In my podcast and recent series – Season of Change and Transformation, I interview leaders from Microsoft on how the recent reorganization is impacting partner engagement for over 300,000 partners to ensure partners stay in lock step with the technology giant.
In this 28th episode, I visit with William Lewallen who leads the Cloud Solution Provider Program in the United States for an encore episode and update on the program for Microsoft’s Fiscal Year 2018.
William was an early guest on Episode 5 of Ultimate Guide to Partnering and as a member of the OCP or One Commercial Partner organization he leads the engagement of over 8000 CSP partners for Microsoft’s United States subsidiary.
In this encore episode you will learn:
- Where the CSP Program now sits within OCP – One Commercial Partner Organization.
- His point of view on the energy level in Bellevue and sense of renewed commitment.
- Changes and enhancements to Microsoft’s Cloud Solution Provider Program since Episode 5.
- Where he is focused to drive incremental growth for the business.
- Channel incentive levers that favorably support the program.
- Where people can learn more about CSP – HERE
You can listen or read the transcript of this episode below.
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I hope you enjoy this episode!
Vince Menzione: William, welcome to the podcast.
William L.: Hey, Vince. Good morning.
Vince Menzione: It’s really great to have you back on this encore episode and update on the business. You were an early interview guest – Episode 5, and given the state of change and transformation, I thought it would be great for our listeners to get this check-in from you on the state of the CSP or Cloud Solution Provider business. So, welcome.
William L.: Yeah. Thanks for having me back and congratulations. We’re a long way from Episode 5 now, and I’ve listened to most of them. And I think what you’re doing is great and providing a real great set of resources for partners. So, congratulations.
Vince Menzione: Thank you for that very generous feedback, and for our listeners who didn’t tune in to Episode 5, can you take a moment to peel back on your role at Microsoft and the Cloud Solution Provider program in greater detail?
William L.: Sure. So, the Cloud Solution Provider program, CSP, is a sales program that allows partners to resell our cloud services alongside their own managed professional services and IP. So it’s a program where partners are responsible for deploying, managing, provisioning, management and billing, so they can offer a more streamlined experience for their customers. And my role in the US subsidiary of Microsoft is, I am the lead for the program.
Vince Menzione: And your role sites in the new One Commercial Partner, or OCP, organization. Is that correct, William?
William L.: That is correct, and the reorganization put all of our commercial partners – so think of that as non-consumer partners – into a single organization called One Commercial Partner. There are a few teams that make up that organization. There’s a Build With side, and I think you spoke with somebody about kind of some more details on that, essentially where we’re doing partner and practice development. There is a Sell With side that’s focused on co-selling alongside our sales teams in the field. I’m part of the Go To Market, or GTM, team, which is really kind of putting glue between the entire looking left to right across the partner life cycle from recruit through enablement and activation and actually incenting partner activity to bring the pieces of the organization together and help provide a consistent and high-quality experience for partners.
Vince Menzione: Great, and I’d really like to peel back as much as we can today, given the fluid state of change. As you know, I’ve been checking with other partner leaders since the July reorganization, and today I’d like to take a bit of deeper dive with you on the Cloud Solution Provider program, how things are progressing, what’s changed since the new organization, and the overall excitement and energy in Bellevue and Redmond these days. Can you take our listeners through it? Walk us down the hallway.
William L.: Sure. So, the organization has undergone a pretty significant amount of change. It wasn’t renaming an existing organization. It was creating a new one from scratch. So, many of the ingredients of this new recipe were part of the organization, but the leadership is brand new. A significant portion of the leadership team are also coming in from different roles, and the way that we are organizing ourselves to work with each other has changed quite a bit. So there’s Build With, Sell With, GTM, and there’s a technical team as well that helps provide coaching and guidance on the technical side to partners. We’re all learning how we work together, right? What are the boundaries of our roles?
