Microsoft goes vertical

The software maker is calling for its channel partners to develop industry-specific domain expertise and products.

MINNEAPOLIS--Microsoft has urged its channel partners to develop and provide industry-specific products, and use this domain knowledge to pull themselves away from competitors.

Senior officials at the company's Worldwide Partner Conference 2005 held over three days starting Friday underscored Microsoft's commitment to growing its channel strategy by helping them bring their products to vertical markets.

The company's intent is not to compel all its partners to adopt a vertical strategy, but to help them differentiate themselves from their competitors, said Craig McCollum, vice-president of worldwide sales strategy, Microsoft business group.

Adopting the vertical approach is especially crucial for partners that are struggling to stay in the business, McCollum said, adding that customers want technology providers which understand their industry-specific needs and have the domain expertise.

"Most businesses, large or small, identify themselves by the industry or vertical in which they do business," McCollum explained. "So it's only natural to address their needs from an industry and industry-solution perspective. What we are signaling today is a stronger focus in this direction… especially in the small and mid-market (where) channel specialization has not been happening to an extent that fully takes advantage of the tremendous growth."

Simon Witts, Microsoft's corporate vice-president of enterprise and partner group, added: "It's really about understanding the issues, challenges and business processes of each customer on its own terms."

He noted that Microsoft does not offer line-of-business products for large organizations but has been working to "understand the industry" and how technology plays in the various industries including financial services, manufacturing, retail or healthcare.

Microsoft's business solutions group is targeting to align 50 percent of its existing partners to a vertical product or service by the end of fiscal year 2006.

To achieve those goals, the company has promised to equip its partners with the necessary resources--including training and marketing--to develop products that fit the business requirements of the various vertical markets.

The software maker also launched a bunch of toolkits including the Customer Solution Finder, Partner Channel Builder and Partner Vertical Resource Center.

Together, these tools will allow Microsoft's partners to identify themselves and showcase their products to customers and other partners, and enable customers find the right partner and product for their business.

While Microsoft will provide sales and co-marketing support to partners across most verticals, McCollum's business solutions group will be putting more resources into 14 verticals within four key industries: manufacturing, distribution, public sector and services. He noted that these market segments represent a significant size of its partners' customer base.

Competitive strategy
Microsoft's heavy focus on its channel strategy mirrors that of its competitors and other major IT vendors, such as Hewlett-Packard and IBM.

While it remains to seen how the general partner community will rate Microsoft against these vendors and an expanding catalog of open-source alternatives, at least two resellers know where they will be placing their bets.

Ric Opal, vice-president of Peters & Associates, has chosen to build its customer's products solely on the Microsoft software architecture. The US-owned systems integrator is a Microsoft Gold Certified partner.

He said that customers not only want to avoid high integration cost, they also need to latch on a technology that is supported by a large ISV (independent software vendor) community. Compared to the open-source community, Microsoft offers more customer value in these two requirements, Opal added.

Tim McKellips, manager of education and information worker solutions at Inacom Information Systems, a US-based systems integrator and Microsoft reseller, agrees.

McKellips told ZDNet Asia that the company chose to align with Microsoft as a "primary" partner because the software giant is a "predominant player" on the desktop.

"We also need to lower the gap between what we can do ourselves in the server room, and what we need to get help from outside," he said. He added that it is more cost effective to focus on a technology that required less user training and, therefore, fewer resources to support.

Asked if Microsoft's integrated product strategy could be seen as a bid to lock customers into its technology, McKellips said that customers can benefit if they "consolidate".

"I don't think customers see themselves as being locked in (to Microsoft), but as being rewarded for having systems that talk well to each other because they have chosen to buy from one vendor," he said. "They're coming to us and telling us they want systems that interconnect well without having to increase cost to do so."

But he added that Inacom is also a certified partner of open-source Novell SuSe because there is "some customer demand", and "we have to be responsible and be able to support that".

ZDNet Asia's Eileen Yu reported from Minneapolis, USA.