Steve reads his Blog

Steve has a Chat with Mona Baset

Typically I am catching Microsoft leaders on my "Steve has a Chat" podcast, this time I thought I would try and pounce on an Enterprise Customer to get some candid feedback on PowerApps. Mona Baset, AVP of Information and Analytics Services for Atrium Health was game for a chat. Atrium Health is comprised of 40 hospitals and 900 locations in the Carolinas and Georgia. Some of the things Mona and I discussed, included the place for PowerApps in a large organization that is committed to Salesforce.com. It was quite interesting to hear how PowerApps is viewed from the customer side of the table. BTW, don't forget to tune into #PowerUpLive every Wednesday at 11AM EST, where Mark Smith (@nz365guy) and I discuss the latest news around all of Microsoft  Business Applications, subscribe here: https://www.youtube.com/nz365guy.

PowerApps vs. PowerApps

It seems clear to me from listening to people on social media, comments on my posts, and generally having an ear to the ground, that too many people, including many who should not be, are still confused about PowerApps... and wouldn't they be? A Quick Quiz. What is a PowerApp?  A Mobile Application you built on top of SharePoint  A Mobile Application you built on top of the common data service  A Mobile Application you built on top of Dynamics 365  A Custom Application you built in Dynamics 365  A Custom Application you built on the Common Data Service  A Custom Application you embedded into a Dynamics 365 Form  Something Else If you answered "all of the above", you get a gold star, but you're no closer to clarity. PowerApps Camps There are three primary camps for PowerApps as I see it. There are campers that come from the productivity side of the lake, where Office 365 and SharePoint live. We also have campers from the Dynamics 365 side of the lake, busily extending the Dynamics 365 applications with their own canvas and model-driven apps. Lastly, we have the Platform side of this apparently three-sided lake, using both canvas and model-driven paths to build apps from scratch on CDS. While these campers can hear the sounds of other campers across the lake, they seem to have little understanding of what the other campers are doing over there, even though they are each called "Camp PowerApp". I want to go a little deeper into the two of these camps that are part of Business Applications that I am familiar with. Someone else can speak to those productivity campers. A Custom Application I think the biggest confusion, for those of us in one or both of the Business Applications camps, are the distinction between items 4 and 5 from the quiz. "Building custom applications in Dynamics 365" vs. "Building custom applications directly on the Common Data Service". But Steve, aren't those both on CDS? Yes they are, but they got there via two distinct pathways, from opposite sides of the lake. They are not the same thing and different rules and licenses apply to each. Dynamics 365 Campers Let's face it, Model-Driven PowerApps are just XrM renamed. Everything you ever did with XrM in the past is now called PowerApps. Along the way a few more things happened, like the separation of the first-party apps from each other, and the introduction of the ability to make new role specific "PowerApps" by mashing up parts of the other first-party apps into your own concoction. Dynamics 365 brings all of the power and advanced capabilities you could want, including A.I., MR, and all the other acronyms. This is the deep end of the pool! The separation of the Apps from the underlying platform was of less importance to this camp, but actually spawned a whole new camp. Platform Campers These campers could care less about Dynamics 365. They are building their own custom apps directly on the same platform that sits under Dynamics 365. Are they masochists or anarchists? I guess a little of both. The "Platform" is actually the old XrM framework sitting on top of a database that is now called the Common Data Service (CDS). It is but a hollow shell of Dynamics 365, containing very little in the way of usable items, yet everything that is required to build as powerful an application as Dynamics 365. This is the deep end of the pool. Deep Ends If you were reading/listening closely, you heard me refer to both of these camps as the "Deep ends of the Pool". Extending the complex out-of-the-box functionality in the first-party apps requires significant skill and knowledge. But building functional, powerful and comprehensive applications on the platform also requires significant skill and knowledge. The shallow water in the middle is where "Citizen Developers" swim, creating their cute little widgets. Fuzzy Rules When it comes to the rules, there is clear separation, but for many it still seems fuzzy. Some common examples: "You can't use a Restricted Entity in a PowerApp!" This is incorrect, a clearer way to phrase this would be "If you are building a PowerApp on top of Dynamics 365, and you include in your PowerApp a restricted entity (for example the Incident entity), the user of your PowerApp will require a license that includes that entity (i.e Dynamics 365 for Customer Service)." This does not mean that you cannot build the app! Also, Restricted Entities have nothing to do with Platform Campers. There are no restricted entities in CDS without Dynamics 365. Similarly, with Team Member and it's restrictions. Team Member licenses are a type of Dynamics 365 license. Again, Team Member has nothing to do with the Platform Campers, only the Dynamics 365 campers need to be concerned with Team Member. "You cannot replicate the functionality of the first-party apps in PowerApps." This was previously true, and relevant only to the Platform Campers, but is no longer the case. For Microsoft to succeed with their Platform aspirations, it was clear they needed to eliminate any artificial restrictions, and they did. Fuzzy Licensing The recent announcement about the Platform License changes that I discussed in my last post, referenced this blog post by Charles Lamanna. Note that this post, and these licenses refer to "standalone" (aka Platform), and have nothing to do with Dynamics 365. This post and these licenses are for the Platform Campers only. You cannot use a Per App License with Dynamics 365, Dynamics 365 has it's own licenses. Similarly, the retirement of the bundled Plan licenses for Dynamics 365 has nothing to do with Platform Campers. A Fuzzy Line The line between these two camps is very clear, yet at the same time, not very obvious. There is way too much "assuming" and lazy interpreting going on, leading to way too much misinformation, leading to way too much confusion. One way to help would be, if you don't know that what you are saying is correct... don't spit it out to the world as a fact. There is an old saying, "Better to be silent and thought a fool, than to speak up and remove all doubt".

