmer Era II: Devices, Consumer and Commercial 37
The Satya Era: All about Cloud & Services 38
Conclusions 40
Lessons for Partners 41
Chapter 3. Co-opetition 42
The early years 42
Competition in the Gates era 44
Competition in the Ballmer era 44
Competition in the Nadella era 45
With whom does Microsoft compete? 46
How does Microsoft compete? 48
How competing has changed under Nadella 48
Competing at the field level. 49
Competing in the cloud world 50
Competing in the AI world 51
Conclusions. 52
Lessons for Partners 53
Chapter 4. The Microsoft Culture 54
A personal experience 54
The famous stack ranking system 55
The Nadella Effect 56
Day to day work culture 58
Conclusions 59
Lessons for Partners 59
Chapter 5. How Microsoft organizes. 60
Global headcount analysis 60
The Corporate Organization 61
The SMSG organization 61
How Microsoft has divided the world 65
The Microsoft organizational setup and the cloud world. 66
Organizational challenges for partners in working with Microsoft 66
The 2018 Commercial sales organization 68
The 2018 One Commercial Partner Organization 70
FY18 implementation status 72
Conclusions 73
Lessons for partners 74
Chapter 6. The Microsoft Partner Strategy 75
History 75
A unique partner sales model 76
Different partner types 76
Pre-Cloud partner Business models 77
Megatrends and their impact 82
Channel predictions 84
Modern Microsoft Partner eBook Series 86
Microsoft´s partner strategy summarized 91
What should a partner do? 91
Conclusions 92
Lessons for partners 93
Chapter 7. The survey results 94
The individuals 94
The Companies 95
Cloud 97
Business Models 98
Working with Microsoft 101
Conclusions 106
Lessons for partners 107
Chapter 8. The partner models 108
Introduction 108
Microsoft Partner Business Characteristics Model 108
The Classic Systems Integrator: Hurricane Technologies 112
The Advanced Systems Integrator: Smartland 115
The Innovation Systems Integrator: Yeworks 118
The Specialized Systems Integrator: Arcaneex 121
The Modern Dynamics Systems Integrator: Globeworks. 124
The Large Systems Integrator: Bluehouse 129
The Cloud SMB: Riverbite 131
The Modern Distributor: Apricot technologies 134
The Classic Dynamics ISV: Pixystems 138
The Verticalized Modern ISV: Oak Systems 142
The Transitioned to the Cloud ISV: Tundracorp 144
The Open Source ISV: Whizystems. 146
The Cloud ERP for SMB: Hummingforce 149
Purplelimited: from Hardware to 100% Cloud Services and IP 152
Driftware: from SI to setting up a new ISV business 155
The Business Characteristics Model for Digital Transformation 158
Conclusions 160
Lessons for partners 160
Chapter 9. Required knowledge to partner with Microsoft. 162
The Microsoft Partner Network 162
Microsoft Competencies 163
Licensing 163
The Cloud Solution Provider Program 167
Channel incentives 169
Working with Microsoft Consulting Services 171
Conclusions 172
Lessons for partners 172
Chapter 10. Define your strategy 174
Microsoft strategy and market trends. 174
Partner business transformation status and trends 175
Partner strategy topics 177
Conclusions 184
Lessons for partners 184
Chapter 11. Operationalize 185
Summarizing the Microsoft strategic imperatives 185
Summarizing Microsoft´s cultural and organizational aspects 185
Summarizing the Microsoft partner strategy 186
Summarizing the soft and hard requirements of doing business with Microsoft. 186
Operationalizing your strategy with Microsoft 187
Plan, Execute & Govern 193
Conclusions 195
Lessons for partners 195
Chapter 12. Best Practices & Challenges in working with Microsoft 196
What are the things that Microsoft should stop doing? 196
What are the things that Microsoft should continue doing? 197
What are the things that Microsoft should start doing? 198
Best practices 199
Lessons learned 201
General best practices 202
Conclusions 205
Lessons for partners 205
Chapter 13. Useful resources 206
Acronyms 208
About the author 210
Appendix 1: Steve Ballmer staff memo July 2013 212
Appendix 2: Satya Nadella email to employees on aligning engineering to strategy 218
Appendix 3: Stephen Elop burning platform Memo 221
Appendix 4: Microsoft Revenue and Operating income per business group 2005 – 2014 224
Appendix 5: How does Microsoft monetize Windows in a cloud world. 226
Appendix 6: Bill Gates´s 1995 Internet Tidal Wave memo 228
Appendix 7: Microsoft total headcount since 2001. 237
Appendix 8: Detailed Survey Questions 238
Appendix 9. Survey Participants 240
Appendix 10. Interview Participants 242
Appendix 11. Microsoft Competencies overview 244
Appendix 12: Planning Services offerings 250
Appendix 13: A Partner2Partner maturity model framework. 251
References: 255


