Microsoft's Focus On Partner Profitability Is A Clear Sign Of Channel Commitment

Watson is correct in assessing that a more profitable channel will produce more sales and profits for Microsoft.

Cisco did a similar study several years ago, recognizing the importance of a profitable channel to the company&'s success.

It&'s very good news that two leadership companies acknowledge the need to help the channel understand what drives profits.

The CMP Channel Group has been pushing this for decades. Almost everything we do touches on partner profitability in some way. Our more than 20 years of research about the channel has been designed to help vendors understand what the channel needs. Our editors are always probing to determine if a new program or product has enough profit potential to be a worthwhile engagement.

To advance this effort, three years ago the CMP Channel Group launched an educational program through our Institute For Partner Education And Development to help solution providers understand all the business dynamics that go into running a more profitable business. Part of that effort is an Elite MBA program we run in conjunction with Babson College. The program includes a software-based business simulation in which solution providers dedicate three days of intensive work that is always eye opening.

We enroll about 30 VARs and break them into teams of five. Each team is given the same set of fictitious resources and put into a separate room to make an initial round of business decisions as a fictitious company competing against the other teams. Each team&'s business decisions are then fed into the software.

Once the first round of decisions is made, and the results are returned, the education really begins because the competition is on. When the teams realize that the decisions they make about where to build product, how much to spend on marketing, how to price their wares, how much capital they need to borrow, and a host of other factors are interdependent on what the competition is doing, the wheels start turning.

Now that we have completed a number of these programs with some very smart solution providers, we are beginning to see trends. We will use this data to help educate in the future.

We also run this same simulation with vendors. One of the interesting things we&'ve found is vendors are much more willing to borrow capital than solution providers are.

Each and every one of these scenarios is unique because every team&'s success is dependent not only on the team&'s decisions, but also on those of its competitors.

One thing that does come through and is an eye opener for solution providers is the importance of marketing. Players who are too stingy on marketing find they lag in sales.

My point in all of this is channel profitability is something everyone in our business needs to think about more.

The CMP Channel Group has had channel profitability concerns as part of our DNA since our inception more than 25 years ago. Having companies like Microsoft and Cisco committed to helping the channel understand how to apply these principles can only accelerate the effort.

I think solution providers have to ask what other vendors are doing along these lines. If the answer is nothing, then ask, why not?

Make something happen. I can be reached at (781) 839-1202 or via e-mail at rfaletra@cmp.com.