"because revenue-based incentive compensation does not reward selling relatively low-priced servers"
That certainly sounds familiar. National Cash Register (then NCR, then part of an old AT&T, now NCR again) had trouble in the 1960s because it was much easier for the sales force to make and exceed quota by selling cash registers than by selling computers. (The guy with the Rich's Department Store computer sales no doubt did very well.)
It took an earthquake at the top (William S. Anderson) to change that.
(National Cash Register was never timid about sales--John Patterson fired Thomas Watson Sr as his head of sales for not being aggressive enough. That worked out fairly well for Mr Watson.)
Wall Street analysts, the media and other armchair pundits are full of advice for Microsoft CEO Steve Ballmer. We’re quick to advise him to tweak Microsoft’s tablets so they run something other than Windows, hurry up with that first Windows Phone 7 update, and bring the Kinect to Windows sooner rather than later.
But are those the kinds of things that Ballmer and his top management team really spend most of their time thinking about? Maybe not.
A source of mine passed on to me some information that seems to come from Microsoft’s own scorecarding system from the end of 2010 that detailed some high priority areas for Microsoft’s sales and marketing folks. Not too surprisingly — in spite of all the public noise around the company’s consumer products — enterprise wares (which still result in the majority of Microsoft revenues) are getting a lot of internal attention.
Yes, Microsoft’s Business Division (the Office team) had a bang-up Q2 FY2011, as the most recent earnings statement made clear. But according to the scorecarding information I saw — which, as some have reminded me, is a small sample from inside the company, and not true of all regions — some Microsoft managers consider Exchange’s license and revenue growth over the last several years to be “anemic,” even though Exchange is currently a $2 billion business.
(If you’re wondering about Microsoft’s hard-core push to sell Exchange Online and to win education accounts over to online services, slower Exchange Server growth is seemingly at least part of the reason. Microsoft execs view education as a key early adopter of cloud-based services, and e-mail is “the gateway application” for schools.)
On the SharePoint front, the public story is that sales continue to be phenomenal, with more than 100 million SharePoint licenses having been sold to 17,000 customers. However, internally some managers are warning that the sales focus on servers has been low “because revenue-based incentive compensation does not reward selling relatively low-priced servers.
SharePoint license growth rates have dropped in the past year, and “naked CALs” — Client Access Licenses sold without servers attached — are now at 40 percent of the total, the aforementioned Softies acknowledged. To counter, Microsoft is counting on its higher-end search products, like FAST Search and its SharePoint for Internet Sites SKUs for growth.
Though not specifically called out by the scorecarders, the changing software distribution models are another watch point for the company. Microsoft traditionally derives about one-third of its revenue and half of its products via preloads from the OEM channel. But the emergence of cloud computing and other new business models is shifting that mix, creating new competitive pressures and changing customer preferences.
Microsoft is already no doubt well on its way toward delivering the next versions of Exchange and Exchange Online, given that Exchange 2010 RTM’d in October 2009 and Service Pack 1in the fall of 2010. And the next version of SharePoint (SharePoint 15, I’d assume), also is moving along the dev schedule, I’d think.