List of tables
Table 1. Microsoft Cloud Revenue 37
Table 2. The pre-fiscal 18 Microsoft partner organizations 65
Table 3. Partner business model overview 80
Table 4. Microsoft partner strategic options 90
Table 5. Partners business model mix. 97
Table 6. Partners Business model mix percentages. 98
Table 7. Partners Future business model changes. 99
Table 8. Hurricane´s Business Characteristics 112
Table 9. Smartland´s Business Characteristics 115
Table 10. Yeworks´ Business Characteristics 118
Table 11. Arcaneex Business Characteristics. 121
Table 12. Globeworks Business Characteristics 126
Table 13. Bluehouse Business Characteristics 128
Table 14. Riverbite´s´ Business Characteristics 131
Table 15. Apricot Technologies´ Business Characteristics. 135
Table 16. Pixystems Business Characteristics. 139
Table 17. Oak Systems Business Characteristics 141
Table 18. Tundracorp Business Characteristics 143
Table 19. Whizystems´ Business Characteristics 146
Table 20. Hummingforce´s´ Business Characteristics. 149
Table 21. Purplelimited´ s Business Characteristics 152
Table 22. Driftware’ s Business Characteristics 155
Table 23. Partner Strategy options II 181
Table 24. Microsoft total headcount since 2007. 216
Table 25. Detailed Survey Questions 218
Table 26. Survey Participants. 220
Table 27. Interview Participants. 222
Table 28. Partner Maturity Model 231


List of figures.
Figure 1 Microsoft Partner Business execution framework 11
Figure 2 Microsoft all up revenue and operating income 2005 -2013 in M$ 32
Figure 3. Microsoft all up revenue per year 2005 – 2013 33
Figure 4: Microsoft all up operating income per year 2005 – 2013 34
Figure 5: Microsoft Revenue, Operating Income and Net Income 2001-2017 36
Figure 6: Microsoft pre-fiscal year 18 org chart 60
Figure 7. Microsoft FY18 Customer Segmentation. 67
Figure 8. Microsoft´s FY18 Commercial model.. 67
Figure 9. Microsoft´s FY18 Customer Solution Areas. 68
Figure 10. Microsoft´s One Commercial Partner Operating Model 68
Figure 11. FY18 Solution Map example 70
Figure 12. Win 10 Revenue Recognition. 206