And so, for me personally, I’m doing the exact same role that I’ve been doing for the past few years. I’m now part of the GTM team, so I’m in a new organization, and then really just trying to get a sense of what’s going on and kind of settle into the new organization at the same time while having a business that continues to grow pretty rapidly.
I will say, all of those teams are very lined up and aligned to the goals that we are trying to achieve this year with CSP. All of the leaders on David Willis, who runs OCP, his entire leadership team, I have direct engagement with ’cause all their teams are excited about what we’re doing, have targets and goals, and want to make sure that they’re being part of what we’re delivering to partners in this program.
I think the energy is high. I think the excitement level is really good. I think that’s driven by a lot of the partner feedback that we’ve received. I think partners understand how we’re reorganizing and see how it will make it an easier and more consistent way of partnering with Microsoft. And I think it also is delivering on some of the things that we’ve been talking about doing, which is creating a whole life cycle roadmap essentially for partners to engage from when they first come into our funnel, all the way through to being successfully co-selling with us.
Vince Menzione: When we spoke earlier this year, there were over 6,000 partners in the ecosystem, and so I’m interested in checking in to see how many additional CSP partners have been added to the program in the US. And you also talked about, at that time, an astounding 30% month-over-month growth. Also, we talked about the revenue split, and so has the month-over-month growth changed? And how has the revenue split changed?
William L.: Yeah. So, we’ve now crossed … We’re just over 8,000 partners who are selling in the program, and I think we spoke in April or May, so that’s pretty good, pretty solid growth since then. Growth and reach is really fundamental to us achieving our overall goals.
The revenue growth rate month-over-month … I think the one I referenced last time was kind of since the inception of the program, so it’s a little bit steeper, but we’re still month-over-month growing in double digits, and that has not changed at all. Some other characteristics … I think last time we talked about the revenue split – like what kind of products and services we were selling. Our non-Office 365 products have continued to increase their share of the total pie by a few points, which is good. And that’s primarily coming in the areas of Azure and Dynamics, and that’s what we expect for the course of the year, is to continue that growth of those other products as a share of the total, obviously while continuing to grow the large Office 365 business as well.
Vince Menzione: So, are you seeing some consistent patterns from the CSPs that are the most successful working in the program?
William L.: That’s a good question. We have so much diversity within the ecosystem of partners who are participating. I would say that the most successful partners are investing in transforming their organization, all the way from marketing to sales, delivery, support. I often say that CSP is a platform for business transformation, but it’s not a guarantee, meaning I think it helps partners get on the journey of providing subscription-based services, helping to create a more simple and holistic end customer experience, but we have to make sure that we’re hearing … To make sure that we’re hearing what customers are demanding requires a deeper set of activities. So that means, right, if you’re just using CSP as a pure resell mechanism, I think that presents risk for a business because over time, differentiating based on the price of the licensing I don’t think is the key to success.
I think people who are using this as a catalyst for reorganizing their companies and thinking about restructuring for the cloud world, as opposed to just begin selling cloud products, are the ones who are gonna be the most successful. And that can be across what people refer to as partner types or ISVs, SIs, value-added resellers. It’s kind of business model agnostic, but for each one of those partner types, how they make money will be evolving. And if they’re really clear on what that is and how that needs to change, and that’s backed up by investments and their capabilities changing. I think that’s the recipe for success.
Vince Menzione: Last time we spoke, we spoke a little bit about the program aspects, and I believe that you said then that the program would continue to evolve and there may be some changes to the program getting bigger and better. Can we dive in a little bit more? Was there some things that have changed about the program? Maybe things that were announced recently at the Inspire Conference, or maybe since?
William L.: Yeah, so, there are a couple of things that are really important. There’s a lot of changes – a few that I’ll call out in particular. The ability to sell our Azure Government services in CSP came online in late June, and so we’re really just at the very beginning of going to market with that. But I think that represents a massive opportunity for us to serve a significant market, and there’s been a lot of demand for that. Office 365 is gonna follow. We’re expecting that, I would say in the second half of our fiscal year, and Dynamics 365 will end up following that. So, having the availability of those dedicated government cloud services available in CSP is gonna be a growth engine for us.
