Channel chiefs, Channel partner programs, CSPs

Microsoft Channel Chief Change Arrives for Cloud 3.0

Phil Sorgen
Phil Sorgen

Microsoft Channel Chief Phil Sorgen is moving into a new position, a company spokesperson has confirmed to ChannelE2E. Gavriella Schuster will guide the partner program forward as its interim leader, taking the helm just as the Cloud 3.0 wave arrives for channel partners.

According to a Microsoft spokesperson:

“Phil Sorgen has transitioned from his previous role as corporate vice president of Worldwide Partner Group to a new role at Microsoft as corporate vice president of U.S. Enterprise and Partner Group. Gavriella Schuster will step in as interim vice president of Worldwide Partner Group until the permanent replacement is hired. Microsoft is committed to the Worldwide Partner Group and its vast partner ecosystem."

Microsoft Cloud Services 1.0, 2.0 and 3.0

Microsoft Channel Chief Gavriella Schuster

Schuster will oversee a partner program that has gradually improved since Office 365 cloud services launched in 2011. But the path to partner success wasn't easy. It looked something like this, according to ChannelE2E's perspective...

Cloud 1.0: Microsoft carefully marches from the classic BPOS (Business Productivity Online Suite) to Office 365 and Windows Azure. Under John Roskill at the time, Office 365 had a rudimentary channel program but partners couldn't manage end customer billing and lacked other basic features.

I never blamed Roskill for the shortcomings. He fought hard for partners. Instead, I sensed that then-CEO Steve Ballmer was trying to control the cloud sales model to compete against and other pure cloud players. The downside? Google Apps had a full-blown partner program and grabbed lots of customer wins during the Cloud 1.0 stage.

Cloud 2.0: Microsoft rebrands Windows Azure as Azure -- basically confirming plans to more aggressively embrace multiple Linux distributions and other open source technologies. The Office 365 partner program begins to hit its stride just as Roskill turns the controls over to Sorgen.

Gradually, Microsoft rolled out pricing and billing features that partners have long craved. Sure, the basic margins and dollars earned on an Office 365 transaction aren't all that big. But partners see the light and begin to understand that Office 365 is the path forward for Exchange Server, SharePoint and more.

Cloud 3.0: This chapter begins to unfold in the 2015-2016 timeframe. Microsoft promotes the Cloud Solutions Provider partner model. And there are signs that partners are beginning to extend from Office 365 to Azure. Many MSPs and VARs begin to merge and double-down on Microsoft's SaaS and IaaS offerings. Key examples include Aldridge's buyout of Arterian and PacketDrivers.

Sorgen, Schuster and other Microsoft channel team members share in the success as the company's cloud partner program really revs up and Microsoft emerges as a true contender to Amazon Web Services.

Microsoft Cloud Challenges

Still, the cloud continues to introduce challenges for Microsoft and its partners. In its most recent quarterly results, Microsoft conceded that its cloud profit margins were falling amid continued infrastructure investments.

The cloud margin discussion became a key point of focus during the company's earnings call with Wall Street analysts in late April 2016. Instead of being in a downward spiral, the margins will fluctuate -- rising and falling -- based on how Microsoft throttles its cloud investments in the quarters ahead, the company insisted.

Still, pundits like Larry Walsh, CEO of The 2112 Group, noticed the margin pressure and predicted partners will continue to face profit challenges with cloud services.

Additional Microsoft Challenges, Opportunities

Meanwhile, Microsoft faces other channel challenges. Among the key items that need ongoing improvement: The partner program for Microsoft Surface. When the mobile devices debuted in 2012, the partner program was rudimentary at best. More recently, Microsoft has gradually opened the program up to distributors more partners.

But rivals like Lenovo have aggressively positioned their combination tablet-laptops as reseller friendly, especially since channel partners can open and service the Lenovo devices. That was a key theme at this week's Lenovo Accelerate 2016 partner conference in Orlando, Fla.

Still, conspiracy theories about Microsoft "going mostly direct" in cloud and mobile have quieted down ever since the CEO crown transitioned from Steve Ballmer to Satya Nadella in 2014.

Next up: Microsoft's channel chief must more clearly articulate profit opportunities on Azure and related cloud workloads. But overall, Microsoft has a much stronger partner story today than it did when Office 365 and Azure were in their infancy.

Joe Panettieri

Joe Panettieri is co-founder & editorial director of MSSP Alert and ChannelE2E, the two leading news & analysis sites for managed service providers in the cybersecurity market.