Content

Content
List of tables 8
List of figures. 9
Acknowledgements 10
Introduction 11
Why the title of the book? 13
How the book is organized 14
Methodology 16
Chapter 1. Vision, Mission & Strategy 17
The Bill Gates era 17
The Steve Ballmer era 17
The Satya Nadella era: Worldview and mission 17
Satya Nadella putting his mark on Microsoft 21
July 2015 – June 2016: Organizing the financial reporting around the Three Ambitions. 22
July 2016 – June 2017: Consolidation & Refinement 26
July 2017 – Microsoft´s Paradigm Shift 27
Windows becoming the edge of the cloud: 28
The Four Platforms 29
In summary for fiscal year 2018 30
Beyond the Cloud 30
Conclusions 31
Lessons for Partners 31
Chapter 2. Microsoft’s Business Model Changes. 33
Ballmer Era I: Selling Software 33
Ballmer Era II: Devices, Consumer and Commercial 37
The Satya Era: All about Cloud & Services 38
Conclusions 40
Lessons for Partners 41
Chapter 3. Co-opetition 42
The early years 42
Competition in the Gates era 44
Competition in the Ballmer era 44
Competition in the Nadella era 45
With whom does Microsoft compete? 46
How does Microsoft compete? 48
How competing has changed under Nadella 48
Competing at the field level. 49
Competing in the cloud world 50
Competing in the AI world 51
Conclusions. 52
Lessons for Partners 53
Chapter 4. The Microsoft Culture 54
A personal experience 54
The famous stack ranking system 55
The Nadella Effect 56
Day to day work culture 58
Conclusions 59
Lessons for Partners 59
Chapter 5. How Microsoft organizes. 60
Global headcount analysis 60
The Corporate Organization 61
The SMSG organization 61
How Microsoft has divided the world 65
The Microsoft organizational setup and the cloud world. 66
Organizational challenges for partners in working with Microsoft 66
The 2018 Commercial sales organization 68
The 2018 One Commercial Partner Organization 70
FY18 implementation status 72
Conclusions 73
Lessons for partners 74
Chapter 6. The Microsoft Partner Strategy 75
History 75
A unique partner sales model 76
Different partner types 76
Pre-Cloud partner Business models 77
Megatrends and their impact 82
Channel predictions 84
Modern Microsoft Partner eBook Series 86
Microsoft´s partner strategy summarized 91
What should a partner do? 91
Conclusions 92
Lessons for partners 93
Chapter 7. The survey results 94
The individuals 94
The Companies 95
Cloud 97
Business Models 98
Working with Microsoft 101
Conclusions 106
Lessons for partners 107
Chapter 8. The partner models 108
Introduction 108
Microsoft Partner Business Characteristics Model 108
The Classic Systems Integrator: Hurricane Technologies 112
The Advanced Systems Integrator: Smartland 115
The Innovation Systems Integrator: Yeworks 118
The Specialized Systems Integrator: Arcaneex 121
The Modern Dynamics Systems Integrator: Globeworks. 124
The Large Systems Integrator: Bluehouse 129
The Cloud SMB: Riverbite 131
The Modern Distributor: Apricot technologies 134
The Classic Dynamics ISV: Pixystems 138
The Verticalized Modern ISV: Oak Systems 142
The Transitioned to the Cloud ISV: Tundracorp 144
The Open Source ISV: Whizystems. 146
The Cloud ERP for SMB: Hummingforce 149
Purplelimited: from Hardware to 100% Cloud Services and IP 152
Driftware: from SI to setting up a new ISV business 155
The Business Characteristics Model for Digital Transformation 158
Conclusions 160
Lessons for partners 160
Chapter 9. Required knowledge to partner with Microsoft. 162
The Microsoft Partner Network 162
Microsoft Competencies 163
Licensing 163
The Cloud Solution Provider Program 167
Channel incentives 169
Working with Microsoft Consulting Services 171
Conclusions 172
Lessons for partners 172
Chapter 10. Define your strategy 174
Microsoft strategy and market trends. 174
Partner business transformation status and trends 175
Partner strategy topics 177
Conclusions 184
Lessons for partners 184
Chapter 11. Operationalize 185
Summarizing the Microsoft strategic imperatives 185
Summarizing Microsoft´s cultural and organizational aspects 185
Summarizing the Microsoft partner strategy 186
Summarizing the soft and hard requirements of doing business with Microsoft. 186
Operationalizing your strategy with Microsoft 187
Plan, Execute & Govern 193
Conclusions 195
Lessons for partners 195
Chapter 12. Best Practices & Challenges in working with Microsoft 196
What are the things that Microsoft should stop doing? 196
What are the things that Microsoft should continue doing? 197
What are the things that Microsoft should start doing? 198
Best practices 199
Lessons learned 201
General best practices 202
Conclusions 205
Lessons for partners 205
Chapter 13. Useful resources 206
Acronyms 208
About the author 210
Appendix 1: Steve Ballmer staff memo July 2013 212
Appendix 2: Satya Nadella email to employees on aligning engineering to strategy 218
Appendix 3: Stephen Elop burning platform Memo 221
Appendix 4: Microsoft Revenue and Operating income per business group 2005 – 2014 224
Appendix 5: How does Microsoft monetize Windows in a cloud world. 226
Appendix 6: Bill Gates´s 1995 Internet Tidal Wave memo 228
Appendix 7: Microsoft total headcount since 2001. 237
Appendix 8: Detailed Survey Questions 238
Appendix 9. Survey Participants 240
Appendix 10. Interview Participants 242
Appendix 11. Microsoft Competencies overview 244
Appendix 12: Planning Services offerings 250
Appendix 13: A Partner2Partner maturity model framework. 251
References: 255