We’re also enabling through a capability we had called Common Service Layer to enable shared services and multi-tenant applications [inaudible 00:10:27]. So we had a technical blocker in the past where CSP would not support those types of scenarios, which kind of blocked a certain segment of the market and partners from building applications that could grow in that way. So that’s coming this fall, and I think that’s going to open up an expanded part of our ecosystem.
The Microsoft 365 Business is a product or a set of … a suite for our small and medium business customers. That was announced at Inspire and will be available later this fall. Reserved Instances for Azure is another one. This is where you have the ability to reserve in advance Azure VMs and at a significant cost savings. And so the company announced at Ignite that this was coming, and it will follow in CSP I think in the late winter time frame.
An organizational change, not a program change, is really pretty significant, and that has to do with the fact that our sellers, our sales leaders, and our business leaders are now being paid based on Azure consumption versus committed revenue, right? So, if we sell a monetary commit up front, but there is no consumption against that, people are not gonna get paid. So, that’s a pretty significant change, and the reason why that aligns with CSP is because CSP is a pay-as-you-go model for Azure. So, revenue equals consumption. So there’s a much better alignment with our field on that front.
Vince Menzione: So if you sold a large enterprise agreement with a ton of Azure on it, you wouldn’t get paid until the customer consumed that Azure. Is that correct?
William L.: Correct. And then in the platform, there are changes and enhancements. We now have the ability to do 38 trial offers for Office 365. There are capabilities for the company to push through to the ecosystem, like promotions and discounts. Partners are now going to be able to do annual billing if they so choose to do so when they’re ordering SKUs and services for the customers. There’s new Power BI reporting and analytics in the platform, so partners can become more knowledgeable in depth at what their customers are doing and how they’re using the platform. Those are a few examples of the things that are new that have changed this year.
Vince Menzione: You mention the platform and multi-tenancy and software providers that have multiples customers utilizing the same instance of the application. Is that what you’re referring to?
William L.: That’s correct.
Vince Menzione: So, William, 8,000 partners in the ecosystem. That’s a massive scale to reach out to and provide support and readiness to. How do you, in fact, reach out to and support such a large ecosystem?
William L.: Yeah. We do that through a very effective channel, and that’s … I think I remember last time we spoke about the two different models and how partners can participate, being the direct and the indirect model. The indirect model is where resellers go and work with someone like Ingram Micro, Tech Data, Synnex, Rackspace, et cetera, and that’s how we scale – through readiness engines, right, because they provide pre-sales engagements, enablement seminars, learning paths, et cetera. So we arm those indirect providers, and then they build that into their own program. So ultimately that’s how we scale. About 90% of our reselling partners work through the indirect model, so those indirect providers are critical to our ability to scale.
And then we support that with programmatic components through the Microsoft partner network through learning paths, through competency attainments. And then, for larger accounts where we have direct engagement through our technical team. Those folks help engage both from a … people who are technology strategists, as well as cloud solution architects. So we have a pretty broad and deep set of activities to touch and reach not only those partners, but that partner base is growing each month pretty significantly. So we have to be really good at scale.
Vince Menzione: Yeah. And so we recently interviewed Scott Peltier for a primer on channel incentives, and so I’d like to drive a layer deeper with you here on how incentives are driving the right levers, and what has changed programmatically to support the current priorities for CSP?