Reduce your Dynamics 365 License costs by 92%?

I hinted in my last post about possibly being able to reduce your Dynamics 365 license costs by up to 92%. I may have been a little too coy, so I titled this post more overtly. Was I just bullshitting you? Well... not all of you. It Depends Follow me here as there are a lot of "ifs", but many organizations will meet them. IF, you are paying $115/user/month for the Dynamics 365 Customer Engagement Plan Licenses. IF, you are only using the basic out-of-the-box features. IF, the advanced capabilities you are using were all custom built. IF, any third-party solutions are compatible, or you can do without them. IF, your users primarily work in a single application, ie. "Sales" or "Service" but not both. IF, you are not using things like "Relationship Insights," or any of the A.I., or other advanced features. Depending on your answers to the above "Ifs", you may well be able to move to the upcoming PowerApps Per App Plan model for $10/user/month. My math says that from $115, down to $10, is a 92% savings. Is this even realistic? How is this possible? The same way it would be possible for certain people to get by fine with Notepad instead of Word... unused features. As a partner who has been involved with hundreds of deployments, I can safely say that the number of customers who use every feature of the first-party apps they are paying for is... zero. I feel quite confident that number does not change for customers using even half of the available features. Of course no two customers are alike, and the mix of features they actually do use varies significantly, but they are all paying for all of the features. Obviously my 92% scenario assumes you are currently paying the highest price ($115), and that you could ultimately be satisfied with a single PowerApp at $10. Not everyone will, and many are also paying less than $115. Free Money? Not exactly. It is not quite as easy as buying a $10 license and cancelling the others. Even if you meet the parameters I outlined, or are willing to give up a few things to do so, there is still some refactoring and a migration to be done. This too will vary significantly from customer to customer. If you are able to save some money, or a lot of money, you will have to spend some money to get there, so the ROI may be deferred. For example, let's say you fit the profile perfectly. You have 150 users and are paying (let's be more conservative here), $95/user/month for the Enterprise Sales App. Assuming your actual needs could be met with a custom built PowerApp, you could potentially save $12,750/month. Of course you need to have the PowerApp built which will cost you something (you may want to explore our RapidStartCRM accelerators in AppSource, and RapidLABS services for a fast and low-cost way to do this). I don't want this to sound like a slam dunk, for some customers the cost to do something like this may actually exceed all of the development costs they have invested so far. There are a lot of factors in this equation. Power "less" By now you may be thinking, this sounds great... for an organization with simple needs. What you will forgo in this Per App Plan are the "pre-built" capabilities of the First-Party applications. But... they are PowerApps too. With enough development funds and time, you could practically replicate them entirely, but that would be silly. Instead, you would just build exactly what you need, no more and no less. We have a customer with thousands of users, where everything but Account and Contact was custom built (Account and Contact already exist in PowerApps). In their case, the customization solution (which includes a single app) could be installed directly on a CDS instance with no changes at all, then just migrate their data, and they would be in the exact same place. There are some massive deployments out there, that with little effort could go this route. In fact, for many of my customers, the Per App Plan offers more than what they are even utilizing today. An "App" in the Per App Plan can include a Web App (aka Model-Drive App) like most customers are already using today, but that "App" can also include a Mobile App (aka Canvas App), which less of them are using, and a Web Portal which very few of them are using. The Outlook App is also available and works the same way. Is Microsoft Okay with this? I would guess that depends on how many of their existing customers, walk through this door that Microsoft created to gain new customers. In my example above, trading $14,250/month for $1,500/month may be an unintended consequence of Microsoft's new model. Make no mistake, this will not be a viable option for everybody. Again, the first-party apps bring a plethora of advanced capabilities that many customers depend on, that would not be practical to rebuild. But it will be interesting to see just how many, are using enough of the out-of-the-box advanced features. The difference in cost sets a pretty high bar for Microsoft's first-party apps. Microsoft will need about 10 net new PowerApps Per App users to make up for each D365 Plan user who makes this switch, but clearly their expectation is that the PowerApps Per App Plan model will blow up to a point where they don't really care. And why wouldn't it? This is more potential business application "power" for $10 than any other company even comes close to, and at $10 moves it into the category of: "Affordable to Anyone". Is Dynamics 365 Dead? Once again, Mark Smith's (@nz365guy) looming prediction that "Dynamics 365 is Dead", shows more life. While there will continue to be a place for Dynamics 365 Customer Engagement Apps for the foreseeable future, it's no longer the "take it or leave it" product it once was. PowerApps has created a highly viable alternative for many customers... new or existing. If you're interested in exploring this, Forceworks is offering a free Assessment, to help you see if you can take advantage.