List of tables
Table 1. Microsoft Cloud Revenue 37
Table 2. The pre-fiscal 18 Microsoft partner organizations 65
Table 3. Partner business model overview 80
Table 4. Microsoft partner strategic options 90
Table 5. Partners business model mix. 97
Table 6. Partners Business model mix percentages. 98
Table 7. Partners Future business model changes. 99
Table 8. Hurricane´s Business Characteristics 112
Table 9. Smartland´s Business Characteristics 115
Table 10. Yeworks´ Business Characteristics 118
Table 11. Arcaneex Business Characteristics. 121
Table 12. Globeworks Business Characteristics 126
Table 13. Bluehouse Business Characteristics 128
Table 14. Riverbite´s´ Business Characteristics 131
Table 15. Apricot Technologies´ Business Characteristics. 135
Table 16. Pixystems Business Characteristics. 139
Table 17. Oak Systems Business Characteristics 141
Table 18. Tundracorp Business Characteristics 143
Table 19. Whizystems´ Business Characteristics 146
Table 20. Hummingforce´s´ Business Characteristics. 149
Table 21. Purplelimited´ s Business Characteristics 152
Table 22. Driftware’ s Business Characteristics 155
Table 23. Partner Strategy options II 181
Table 24. Microsoft total headcount since 2007. 216
Table 25. Detailed Survey Questions 218
Table 26. Survey Participants. 220
Table 27. Interview Participants. 222
Table 28. Partner Maturity Model 231


List of figures.
Figure 1 Microsoft Partner Business execution framework 11
Figure 2 Microsoft all up revenue and operating income 2005 -2013 in M$ 32
Figure 3. Microsoft all up revenue per year 2005 – 2013 33
Figure 4: Microsoft all up operating income per year 2005 – 2013 34
Figure 5: Microsoft Revenue, Operating Income and Net Income 2001-2017 36
Figure 6: Microsoft pre-fiscal year 18 org chart 60
Figure 7. Microsoft FY18 Customer Segmentation. 67
Figure 8. Microsoft´s FY18 Commercial model.. 67
Figure 9. Microsoft´s FY18 Customer Solution Areas. 68
Figure 10. Microsoft´s One Commercial Partner Operating Model 68
Figure 11. FY18 Solution Map example 70
Figure 12. Win 10 Revenue Recognition. 206

Overview

The idea to write this book originated during Microsoft´s Inspire event in July 2017, formerly called the Microsoft Worldwide Partner Conference. Microsoft just announced their new organizational structure and I decided to write an article on LinkedIn with my analysis of the reorganization and what it would mean for a partner.
In less than two weeks’ time, I had over 18.000 views and more than 5.000 of those came directly from Microsoft employees. Maybe more than the right content it had to do with the right timing. There had been many rumors and secrecy around the reorganization and my article apparently filled the void. Another Microsoft partner at the conference told me that someone with my knowledge of Microsoft should write a book in order to help other partners and Microsoft. But I didn’t want to write a book on my own. That is why I spoke to Olivia Trilles. Olivia is CEO of Auraportal and she impressed me with how she built her engagement with Microsoft over the last two years reaching a level of understanding that cost me almost twenty years to achieve.
Browsing through the existing literature the latest book you can find on engaging with Microsoft dates back to 2009. This book is more of a how to guide and furthermore sponsored by Microsoft. We want to write a book by partners for partners without the need to be politically correct. This book will help you understand how to build your business with Microsoft. This book is intended to be helpful to companies that want to start to work with Microsoft but it can also be useful for existing partners that want to improve the outcomes of their business working with Microsoft technology. For the existing partners it is important that we dive into how things where before just to put some of the changes into perspective. Our hope is that for the new partners this doesn´t become too boring.
One specific call out we would like to make is that this is not just a book for alliance or channel managers. If you want to be successful in a partnership, you cannot abdicate the strategy and the management of that partnership to the alliance person. It needs to be a top down and bottom up approach. This book is for CEO´s, CMO´s, Practice managers, CTO´s and partner roles.
One of the feedbacks we are expecting is that there is too much detail in this book. Why can´t Microsoft just assign me a single point of contact that can help me with my engagement? Interestingly enough Microsoft has just done away with that single point of contact in their fiscal year 18 and it makes a lot of sense. If you want to be successful with Microsoft, you have to understand in detail their strategy, their organization, the culture, the roles, the people, the incentives, the scorecards. You have to understand the Microsoft way.
We hope you enjoy the book and feel free to connect with us on LinkedIn https://www.linkedin.com/in/oliviatrilles/ and https://www.linkedin.com/in/michielvanvliet/ or on Twitter @oliviatrilles and @michielvvliet.
The aim is be to make small updates to the book anytime Microsoft is changing strategy, business models, Go to Market models or organizational structures which will normally happen early July when Microsoft starts its new fiscal year.
Happy reading

