Microsoft has over 400,000 partner organizations that work every day to make small businesses more productive, multinationals more competitive, governments more efficient, and much more like that. As customers are undergoing digital transformation, there is a need to continuously co-innovate and jointly go to market with tailored solutions. Microsoft commissioned a study with IDC to examine key drivers of partner profitability and growth and found that partners who have invested the most in their Microsoft relationship, offered their intellectual property (IP), and taken advantage of co-selling opportunities were able to realize the greatest economic benefits.
How can Microsoft partners get on the path to profitability?
Microsoft platform for economic value creation
Depending on partner revenue and the activities that partners perform to drive that revenue, Microsoft partners can be segmented as resale-led, services-led, and software-led. What partners do affects how much money they make by partnering with Microsoft. This can be different for each partner because each partner does different things.
For example, resale-led partners get most of their money from reselling, but also generate some money from their services and/or software.
The study finds that for every $1 of Microsoft revenue, partners are able to receive a multiple in their own business depending on their activities or revenue share of those activities. Services-led partners make $7.63, and software-led partners make $10.11.
Increasing investment for increased profits
Microsoft partners experienced revenue growth of 19% in 2021 and expect a growth of 26% in 2022. In 2021, 96% of partners grew or maintained Microsoft-related revenue. In 2022, 98% of partners are expected to grow or maintain Microsoft-related revenue.
Microsoft Cloud consists of different solutions like Modern Work, Security, Azure Core, Digital & Application Innovation, Data & AI, and Business Applications. Microsoft partners that are more engaged in multiple Microsoft cloud solutions areas tend to grow faster. This is because they can offer more solutions to their customers.
There are a lot of ways how partner business models can team up with Microsoft, and each different business models yield different paths to economic value. Partners who reap the most benefits are those that have invested the maximum in their Microsoft relationship. For example, those that offer their intellectual property (IP), and those that take advantage of co-selling opportunities with Microsoft.
Co-selling with Microsoft to drive partners’ growth
There are many attributes associated with the value that partners receive in their Microsoft relationship. However, the two categories that help generate economic value for partners are Product & Technology and Go-to-Market.
Product and technology: Microsoft partners can benefit from access to the technical resources required to develop and implement solutions.
Go-to-market: GTM includes co-marketing campaigns, co-sell, and the benefits of being associated with the Microsoft brand. Sometimes, partners work with Microsoft field-sales organization and benefit from joint account planning, Microsoft account introductions, and moving deals through the sales pipeline together.
Co-sell through the Azure Marketplace and App Source as well as with the Microsoft sales force are both effective ways of increasing partner revenue and acquiring new customers. By collaborating with Microsoft, partners can perform joint account planning, be brought into deals by Microsoft sales teams, and scope and propose solutions to clients together.
“Our work with partners impacts every facet of what we do; from conception of ideas with our customers to how we inspire and design and how we execute in the field and drive deals together. And, most importantly, it impacts how we help customers realize the value of our technology”, says Nicole Dezen, Chief Partner Officer and Corporate Vice President, Global Partner Solutions.
Co-selling with Microsoft is often an important part of partners’ growth strategies. By co-selling partners can work with Microsoft’s field-sales teams and generate and share opportunities, as well as expand and extend their customer engagements.
Microsoft Azure Marketplace and AppSource are online stores that contain thousands of software applications and services built by Microsoft partners. AppSource contains business and industry solutions, including applications that integrate into Microsoft 365, Dynamics 365, and Power Platform. The Azure Marketplace focuses on solutions built on the Azure platform. By taking advantage of these marketplaces, partners can get to market faster and reach a broader range of potential customers.
Microsoft partners can explore the study here and identify the most impactful actions for their business in the coming year.