Updating to Unified Interface? PowerApp it!

The Dynamics 365 Web Client is going to be deprecated soon. If you have not transitioned to the Unified Interface, time is running out to be in control of that process for yourself. Maybe there is a reason to look at this "chore" as an "opportunity". Unified Interface The Unified Interface is awesome, a vast improvement over the previous Web Client. Yet a significant number of organizations are still using the Web Client. Microsoft needs you to get off your ass and move. In fact they recently created an Online Community dedicated to this single purpose. In my informal survey of customers who are still on the Web Client I am aware of the following three reasons: Obliviousness, Fear or Money. Obliviousness There are a reasonable number of customers who deployed Dynamics 365 without a partner. Many of them bought the licenses and then went underground on their own, disconnected from whatever may be happening on the surface. Many other customers were deployed by a non-Dynamics partner who likewise is not up-to-speed with changes in the product. There are also customers, as well as partners, who engaged offshore resources or freelancers, most of which are also out-of-the-loop of current information. So in addition to many other things this large customer group is unaware of, the looming deprecation of the Web Client they use every day, is yet another. Fear This group of customers is aware of changes coming to the platform, but lives in fear that their deployment, which they liken to a Rube Goldberg machine, will break if they dare touch it. This group will always wait until the very last minute, which is ironically the scariest and riskiest thing they could possibly do. Their fear is often a result of a lack of confidence in either their own, or their partner's knowledge and understanding of the platform. In other words, they're ignorant. Money Is there a free service that will update you to the Unified Interface? Not that I am aware of. Is it a simple project? That depends, for some users it could be, but for most it will require more effort. Is it frustrating that you subscribed to this product, paid some partner to help you initially configure and customize it for your needs, have been happily using it for a long time, and now out-of-the-blue you have no choice but to spend some money to keep using it? Yes, I would assume that is frustrating. More so if you have no budget for things like this. Opportunity Does this upcoming unavoidable "Effort/Expense" present a possible silver-lining opportunity for customers? Maybe. As a Partner, I often look at changes like this as a good reason to look at what a customer is doing today, vs. what they were doing when we first put this thing together. Hindsight is always 20:20. If we have to crack this thing open anyway, let's go ahead and address some of those issues we discovered after launch, that we never got around to taking care of. At least if the customer has to spend some money for a required change, they can get a little upside out of it. But is there even more upside potential today? PowerApps What if I told you, that while you were at it, you could potentially reduce your license costs by 92%! Is this even possible? You will have to wait for my next post to find out.