Chapter I

Chapter 1. Vision, Mission & Strategy

Microsoft has had various different visions, mission statements, worldviews and strategies over the years. In this chapter, we will try to explain some of those changes and why these are important.

The Bill Gates era
April 1975 – June 2000
Depending on your age, you might still remember one of Microsoft´s first mission statements, a PC on every desk and in every home. This was all about democratizing computing for the masses, from consumers to Small and Medium Business to large corporations.

The Steve Ballmer era
June 2000 – February 2014
During the Ballmer reign, the mission was to enable people and businesses throughout the world to realize their full potential.
Then with the reorganization that Ballmer started in July 2013, Microsoft moved to creating a family of devices and services for individuals and businesses that empower people around the globe at home, at work and on the go, for the activities they value most.
In 2013, Microsoft became a devices and services company . This was an important change. Microsoft at the time was a software company. The issue with software was that the world was changing to a new form of monetizing software. Advertising based (Google), integrated through hardware (Apple), or sold as a service (Salesforce). It became more and more difficult to sell software via licenses and maintenance fees. Under Ballmer Microsoft was on a course to a mixed business model of being like Google, Apple and Salesforce monetizing through advertising, volume first party hardware (Nokia, Surface) and SaaS models (0365).

The Satya Nadella era: Worldview and mission
Being the Productivity and Platform Company for the Mobile first and Cloud first world
The world view in 2014
So how did the Microsoft mission change under Nadella? Microsoft moved from being a devices and services company under Ballmer to being the productivity and platform company for the mobile first and cloud first world under Nadella.
Microsoft defines its mission in 2014 like; “we will be the productivity and Platform Company for this mobile-first and cloud-first world. We will empower every person and every organization on the planet to do more and achieve more. And we will accomplish this by building incredible Digital Work and Life Experiences, supported by our Cloud Operating System, the Device Operating System and Hardware platforms .”
A common mistake at the time was calling Microsoft´s mission Mobile first, Cloud first. Satya has always stated that Mobile first; Cloud first is a World View. Everything Microsoft did had to be done with that worldview in mind. The mission was being the productivity and Platform Company.
Satya Nadella;”I am grounded on two things. One is what is the worldview that is driving us forward and to me it is about really thriving in this new paradigm of mobile first cloud first on which I have a pretty explicit point of view because when we say mobile first it is actual the mobility of the individual, not the device, starting by thinking of just the one form factor today is not in the full arch of time where we are going to go. So you have to really think about how is the user across all of the compute power that they are going to interact with in a day going to be able to get the richness of that.”
“If I had to take the Uber view of categories we compete in the two things, I want us to be great at and leading: be the best in the world when it comes to productivity broadly defined, individual productivity, team productivity, business process productivity. That is why we do everything from individual tools in Office to business process in CRM and ERP. We think of it as a continuum, the category definitions that exist will change in time. And the second one is getting these platforms right. Platforms mean consistency for the user, the consistency in the control plane for IT and the developer opportunity and getting that equation right. That is what we really want to be great at .”

Let´s dissect the four words of the mission statement and what they meant in 2014.

Chapter II

Microsoft describes what it offers to the market like this :
“We develop, license, and support a wide range of software products, services, and devices that deliver new opportunities, greater convenience, and enhanced value to people’s lives.”
“Our products include operating systems; cross-device productivity applications; server applications; business solution applications; desktop and server management tools; software development tools; video games; and training and certification of computer system integrators and developers. We also design, manufacture, and sell devices, including PCs, tablets, gaming and entertainment consoles, phones, other intelligent devices, and related accessories that integrate with our cloud-based offerings. We offer an array of services, including cloud-based solutions that provide customers with software, services, platforms, and content, and we provide solution support and consulting services. We also deliver relevant online advertising to a global audience.”
Microsoft sells software, services and devices. They sell this to businesses and consumers. As you can see there are many different business models mixed here.
Let us try to dissect all of those one by one.