William L.: Yeah, it’s a great question. An important one has to do with partner profitability, which is really critical. And I work closely with Scott. So as a reminder, one thing that hasn’t changed is we have a global rebate that gets paid out on every dollar of CSP revenue, regardless of what product it is, and that’s at 8%. And I’ll also call out, right, these are incentives on top of kind of product margins. So you have product margin. Then you have these incentives. The global rebate, like I said, is staying constant at 8% year-over-year, and then every year based on particular areas of focus, we put in place accelerators. And those are, between worldwide and US, we’ve put an additional 10% on Azure sales this year, and then 5% on Dynamics 365, Microsoft 365 E3 and E5, and then the Office 365 E5 and PSTN products. And to earn those incentives, partners have to have at least a silver competency in one of our eight cloud core categories in the MPM program. And so, with that attainment, you’re eligible to receive those standard and accelerator type rebates.
Vince Menzione: And is there anything changing in terms of priorities that you’re driving?
William L.: In the US specifically, we made the big bet on Azure. We’re putting a significant portion of our US funding for this accelerator towards Azure. That’s the part of the business where there’s the most white space, where we see a huge upside for Microsoft and our partners. So that’s a real area of emphasis. It’s not that Office 365 is not important. That business is I guess a more mature business. We have greater penetration, and we’re looking for exponential growth in Azure, and so that’s where we’re putting more money this year.
Vince Menzione: Great. And are you able to separate specific workloads within Azure, or does that capability exist yet?
William L.: We pay today … So there is service level reporting within our operational platform. We pay dollar for dollar on any revenue, so it’s not kind of split or bifurcated anyway. If you sell a dollar of Azure, you’re gonna be eligible for 10 cents of accelerator funding.
Vince Menzione: And we talked about partner types, markets, competency areas, and so on. What are some other things that you think are a little challenging to explain to partners that maybe you could expand on here?
William L.: I think one thing that partners may underestimate is the operational requirement. Moving to a subscription business, a lot of partners are not used to billing customers on a monthly basis, right? So that takes infrastructure, and that takes work, and that takes new capabilities and capacity. I think that’s one thing. Just getting used to a new operational platform. Keeping up with the information that comes out from Microsoft about what’s new and changing because this is a cloud platform, and we want to deliver a lot of components. So you really have to kind of stay tuned to what’s going on. We’re no longer in the cycle of putting out products or services once every 12 months, so there’s just a lot of incoming traffic to be digested, and then learning how to operationalize a platform.
I think some partners also struggle with building out product management capability, right? So if you’re not simply in a resell world, you have to think about how you build a package of services and solutions that will differentiate you relative to your peers. So that capability of product management may be a new thing for a lot of our partners. So how do we set up a tiered set of offerings, and what do we include in each one, and how do we price them? Some of those capabilities are new, and I think that there are a lot of partners who are early in the learning journey in kind of building their competency in those areas.
Vince Menzione: Right because the partners are now the tip of the spear to the customer on all things CSP, correct?
William L.: That’s correct.
Vince Menzione: So they own that relationship and the first line of support. Yep.
William L.: That’s correct.
Vince Menzione: So let’s talk a little bit about William. How are you thinking differently about leading the program given the organizational change and the program change? How are you thinking differently about leading CSP?
William L.: Yeah. One thing that’s really great is now that we have a single commercial partner organization, there’s a little bit more wind at my back, right? So I’ve got a broader set of stakeholders who have a much more direct interest in what we’re doing. I walk around the floor – not only the floor that I sit on here in downtown Bellevue, but on other floors and hear … Walking past people’s cubes, I hear all these people talking about C … I hear, “CSP. CSP,” so there’s a lot of people who really care about it. So that’s really affirming for me given having been involved in the business from a very early stage where were definitely not a very well-known group of folks, and it wasn’t understood what we were trying to accomplish.
Some things though, as the business has started to scale, right? Keeping an eye on continued momentum and just good execution and our plans for the year is important, but some areas of particular importance to me are making sure that we’re set up to tackle new markets. For example, the government space is an area of focus for me. I’m also thinking more strategically about channel expansion. How can we get into new spaces through partners? Are there parts of the ecosystem we haven’t been able to tap that we can now based on new capabilities or based on new outreach or value propositions? And so, right, those type of things, I would say, give us the opportunity to bend the growth curve up from where we currently are, and I think there’s a lot of interest in finding different ways for us to do that.