The ISV Revenue Sharing Addendum Review

The ground is shifting under Microsoft Business Applications ISVs. Only time will tell if it is shifting forward or backward. Regardless, to continue existing, you will need to sign a new document, so let's take a look at it. A room full of Elephants Microsoft's new "Business Applications ISV Connect Program" hopes to be a comprehensive program for ISV success, yet it's most often referred to by partners as the "Revenue Sharing Program", due to its prickliest aspect. But sharing 10% or 20% of your revenue with Microsoft is not the only thing you need to understand. In fact, that's probably the simplest thing to understand. Reversals I recently wrote a post highlighting Microsoft's plan to eliminate IUR benefits. In that post I said that I did not think they would back down... and they backed down the next day. I have been assured that this was not to make me look like an idiot. When I first wrote about the new ISV program, I also said I did not think Guggs would back down, and it looks like he is going to prove me right. So I have a 50% accuracy rate on back down predictions! The Addendum Between now and October, ISVs will need to agree to the compulsory ISV Addendum in order to continue to offer solutions (apps) that are built on, connected to, or extend Microsoft's Business Applications platform including Dynamics 365 and PowerApps, and where there is a revenue opportunity, Microsoft Flow. Microsoft Business Central and Power BI are exempt, for the time being. The Whole Truth It's not enough to just review the Addendum, as it references other documents, including the ISV Program Policies, as well as the Publisher Agreement.  I am not a fan of spreading terms across multiple documents. The Addendum is 9 pages and the Policies are only another 5 pages, with a lot of duplication between them. Why was this not a single document? This is so they can change the policies whenever they need to, without having to get you to re-sign anything. Classic lawyer games. The Publisher Agreement is an additional 47 pages, but my quick scan of it seems less related to the specifics of the Bizapps ISV Connect Program. So while everyone seems to be focused on a single aspect of this program, let's take a look at some of the other terms of these agreements. I am not a lawyer, but I do know how to read, and I'll share my "Business Owner" interpretation. Tiers Tiers are per app, and while the "Standard Tier" (10%) is compulsory, the "Premium Tier" (20%) is optional... for both sides. While there appear to be some specific requirements, Microsoft has maintained the discretion to accept or deny your Premium Tier request arbitrarily. I expect that this will cause some drama, but I see the rationale. The primary additional benefit of the Premium Tier is the activation of Co-Sell. This means Microsoft's own internal sales teams out there hawking your app, and being spiffed for doing so. Obviously salespeople, and hours in the day are both finite resources that Microsoft would rather not waste on "crappy" apps. But who judges "crapiness"? I would assume that any ISV solution that generates the sale or activation of Microsoft product licenses will pass muster, regardless of its intrinsic value, but what else? What about an app that reduces the need for additional Microsoft licenses? If you determine that you are not getting value for an app from the co-marketing and co-selling motions of the Premium Tier, you can "Down-Tier" that app back to the Standard Tier. It is not clear what percentage you will pay for any deals closed for that app while it was previously in the Premium Tier. Nor is it clear what you will pay for prior deals after you "up-tier" an app. There also does not appear to be any language preventing you from have having two versions of your app, one on each tier, possibly at different prices... I'll let that settle into your brain. What Counts? The definition of a "Business Application", that falls within this agreement is quite comprehensive. It also includes so-called "free" apps, that connect to paid services you offer, so no Trojan Horses. Fees Some math is required to figure out how much you're supposed to pay Microsoft, regardless of the tier. Basically, the total amount of your customer bill, less taxes and "non-recurring" services you perform, and your cost of any CSP licenses you may have included. So this includes your license margin also, if you sell Microsoft licenses as a part of your solution. It really feels and sounds like Microsoft does not think ISVs need to make any margin on Microsoft licenses, and while most don't... some do. It also appears to me to include any and all recurring revenue, like for example monthly or annual support plans, or any sort of managed service type offerings related to your solution. So as an ISV, if I offer a monthly support plan to the customer, I have to pay the fee, but if a reseller of my app offers the same monthly support plan, no fee would apply. The agreement includes this line: "you are solely responsible for End Customer credit decisions and Total Solution Value will not be reduced for uncollectible accounts." So you will still have to pay Microsoft, even if your customer stiffs you. I have no idea how this is supposed to work in the future when a customer purchases directly via Microsoft's AppSource Marketplace with a credit card. The agreement also includes this line: "You will accurately report each Paid Eligible Sale to Microsoft within 30 days of a Paid Eligible Sale occurring". Self-reporting always works! Of course Microsoft has the right to audit you, at their expense, and go back 3 