Ballmer Era I: Selling Software
Since taking over from Gates in 2000 until he changed the strategy of Microsoft to becoming a Devices and Services Company the business model for Microsoft was mostly based on selling software with some residual services and devices.
Selling software.
Software is very expensive to develop but once developed your marginal cost to produce an extra item is very low, as you only need to give out an additional license key . Successful software companies have very high gross margins. The other beautiful part of the model is upfront payments and maintenance fees (which hover around 20%) .
For Microsoft the gross margins have always been highest for Windows, then for Office and then for the server products. This has to do with the sales model. Windows is mostly sold to OEM manufacturers that pre-install Windows on PC´s that they sell. So very few customers with very high volumes . Then there was the Windows enterprise business selling windows enterprise with Software Assurance and some residual boxes sold via retail.
For Office a large part of the business was the enterprise sales motion, then ´Office attach´ to OEM PC´s (Not 100% as not every consumer buys Office) and then residual boxes via retail or online.
For Server products, the sales cost is higher as you have to sell complex products to businesses that require longer sales cycles with more resources.
A structural problem Microsoft always has had to cope with is illegal use of its software specifically on the consumer side. Current estimates of illegal use range from 62% (Asia Pacific) to 19% (North America) . On the business side, part of this incorrect use is caused by the sheer complexity of the Microsoft licensing terms. A much-used instrument in the field during years or quarters when it was hard to make the numbers was to have audits done at the client (or the friendly description Software Asset Management engagements). A positive consequence of the cloud model is that illegal use will become near to impossible for users using Microsoft cloud services.

Selling Services
Services for Microsoft during the Ballmer era was search, online advertising, x-box related services and Microsoft (Consulting) services. Microsoft Consulting services was counted for under the Server & Tools product group and in my estimate has never reached more than 5% of all up Microsoft revenues. Advertising was a big play together with search and Microsoft spent 6B$ to buy Aquantive in 2007 which was mainly a display advertising technology company in response to Google buying Doubleclick months earlier . Then Microsoft decided to focus mostly on search and search advertising with Bing and wrote off 6.3B$ in 2012 on the Aquantive purchase . X-box related services has to do with the online Xbox properties like Xbox LIVE services.

Selling Devices
Devices for Microsoft has historically been peripherals like mice and keyboards and Xbox related hardware. Then Zune came into the picture to compete with the Ipod and Phones. Selling hardware is a complex business compared to selling software. You need to purchase parts, integrate, do logistics, do warranty etc.

Business model profitability
To understand how profitable the Software sales business model is we have looked at the Microsoft numbers from 2005 to 2013 . The reason we took this period is twofold. First, it is the longest period that the reporting has been done for a consistent grouping of businesses (Windows Client, Business group, Server & Tools, Online Services and Entertainment & Devices). Second, this is a subset of the period Steve Ballmer was at the helm.

Figure 2. Microsoft all up revenue and operating income 2005 -2014 in M$

In the nine year period Windows generated revenue of 147B$ with an operating income of 99,9B$, a 68% margin. Office generated 171B$ with an operating income of 111B$, a 65% margin. Server and Tools generated 127B$ with an operating income of 46B$, a 36% margin. Entertainment & Devices (mainly x-box) generated 67B$ of revenue with a margin of 53M$. Basically break even. The big money looser was online services with a revenue of 17B$ and 6B$ of losses .
If you look at the risk profiles probably the least risky is the Server & Tools business, then the Windows, then the Office business. It is hard to change databases to another vendor, client OS you would not easily change in the enterprise and probably Office is the least risky thing to change. Both Online services and Entertainment & Devices are much more risky. Online services because there is a large incumbent (Google) and because this depends on advertising budgets which depend on marketing budgets which depend on economic cycles.
Xbox is even a more risky business model. You have to spend billions on R&D for several years to deliver a gaming console with a closed ecosystem that very soon after launch you sell for what it costs to produce. Here the model is to have the key games ideally on your platform only and you monetize through games. Part of having the key games is producing them yourself which has the risk profile of trying to produce Hollywood blockbusters.

