I recently had the privilege of hosting Tackle’s Cloud Marketplace Office Hours with special guests from Microsoft’s Co-Sell and Azure Marketplace teams. This session was focused primarily on changes to Microsoft’s IP Co-sell program. Here are the highlights:
Microsoft “Co-sell” Program Overview
Microsoft launched its co-sell program in 2017 specifically to enrich the customer value proposition by compelling Microsoft direct sellers to collaborate with the partner ecosystem on a wider set of offerings.
The co-sell program is available for any collaborative engagement between Microsoft their partner ecosystem, whether selling directly to the customer, through a partner, or through Azure Marketplace. This includes “building demand, sales planning, sharing sales leads, accelerating partner-to-partner empowered selling, and delivering marketplace-led commerce for customer transformation.”
The program is clearly delivering on its goal, as outlined in the statistics summarized in the document “FY21 Co-sell Playbook.”
According to Gina and Joselyne, the co-sell program opens up partners to an ecosystem of 4M unique visitors each month in Azure Marketplace and is responsible for driving over $15B in partner annual contract value—pretty impressive, indeed! The program allows partners to co-sell with Microsoft, regardless of the channel in which they are selling – with Microsoft Sellers, with other partners, or directly to the customer through Azure Marketplace.
The co-sell program is tiered to allow partners to join in the co-sell fun with minimal investment. Microsoft describes these tiers in the form of “steps” that operate sequentially.
Gina described each stage as a step along the partner journey, where the co-sell appeal grows as the partnership progresses. My preference is to depict this in a stepwise manner, as follows:
Those that have been co-selling with Microsoft for a while know that the designation of “IP Co-sell Ready” was confusing to understand. Gina notes that previously, the “Co-sell Ready” designation required the ISV to spend $100K on Azure over a rolling 12-month period. New for this year is the designation, “Co-sell Incentive Eligible,” which is where Microsoft direct sellers are incentivized to collaborate with Partners. The $100K spend requirement is now associated with this third step while a new, alternate way to achieve this step was introduced. According to Joselyne, this new option is to bill $100K or more through Azure Marketplace using a SaaS Transact listing (if you don’t yet have a SaaS Transact listing, reach out to see how Tackle can help).
The panel didn’t get into specifics about Microsoft’s compensation policy, but Brian Levenson characterized it well by stating that Microsoft Sellers are incentivized to “solve the customer’s business problems and drive Microsoft services” (platform, infrastructure). It’s safe to say that direct sellers will be most interested in partner solutions that (1) clearly drive Azure consumption and (2) offer a differentiated way to solve customer problems.
Finally, ISV partners will benefit from IP co-sell status beyond access to customers and Microsoft Sellers. This slide is a great summary, particularly calling out the reduction in Marketplace fees from 20% to 10% of billed sales:
Changes for FY21 (7/1/20-6/30/21)
Microsoft has made some changes to the program for FY21 to clarify the different levels of “co-sell” status and, in many cases, make it a bit easier to achieve the higher “IP Co-sell Incentivized” status.
The following slide nicely summarizes the program changes for FY21:
“One of the main changes that we had this year compared to FY20 is that we are expanding to Marketplace our Azure IP Co-sell program.” – Joselyne Rivera
The role of Azure Marketplace will continue to increase this fiscal year, according to the panel. Currently, lead creation and registration is mostly managed in Partner Center (with some accounts still using Partner Sales Connect). Later this fiscal year, transactions through Azure Marketplace will be automatically registered, significantly lowering the time and effort to manage co-sell opportunities. As a partner that has a “Co-sell Incentivized” offer in Azure Marketplace ourselves and licenses over 90% of its deals through Marketplace, we are really looking forward to the release of this new feature!
Changes are also coming in the area of governance and compliance. Historically, the compliance team would reach out to the ISV partner and audit a set of larger transactions, requesting to view information from the partner’s CRM pertaining to the deals in question. Going forward, this will be a risk-based exercise which should reduce the frequency of these audits (Microsoft does not share details about this exercise, since it is an internal validation/compliance process).
Best Practices for Co-selling with Microsoft
“Microsoft Sellers are compensated for driving Microsoft product sales and satisfaction of their customers. Those are the things that you want to really make sure they understand about your product: How does it solve the customer’s business problem? Do you have happy reference customers and case studies? How do you drive adoption and consumption of Microsoft products?” – Brian Levenson
The trick to making this work for you, the ISV partner, is knowing how to maximize your impact on the Microsoft direct sales team. This is done by clearly outlining the value that your offer provides, to both the customer and to Microsoft.
Of the many data points noted on the following slide, the panel outlined a few key observations:
While Partners “must have a solution in Marketplace, a complete and succinct profile is key to grabbing the attention of Microsoft Sellers” – Gina Yong
Add details to your lead like what you are trying to achieve, who you are talking to, how far the deal has progressed, and how can Microsoft help
Be clear and explicit in the solution value to get to the “top of the pile”
Invest the time to make the co-sell assets as clear and impactful as possible
Maintain the co-sell assets and ensure they are fresh and relevant
The most effective way to co-sell is to train your sales team on how to carry the “better with Microsoft” story
MACC (Microsoft Azure Consumption Commitment) and Co-Sell
The session ended with a brief discussion on the recently announced “MACC” program. For those that didn’t see this, the MACC program allows enterprise customers to decrement their Azure spend commitment to Microsoft by purchasing third party software and services through a Transact listing in Azure Marketplace.
Brian outlined two stipulations of this program:
Partner Solution must be sold through Azure Marketplace
The Solution must have the “IP Co-sell” designation
Brian further explained the rationale for requiring IP Co-sell status for MACC eligibility. IP Co-sell status can be viewed as a proxy for “running on Azure,” which allows Microsoft to be sure it incentivizes sellers for solutions that run on Azure.
When asked if there was a way to know if a customer is party to a MACC agreement or not, the panel stated there was no programmatic way to know, since this information can be somewhat sensitive to enterprises. Instead, the panel guided ISV’s to simply ask their customers or the Microsoft direct seller.
In many large organizations, participation in programs like MACC is not widely known or understood. According to Brian Levenson, Microsoft is drafting a new document that helps someone from the customer organization to determine if their company has signed a MACC agreement (we’ll add a link to that document here once it’s live).
The panel generally agreed the MACC program will be an impactful incentive to drive transactions through Azure Marketplace. They expect the number of enterprises having a MACC agreement to increase substantially over the next fiscal year. We’re excited to see the result of this program, which should be more transacting via SaaS listings in Azure Marketplace!