years. Interestingly, their audit not only covers fees that may be due to them, but also appears to include your violation of any applicable laws? If they discover anything, you will foot the audit bill. Connect I think Microsoft is going to lose many Connect ISVs right out of the gate. Remember the "Connect" pattern is the one where you already have your own service, and you offer an app to connect it to D365. For example, let's say you offer some deep industry bench-marking service for the princely sum of $10,000 per month. Users typically gain access to your high-value data directly on your secure web portal. As a convenience, you decide to make a small free app, available to your paying customers, that will push your service's resulting "Account Score" field over to Account records in your customers' D365 instances. Guess what? You owe Microsoft $1,000/month for each customer that uses it. The technical definition of a "Business Application", as I read it, would also include third-party published "Connectors", based on what they do, and I am not seeing an exemption for them. So as soon as I wire up the CDS connector to some third-party's connector, is that third-party on the hook for a fee? Or, will they create an exception for connectors? If so, then won't all savvy Connect pattern ISVs just publish connectors instead? Prior Deals For any customers that you may have invested heavily in marketing and selling your solution to, possibly involving significant costs for travel, wining and dining, and ultimately heavily discounting your product to land their "Logo" account, all without any assistance from Microsoft... there is some good news. You have about a year to either raise your prices or decide to absorb the new fees. I assume many ISVs have some sort of term, and the fee will start being due if your customer has to renew between now and next July also. If you have a month-to-month auto-renewing agreement, it looks like you have until about the first of next July. Hopefully, not many ISVs had multi-year agreements with their customers. On the Ball If you sold 100 licences of your product to a customer, and Microsoft began invoicing you for their fee, and later the customer reduced their license count to 50, you better move fast. Your Microsoft fees will not be reduced for any current invoices, or any invoices that were to be sent to you within 30 days. If you somehow mess up and forget to let Microsoft know about the reduction for a while, no credits will be issued to you. In fact, it appears that no credits will ever be issued to you, regardless of... anything. Benefits I found interesting in Guggs' Inspire session, his referring to "access to Microsoft's platform" as a program "benefit". Guggs says he does not like the term "Tax", and I agree... based on this, "Tariff" seems better. This "benefit" had not come up in my past conversations with them for my post about the various benefits ISVs can expect. It looks like the catch-all for anyone trying to avoid the new program. Basically, part of what you are paying Microsoft for, is their permission to play in their playground, that they built, expand and maintain. Microsoft reserves the right to change any of the rules at anytime. So regardless of how much you may have invested to go "all-in" on D365/Power Platform, if you fail to meet some new or changed future requirement... you're out. Summary While I am optimistic about the concept, some of the execution so far feels ham-fisted. The agreements, as you would expect, are pretty one-sided. Establishing a "here's the rules" approach for new ISVs is one thing, simultaneously enforcing a "take it or leave it" approach with long-standing ISVs feels pretty arrogant, even when wrapped in a "for the good of us all" message. While some ISVs may leave, most probably have too much invested and really can't leave, even if they wanted to. Clearly Microsoft's focus is on large ISVs for enterprise customers, as they were the ISVs that were engaged to help craft this. For all other ISVs, time will tell if this is a shift forward or backward. 07/29/19 Clarifications from Microsoft You asked which revshare rate would apply when apps that change tiers.  The revshare % is “based on the App Tier in effect when the [sale] occurred” (Addendum, Section 5.a.i).  In other words, if an app’s tier changes, the new revshare rate will apply to future sales but not prior sales. You asked whether the same app can have two listings, one in Standard tier and one in Premium tier.  While not discussed explicitly, that isn’t our intent and we wouldn’t expect to approve (in certification) the second listing for the same app. You wondered if credit decisioning works differently when customers transact directly on AppSource.  I believe it works differently on direct AppSource transactions.  With respect to the ISV Connect program, please note that direct AppSource transactions are specifically excluded, since they are subject to different terms and an agency fee under the commercial marketplace agreement.  (The Addendum’s definition of a “Paid Eligible Sale” excludes sales “through a Direct AppSource Sale”). Lastly, I wanted to clarify when fees apply on pre-existing deals. On pre-existing deals (i.e., entered into before 7/1/2019 and registered by 12/1/2019), no revshare is due until 7/1/2020. This waiver period also applies to renewals (before 7/1/2020) of these pre-existing deals.  In addition, on multi-year fixed term pre-existing agreements with a term that extends beyond 7/1/2020 (without renewing), revshare doesn’t begin until it does renew/extend (even if that is after 7/1/2020).  This is the intent of Addendum Section 5.b.