Figure 3. Microsoft all up revenue per year 2005 -2014

Looking at the revenue one can see that Office has been the largest revenue contributor since 2005. However if you look at operating income (see figure 3 below) one can see that Windows has been the biggest contributor until 2010 (except for 2009) and then you see the decline starting in Windows caused by the secular shift of activity to mobile platforms. People where buying less and less PC´s and those that were being used where used for a longer time then the standard four years .
What made the decline in revenue less steep for Microsoft were the enterprise clients on three-year contracts. Other secular shifts that were going on: cloud and a tendency of business not renewing Office licenses as on the one hand people became feature tired and specifically on the consumer side there were other good enough alternatives out there.
Cloud revenue was still low. Microsoft had been investing in the Azure cloud since 2010 and Office365 since 2011 however, the field salesforce were hesitant to sell the cloud alternatives, as they were afraid it would negatively affect the on premise business .

Figure 4. Microsoft all up operating income per year 2005 -2014

Chapter IV

The 2018 One Commercial Partner Organization

Microsoft is splitting the partner engagement up in to three distinct groups that support a build with, Go to Market with and Sell with motion. This is depicted in figure 10

Build with
The Build with people will be specialists on the all up ecosystem in a country. They will have a deep understanding of the Microsoft strategy and will figure out where there are gaps in the portfolio and for those gaps they will recruit partners and build capabilities. The build with team will work with the partners to develop new practices, new capabilities and new solutions. Partners will have a single point of contact (spoc) in this team to help with transformation and building growth plans. (Not a spoc that will help with everything within Microsoft)
Sell with.
Microsoft has concluded that partners want to work with Microsoft people that have a deep understanding of the accounts, that know the customers and that know the opportunities. The Enterprise channel managers and territory channel managers will fulfill this role. The channel managers are aligned by accounts. This means that on the Sell with side a partner will have to engage with multiple contacts versus a single point of contact on the build with side. So there is a SPOC on the left hand side but multiple Microsoft people to engage with on the right hand side but the relevance and impact of these interactions should be higher.
Go To Market
The Go to Market people will help the partner define a demand generation strategy. Large partners in general have their own marketing teams and can do demand generation, can engage on digital, social, and they know how to get to new sets of customers. When you are a smaller partner, this can be an issue. That is where the GTM team is going to help. For example, Microsoft will roll out a marketing in a box offering for partners. The GTM piece is designed to help partners expand their demand generation engine and will be complemented with inside sales support.
Technical team
Microsoft is investing heavily in cloud architect roles. These will be Cloud architects that work with partners helping with the partner business model transformation. Microsoft has stated that it will focus a lot of effort on partners that want to transform with Microsoft.
Aligning with solution areas.
Another important aspect will be that partner capabilities and partner focus will be mapped against solution areas. See figure 11 for an example of horizontal solution areas. Some will be global; some will be decided on area level. Some will be decided on country level. In some cases/countries there will be more vertical solution maps.

As a partner specializing in one of those priority areas you have to make, sure Microsoft understands your capabilities. Territory managers are going to use those solution maps to engage on opportunities.

Chapter Overviews

An overview of some of the chapters

A short description of some of the book chapters for you to get a feel what the book is about

Chapter I

Chapter I

Microsoft´s Vision, Mission and Strategy and how this has changed from Gates, through Ballmer and now with Nadella.

Chapter II

Chapter II

An overview of Microsoft´s business models over the years, the changes, impact and its financial results.

Chapter III

Chapter III

How does Microsoft Compete at the corporate and at the field level?

Chapter IV

Chapter IV

Understand the corporate and field organization and the rythm of business.

Chapter V

Chapter V

Get a better understanding of the Microsoft culture and some of the changes that have happened under Satya Nadella.

Chapter VI

Chapter VI

Go deep on the Microsoft partner strategy

Chapter VII

Chapter VII

What you need to know when partnering with Microsoft.

Chapter VIII

Chapter VIII

How to work with Microsoft as a partner

Reader Messages

The most inspiring testimonials from readers of our material

Global Alliance Manager at one of the largest global System Integrator

Global Alliance Manager at one of the largest global System Integrator

"This is an overdue thank you for your eloquent and informative posts about your views about Microsoft's GTM strategy, priorities, investments, and overall mindset. Unbeknownst to you, you have helped me rapidly get up to speed on the New Microsoft. In sum, thank you for your posts; your views are appreciated from places you may not expect!"

