Microsoft Creates New SMB Division To Take Its Cloud Effort To New Heights

In a move to counter threats from new competitors entering the SMB cloud market, Microsoft has created a new division charged with dramatically growing the software giant's SMB partner cloud footprint.

The new division, for the first time, puts all of the U.S. SMB sales, technical, marketing and distribution resources under a single multibillion dollar division with all of the autonomy it needs to rally more than 100,000 U.S. SMB solution providers to take the cloud high ground from rivals like Google.

The new division will be headed by Cindy Bates, a ten-year Microsoft veteran who has risen rapidly through the company. Sources said Bates, who is currently vice president of Microsoft's U.S. Partner Strategy, Marketing and Programs Group, will in effect, become U.S. SMB czar for the $60 billion software giant. Bates will have responsibility for SMB strategy and business development, regional field sales, channel marketing, customer marketing and distribution.

The changes place Microsoft's SMB organization into a similar position as the company's Microsoft Dynamics organization which has end-to-end responsibility for sales and marketing of Microsoft's midmarket-focused Enterprise Resource Planning (ERP) and CRM software solutions.

The changes were announced in an internal memo that pointed to the SMB segment as "shaping up to be a very competitive battleground" with competitors turning their software guns on Microsoft. The memo cites "new competitors coming in and trying to take market share." The new unit, the internal memo says, will continue to build the "foundation for cloud and annuity penetration."

As part of the restructuring, Jenni Flinders, a ten-year Microsoft veteran who was vice president of U.S. Partner Business Development and Sales, will now focus on Microsoft's larger U.S. partners, including LARs (Large Account Resellers), national system integrators and ISVs along with overseeing Microsoft's partner program initiatives.

That's a major structural change since that distinct group often ended up competing for resources and mind share against SMB partners, sources said.

Next: Microsoft's Two Biggest Bets

"Cloud and SMB are Microsoft's two biggest bets for the new fiscal year (starting July 1)," said one source with knowledge of the shakeup. "This is going to allow Microsoft SMB partners to take advantage of the exciting cloud opportunity. Microsoft is laser focused on SMB and will be going both wide and deep on cloud."

The SMB offensive is part of a broader, no holds barred effort being led by Microsoft CEO Steve Ballmer to make the company a leader in cloud computing. Ballmer has focused more development and sales resources on the cloud. For example, Microsoft moved 300 to 500 direct salespeople, effective July 1, into new roles focused on helping partners sell cloud solutions.

Microsoft insiders said the cloud sales push represents the same kind of all-out attack that Microsoft placed in the internet game in the mid-90s when Netscape's Navigator browser early on beat Microsoft to the punch. Microsoft's aggressive push with its own Internet Explorer ultimately ended up decimating Netscape's Navigator in the browser wars. Now Microsoft is mounting the same kind of effort to take down Google in the cloud.

"There is a realization that we weren't first to market, but now it is time to take all of our solutions and our rich experience in software that everyone is familiar with utilizing and focus it on the cloud," said Vince Menzione, Microsoft general manager, partner strategy for U.S. Public Sector, in a recent interview with CRN. "There is an opportunity to get out and be a market leader."

Microsoft insiders said the structural changes will be formally announced to partners at the Microsoft Worldwide Partner Conference on July 11-15 in Washington, DC.

Menzione, for his part, has pledged that the partner conference will include new partner and pricing models around cloud services. "We are breaking glass within Microsoft," he said. "It (The Cloud) is changing our business models, processes, and product portfolio."