Steve chats with Muhammad Alam

In this episode of "Steve has a Chat", I was able to catch Muhammad Alam before he headed out for Inspire. Muhammad is the General Manager of the Dynamics 365 Finance and Operations (F&O) team, and recently Microsoft Business Central was added to his list of responsibilities. He has been with Microsoft since 2005, so he knows where the bodies are buried. We covered a lot of ground, including these burning questions: Will Microsoft get to a single Cloud ERP Solution? Will Mike Ehrenberg ever let go of Business Central? Why many customers don't even know about F&O. Where do ISVs fit in? Is Dynamics 365 under-priced? The Pain of getting to Single Version. The future of A.I. and Mixed Reality for ERP.

Microsoft’s Partner Network needs an Enema

I recently tweeted a link to an obscure Microsoft post I found about eliminating IUR. I thought at the time, "this is going to get messy". I followed up with a post on it myself, which promptly blew up, and now there is actually a petition someone started. Just to be clear... I did not sign this petition, and I will not be wielding any pitchforks at Inspire. Why not? It Had to Happen The vaunted "Microsoft Partner Network"! Wow, that sends chills down the spines of all other software companies! "Oh no! Here comes a Microsoft Gold Partner! We might as well just pack it in, we don't stand a chance", said Salesforce or SAP never. The ones who are the most impressed by Microsoft "Gold" partners, have always been Microsoft Silver partners. The Microsoft Partner Network (MPN) is a legacy construct, designed for an era that has passed. In fact, I think the entire MPN today is constipated! Wait, I thought you were with us! It seems that many folks read my post and tweets as a rallying cry, but if you re-read it now, knowing that it was not, it will sound quite different to you. This is not the first time I have landed on the bank opposite of the screaming hordes. The recently introduced ISV revenue-sharing model was another brouhaha that most seemed to have assumed that I, as an ISV, would have had a tantrum over. Instead, I was all for the changes. The fact that I have written some rather scathing reviews of things that I thought were dumb moves by Microsoft, does not mean that I think Microsoft is dumb. I am not "that guy", but I have met "that guy". I run into them at every event, and they frequently comment on my posts. They can clearly see the conspiracies that I am obviously missing. Like, how at every event Microsoft has these kids in purple shirts standing around with tablets... appearing like they are giving you directions... but what are they really doing? Back to MPN Microsoft is not good at giving news that they feel will be poorly received. With the exception of Guggs, who seems eager to stick his face into a fire, the rest would rather hide. But just because Microsoft is staffed by chickens, doesn't mean they're always wrong. In fact, over recent years, it would seem that are right way more often than they are wrong. But even though things are publicly looking great for Microsoft right now, there are leaks in the ship. None that will sink it, but if not addressed, they will cause issues in the near future. MPN is leaking like a sieve. Within MPN are a lot of things, beyond just training and competencies. Your MPN membership controls everything about your relationship with Microsoft, or lack thereof. Competencies As far as partners without a competency are concerned, competencies are a shitty way to grade partners. First of all, they are not required. You could well be a highly capable firm with many professionals, selling a butt-load of licenses, but unless you opted to pay the fee, you are not Microsoft competent. Conversely, up until recently, any firm with a handful of people and few deals, could opt to pay the fee and voilà, they're a Microsoft Gold Partner! So basically competencies as they existed, were pretty much a sham. BTW, I am saying that as a current Gold partner, not one of those petty and envious Silver ones. A lot of noise was made recently about the required increases in certified individuals and revenue to maintain a competency, but in reality Gold didn't mean shit anymore, and Silver never did. Microsoft's entire competencies strategy needs an overhaul, pulling the IUR benefits out of it, just stopped some bleeding from a program that was not working... for anybody. 80:20 We're all familiar with the 80:20 rule; 80% of the value that Microsoft accrues from their Partner Network, probably comes from less than 20% of the Partners in that network. Those who are calling for revolt, creating petitions, and threatening to leave the channel are in the 80%. So, on the unauthorized behalf of Microsoft let me say... "Please Leave!". How much more nimble and focused could Microsoft be, if they lopped off the 80% deadwood in their channel? How much time and money could they save, by instead of catering to partners who ain't doing shit, just hitting the delete button? To put this into context, I thought I had heard recently that there were like 600,000 Microsoft Partners Worldwide. Even if that number is way off, how many partners does Microsoft actually need to accomplish their "new" goals? I mean, 20% is still 120,000 partners! Never say Never Satya Nadella himself proclaimed "Microsoft has always been a partner led company and will always be a partner led company". Hmm... it seems like he should have left some wiggle room there. I can easily see a Microsoft without partners, or at least with a fraction of them. Microsoft itself suffers from Pavlovian conditioning, opening every partner presentation with the obligatory "Thank You Partners!" slide, and then going though a whole deck on how developers are no longer required. Many partners, and all LSPs are basically order takers for Microsoft, while at the same time Microsoft continues to expand it's direct sales capabilities at an unprecedented rate. "Reselling" licenses is a pointless relic in the SaaS world. Lipstick on a Pig I had something great for this heading, but I feel like I am starting to sound like a raving lunatic already, so I will save it for a future post.