Partner Director at Market Consultancy Firm

"Great deep dive into Microsoft last results: the journey to the cloud business model wisely began but still not close to payback in numbers. Congrats for your clear vision here."

Partner Director at Market Consultancy Firm
B2B Sales Consultant & Senior Lecturer

B2B Sales Consultant & Senior Lecturer

"A must read for Microsofties willing to understand where they really are in the transformation journey."

Michiel van Vliet

Michiel has been working for and with Microsoft and the Microsoft ecosystem since 1995. First as a supplier managing the outsourced support at Emea level for Windows 95. He then moved to Unisys where after a couple of other roles he ended up managing the European Microsoft Practice and then the global Microsoft Practice. He then joined Microsoft Spain as a services lead, a role he had for 3.5 years and then was responsible for the Emea enterprise partner strategy and execution working with some of the largest Microsoft alliances for 5 years. He joined Kabel as their CEO in 2016 and Kabel became finalist partner of the year in Spain in FY18. Michiel is also an active contributor on Linkedin with a large following of people interested in Microsoft. Michiel is one of Microsoft's biggest fans but also one of its biggest critics but with an aim of making sure that Microsoft continuously improves.

Personal motivations & special thanks

The idea to write this book originated during Microsoft´s Inspire event in July 2017, formerly called the Microsoft Worldwide Partner Conference. Microsoft just announced a new organizational structure and I decided to write an article on LinkedIn analyzing the reorganization and what it would mean for partners. In less than two weeks’ time, I had over 20.000 views and more than 5.000 of those came directly from Microsoft employees. There had been many rumors and there was much secrecy around the reorganization. Other partners at the conference suggested that I write a book to help them, so during my holidays in August 2017 instead of reading books, as I normally do, I started writing one. The latest book you can find on engaging with Microsoft dates to 2009. Originally the subtitle of this book was a ´practical´ guide to successful business partnering with Microsoft but I soon figured out that what was needed for this book to be useful was to create something that would not be completely out of date in one fiscal year. Therefore, I have tried to stay away from short term and very timebound tips and tricks as much as possible and have tried to take the long view. Additionally, I wanted to write a book for partners without it being a marketing outlet for Microsoft. I hope that because I am personally living and driving the transformation at the company I work at as a CEO this might give some additional credibility compared to what you can get from other sources. Microsoft wants you to transform as a partner and they explain the why and sometimes the what, however they come short on the how as very few field people in Microsoft have lived through what it takes to transform as a company. Transformation is hard, painful, and costly. You will see several examples in this book. Some partners had to reduce their staff by over 50 percent to transform, others built completely new businesses. This book will help you understand how to build or transform your business together with Microsoft. This book is intended to be helpful both to companies that want to start to work with Microsoft and existing partners that want to improve the outcomes of their business working with Microsoft. For existing partners, it is important that I dive into how things were before just to put some of the changes into perspective. I hope that for the new partners this doesn´t become too complex or boring. One specific call out I would like to make is that this is not just a book for alliance or channel managers. If you want to be successful in a partnership, you cannot abdicate the strategy and the management of that partnership to the alliance person. It needs to be a top down and bottom up approach. This book is for CEO´s, CMO´s, Practice managers, CTO´s and partner roles. Everybody in your organization that has something to do with Microsoft can benefit from reading this book. One of the feedbacks I expect is that there is too much detail in this book. Why can´t Microsoft just assign me a single point of contact that can help me with my engagement? Interestingly enough Microsoft has just done away with that end-to-end single point of contact in their fiscal year 18 and our view is that that will not change in FY19. If you want to be successful with Microsoft, you must understand in detail the Microsoft strategy, organization, culture, roles, incentives, and scorecards. You must understand the Microsoft way of doing things. I hope you enjoy the book and feel free to connect on LinkedIn https://www.linkedin.com/in/-mvv-/ or on Twitter @michielvvliet. The aim is to make updates to the book anytime Microsoft is making major changes in strategy, business models, Go to Market models or organizational structures which will normally happen early July when Microsoft starts its new fiscal year. Happy Reading!


I would like to thank my wife Claire for all the hours she had to miss me due to my work on this book. My children Sarah and Thomas are old enough not to miss their dad during evenings and weekends :-). Furthermore I would like to thank all the partners that have contributed directly or indirectly to this book.