Vince Menzione: And how do you think about doing that? Is there anything you’re doing differently from an analysis perspective or from a business motion perspective?
William L.: We’re looking at nontraditional channels as one area of growth, right? So we actually have a lot of our enterprise customers who have … the way that they serve customers … have some interesting opportunities where CSP can be part of the delivery of what that IP or those services are. As we’ve also brought the commercial partner organization together, there’s a number of folks who are just new to CSP and have some new ideas, right? So it’s educating those folks on what we’re doing, and then listening. Kind of stopping talking and listening to concepts that they may have. So I think some of this channel expansion requires us thinking outside of the box, talking to different people within the organization and the market, and realizing that there are people who are not part of our ecosystem today where we either have value props that are compelling, or we need to develop them so we can continue to grow our business. And I think the platform of reselling our cloud services is a great entrée to some of those conversations.
Vince Menzione: You do see this quite a bit where IP is developed once and repeatable multiple times as a solution set to other customers, right? So I’ve seen this before in instances like healthcare, where a healthcare system might develop an application for their own use and make it available to other healthcare providers.
William L.: Yep. And partners might want that from a profitability perspective, and I think it’s part of how the ecosystem has evolved – that there’s IP in a lot of different organizations. It’s not just sitting within what we think of traditionally as ISVs. There’s a lot of IP across the partner ecosystem, and I think those are real scenarios where we create a pull-through for our platform, as opposed to a push-through of our cloud services. And I think in some cases, that helps us accelerate our existing goals, and in other cases, it helps us, like I was talking before, tap new markets.
Vince Menzione: So are there any best lessons or career advice that you’re bringing forward during this season of change and transformation?
William L.: I’m doing more testing of ideas. Putting things out there for feedback early and often, as opposed to fully baking them, and it’s only because I don’t want to kind of be blinded by the bias that I’ve had of running the business for the last two years. It’s been a very intense time and an era where we have a lot of new people coming into the organization who are thinking about this. Being open to people who’ve had a much lower and different level of familiarity with the program. So that’s been really fascinating. We still have to continue telling people what CSP is because people haven’t been eating, sleeping, and breathing it like I have. So, matching … Just going out and telling the story. Being an evangelist. Testing ideas. And then, empowering others, right? We’ve talked about this is a program that has to be built for scale, and while I am the lead for this in the US business, my success also depends on scaling through hundreds, thousands of people here in the US. And so empowerment and readiness is another key area where I’m making a lot of investment this year.
Vince Menzione: CSP is such an important aspect of the business, and I really appreciate your time today, William, to take our listeners through the changes and the transformation. Any other closing comments for our listeners?
William L.: I would say one of the things I think is really important is … I mentioned this earlier around looking at organization change as you think about participating in CSP. Microsoft has invested a lot of time and resources and worked very closely with IDC and some others to look at the overall concept of cloud profitability and what we call the modern partner, and all of this content can be found at aka.ms/modernpartner. It has a wealth of research, of practical tools to look at how to evaluate and assess and set your organization up for change. And I think that’s probably, in addition to just getting engaged and getting involved with selling through CSP, is to be really closely aligned and aware of how you’re going to invest in evolving your organization to truly take advantage and maximize your opportunity around meeting our customers’ changing needs in a world of cloud and subscription based businesses.
Vince Menzione: That’s great, William, and we’ll make sure we provide that link: aka.ms/modernpartner in the show notes and make that available to all our listeners. And I just want to thank you, William. I know how compressed your schedule is right now, this busy time of year, this season of change and transformation, and I appreciate you taking time from that schedule to join the Ultimate Guide to Partnering today. So thank you.
William L.: Yeah, absolutely. Thanks for the invitation. It was great to spend time with you again.