Microsoft to Partners, ”The Free Rides are Over!”

The news media and investor market is certainly embracing the "Softer" side of Microsoft introduced since the appointment of Satya Nadela as CEO. While the company's stock is at an all-time high, it seems Microsoft's network of Partners are being gradually introduced to a new "Harder" side. Update: You can still read this, but Microsoft reversed this decision. Partners Pummeled In recent months, partners have seen a continuous barrage of changes that are catching most off-guard. Many have described some of these changes as types of "Partner Taxes". For example: Mandatory, but unnecessary, requirements to purchase Advanced Support for Direct CSP Partners (Minimum $15K/yr) 10%-20% of ISV's Revenue to now be shared with Microsoft The elimination of Internal Use Rights licenses (IUR), as I was the first to tweet about last week. Add to these, recent changes to the Competency Requirements, tripling the number of certified individuals. It all has a lot of partners wondering... WTF! Let's break it down. The Purge What most of these things will have as a common result, is a reduction in the number of partners. Fewer Direct CSP Partners, fewer Gold Partners, fewer Silver Partners, fewer ISV Partners... fewer partners across the board. It seems that Microsoft is struggling with how to achieve a new goal: dramatically increase the "Quality" of partners in their channel. One part of reaching that goal, is reducing the "Quantity". Quality Partners Ask 20 partners what defines a "Quality Partner", and you'll get 20 answers. But none of them matter, because the definition of a "Quality Partner" is determined by Microsoft, and always has been. Over the years, Microsoft's own definition has evolved, along with changes in technologies. A "Quality Partner" ten years ago, may well be an irrelevant partner to Microsoft today. Irrelevant partners aren't removed from the program, they're just ignored. This is not on Microsoft, this result sits squarely on the shoulders of the partner who did not evolve. Over the years Microsoft has increased the number of their partners significantly, but today they actually see many of them as irrelevant, serving only to boost numbers on brag slides. So why not just remove them from the program? Re-read the first paragraph if you don't already realize that's what's happening. Beauty is in the Eye of the Beholder So what is a "Quality Partner" to Microsoft... today anyway. This will vary significantly from one internal group to another, but it does seem that there are some common themes. The first is that they are usually big. Big partners sell big deals, small partners sell small deals, simple. There are exceptions, small partners that somehow sell big deals, or small partners that sell big logos. Microsoft's only interest in small partners is whether they have the potential to become big partners... soon... and most do not. This is not Microsoft's fault, they are not a charity organization. With success on Wall Street, comes extreme pressure to increase that success, this is all new to Microsoft, but clearly small partners won't cut it. Big is not the only metric, in addition to that, the partners have to be selling the right things, like Azure. If you are not selling Azure today, your relevance to Microsoft is significantly diminished. Again, Microsoft's Azure Powered Cloud is the force-multiplier on their stock value, and there will be no re-trenching. Irrelevance? So, if big Azure selling partners are the holy grail, are all others irrelevant? Not "irrelevant", just "less relevant". Out of Microsoft's 120,000+/- employees, a percentage of them do not have Azure as their highest priority. Although, if you followed the string connected to whatever their priority is, it often eventually leads to