Microsoft's Huddleston On Removing 'Artificial Friction' With Partners, The Future Of Software Licenses, And Why AWS Can't Learn A Partner-First Culture

The Word From Microsoft Inspire

Big changes are afoot at software giant Microsoft, with major implications for channel partners of all types. As Microsoft continues its shift to focusing on enablement of digital transformation, the company is making moves including a major reorganization shake-up of its salesforce and a further de-emphasis on the business models of the past. Spearheading the changes within Microsoft is Ron Huddleston, corporate vice president of the One Commercial Partner organization, which is the umbrella group for working with all of Microsoft's various partners. During Microsoft Inspire 2017 this week in Washington, D.C., which Huddleston kicked off on stage in front of thousands of partners, he sat down with CRN to discuss some of the ins and outs of the latest moves by the company. What follows is an excerpt of our interview with Huddleston.

Could you talk about the changes with the Microsoft sales force and how that's going to affect channel partners?

What's going on with sales is we've taken all of our technical expertise, and all of our customer-facing expertise, and we thought about it in a new way. The way we were thinking about it is, how do we get the right resource to the right customer at the right time? Historically, the way resources to help customers succeed were allocated was largely viewed through the lens of how many users a company had. If you look at companies that way, you'll miss things -- opportunities like heavy-compute companies. So if you were looking at a big trading company in New York, with eight people in it, but they're running a $10 million data state -- historically, that would look like a 10-user customer. Examples like that were leading to situations where we couldn't get the right resource to the right customer at the right time. Or we could, but it was just more difficult. So when you think about sales, we've put better alignment around the resources that we have to try to connect with customers, and help them understand what's possible for digital transformation. And obviously our partners are a big part of that, and that's why we're trying to simplify down to these four solution areas [apps/infrastructure, data/artificial intelligence, business applications and modern workplace].

How does the announcement of the channel manager position tie into this?

Those solution areas are set up to connect directly with the channel managers. Their job is to get the partners connected right in to all these different projects -- all the different solutions -- that customers are working with us on, or are interested in accomplishing. So what we've done is, we've tried to optimize how we're ensuring that we get customers the right resources they need, and then make sure we do the best job to get the partners connected to all of those. That channel manager role is very new -- we didn't have an army of people, historically, whose only job was finding a partner in the ecosystem. Because these channel managers are in a big global community, and we have a set of tools that give them prescriptive guidance by industry or by solution area -- because they're backed up by that global knowledge of what works -- they can pull in the right partner at the right time, for the right customer. So that's where the magic happens. So now, whatever partners make -- whatever they build, whatever IP -- they have one team to go to, to connect to all this stuff. Where historically, they'd have to find their own way.

Are Microsoft's salespeople in general being incentivized to work more closely with partners?

Yes. One really big thing we did is, the partners told us that while our sellers were focused on [pre-commitment] revenue, partners actually run their businesses as the services get utilized. It was just artificial friction because we had aligned things differently. So we've removed that friction, so now everybody's looking at driving revenue over time. So there's not that stark contrast in decision that's forced upon sales. Now their pay is aligned, and the way the channel managers introduce partners, the primary story we see is we're going to increase the customer's path to consumption. ...

Another one is that if our sales rep is selling with you, we're asking you to tell us how much you sold your solution for, and we're paying [the sales rep] on the partner's solution. That's unheard of in the industry. No one pays their salespeople on someone else's stuff. That's new. ... If you want to build IP on Azure, this incentive is available to you.

What's your pitch around what makes Azure superior to these other cloud players -- AWS , Google, Salesforce?

At 64,000 cloud partners, we have more partners in the cloud than Google, Amazon and Salesforce combined. In the end, what matters to partners is that the customers they're working with are successful, and they're working with as many customers as possible. So to that end, Microsoft has the most customers, and especially with the new channel managers that we've got in place, we have the best capability to get them connected to the customers and make them as successful as possible. In the software industry, in the cloud industry, we are 100 percent unique for this one reason: We are the only company that actually has partners in our plan. I was shocked when I came in because every single person at the company believes the only way to succeed is with partners. You can't teach that, you can't change that. It's a deeply embedded belief in culture, and that to me is Microsoft's super-secret weapon in the future to come. Because technology will always advance, but no single company is ever going to be able to deliver what a whole ecosystem of partners can deliver. And we're the only company that puts our love and our time and our effort, and belief, that only through partners we can succeed. If you ask those other companies, I'm sure they'll have partners somewhere in their plan, but I guarantee it's a means to an end.

So you don't feel like these other cloud companies can learn the culture or the belief in working with partners?

I've been spending 20 years of my life trying to teach it. ... [At Microsoft] we just need to focus it, and that's what we're doing. When I showed up [from Salesforce], I had conversations with product leaders, program leaders, market leaders, sales leaders. And they all had their own plans, which involved a certain partner set. We needed to take all that love and belief and put it into something that was able to provide the resources that partners need to help them build their business, without limitation. Everything Microsoft can offer in one place. It was hard to get to before.

One other thing we've heard from partners is that while there's an emphasis on pushing more business to partners, some SMB customers might feel like they're being pushed to do self-service. Is there any push to having SMB customers go through self-service?

Let me put it this way -- 95 percent of Microsoft revenue is through partners. There's a reason for that. That said, anything we can do to make it easier, we should do. But partners make it easier for customers, too. There's no self-serve option to solve really complicated problems. For all of our customers today, if they're going to transform digitally, if they're going to make progress as companies and be able to compete, they're solving complex problems.

Down the road, will partners be making more money on digital transformation and IP than on licensing? Or do you see licenses remaining a key revenue source for a long time?

When you look at these digital transformations [highlighted in the Inspire keynotes], these things took a village. I guarantee there were [multiple] partners, there were services partners, there were ISVs, there were Microsoft services. And then there were Microsoft technology licenses, and other companies' technology was a part of each of those too. With digital transformation, the big change is that it's not one company solving one problem, it's lots of companies working together to solve really complicated problems. And that includes a lot of partner types. And so for me, any digital transformation opportunity will probably have more licenses across more companies than what you've seen.

What would you want partners to know in terms of Microsoft's channel direction further out? How can partners make sure they're in sync with what you're doing two or three years down the road?

Fundamentally, Microsoft has always been partner-led, always had the right culture when it comes to partners. We're taking all that energy and we're centering it on partner success. And that means we're doing what's right for them, to help them build their business in any direction they want. And we are making huge investments in getting the best of what they do connected to customers. Is this different? Yes. Are we going to learn together over the course of a year? Yes. Some of this stuff is going to be new. But it's built around their success first, not Microsoft's. Because in the end we believe deeply that it's only when they succeed, that we will. Now we're showing it in how we're organized, how we invest. The proof is there.