Azure, down the road or behind the scenes. If you look at the intentional "culling" efforts underway, it is fairly clear that Big Azure partners are immune. Second to the last Partner Standing If you are not a big Azure selling partner, and you are not able to become one, what is your next best option to remaining or becoming relevant to Microsoft today? You better follow the bouncing balls. Today, it is not important "how" good you are, what is important is "what" you are good at. On my side of the Microsoft house (Business Applications), you better be good at verticals, and migrating customers off of competing solutions. And, if you're not racing towards the Power Platform, you're racing towards irrelevancy. Whatever part of Microsoft's business you're in, you better be listening to their signals. Your agreement with the directions they take is not relevant. Effects of Motions Let's look at what I think the effects will be of some of these recent motions: Increasing the number of required Certified individuals for a Competency. This will dramatically reduce the total number of partners with competencies. Many Gold Partners will become Silver Partners, and many Silver Partners will simply fall off. Is it fair that Microsoft has decreed that your "Competency" with a product (which the dictionary defines as "the ability to do something successfully or efficiently"), is specifically proven by the quantity of certified people you have? Advanced Support Requirement for CSP Partners. Clearly this is Microsoft fixing their own mistake. In their zeal to grow this program initially, they lowered the bar to entry for Direct CSP partners. The predictable result was too many partners who were not qualified or capable of managing and supporting the Direct CSP arrangement. Coincidentally, the vast majority of those were small partners, and what's the best way to shake off a bunch of small partners? Add a significant new cost. It has the added benefit of not appearing like Microsoft took anything away... small partners removed themselves! ISV Revenue Sharing. I already wrote at length about both sides of this coin here and here. Elimination of IUR benefits. This will primarily impact smaller partners, who we have already determined are less relevant anyway. I expect there will be a lot of noise from those small partners, but if a tree falls in the woods... Microsoft won't hear it. This one has some fairly clear motivation behind it. Back in the day, IUR meant giving you a license key to on-premise or desktop software. It may have been foregone revenue, but at least there was no cost to Microsoft. Today, most of the IUR benefits are not free to Microsoft... they have a cost. Imagining the number of IUR services activated across their huge network, this cost is significant. Eliminating this benefit will have the dual effect of reducing costs, and increasing revenue... and who doesn't want that? What does it all mean? If you thought, with the dramatic and rapid evolution of Microsoft from near irrelevance, to the most valuable company in the world, that your life as a partner would remain unaffected... well then you're just a moron. Like Microsoft, you also have to let go of the past. All the old "favors" you racked up, have no value today. The cronies that protected you, are all gone. All of your storied history with Microsoft... pfft! What have you done for Microsoft lately? That is all that matters, and frankly, all that should matter. Microsoft is "Culling the Herd", which by definition means "Literally, to separate or remove (and usually kill) inferior animals out of a herd so as to reduce numbers or remove undesirable traits from the group as a whole." To me, this sounds like exactly what's happening...    

Steve has a Chat with Jeff York

Steve Chats with Hayden Stafford