Microsoft partner ecosystem takes on AI boom, program shifts

Microsoft Inspire 2023 saw the company relaunch its partner program to address the expected boom in AI. Partners discuss technology developments and partner program changes.

Microsoft this week recast its partner program for next-generation AI technology, which the company said could expand its partners' total addressable market from $4 trillion to as much as $6.5 trillion.

Amid the potential for 50%-plus growth, the Redmond, Wash., company launched the Microsoft AI Cloud Partner Program, which aims to help the Microsoft partner ecosystem build offerings on the company's AI platform. The program change, announced at the Microsoft Inspire 2023 partner conference, is the second overhaul in nine months. In October 2022, Microsoft replaced its Microsoft Partner Network with the Microsoft Cloud Partner Program to reflect customers' cloud-centric IT purchasing habits.

Partners navigating the Microsoft Cloud Partner Program shift said the changes have helped them differentiate their services. But going forward, they would like to see further investments in marketing and simplification of program requirements.

While the cloud program asked partners to achieve a particular capability score, the arrival of the Microsoft AI Cloud Partner Program should present fewer transition challenges. Microsoft said current partners have been automatically enrolled in the new program, in which they keep their previous benefits and designations.

The AI opportunity

Satya Nadella, CEO at MicrosoftSatya Nadella

Satya Nadella, Microsoft's CEO, called the economic growth stemming from AI "a massive partner opportunity."

Generative AI, along with the expectation that most enterprise applications will embed AI within the next couple of years, will significantly expand the partner ecosystem's total addressable market (TAM), according to Microsoft. Such AI developments could add $2 trillion to $2.5 trillion to the ecosystem's current TAM, which Nadella pegged at $4 trillion.

Partners, many of which are creating AI services, will be watching how Microsoft's AI partnering strategy unfolds.

Sumeet Sabharwal, CEO at Netgain Technology, an MSP based in Minnetonka, Minn., said he's keen to learn more about the Microsoft AI Cloud Partner Program given his company's plan to build a line of business focused on driving mid-market AI adoption. He is also interested in new solution partner designations around AI.

In addition, Sabharwal said he will be looking for further details regarding Microsoft's $100 million expenditure on partner innovation support in analytics and AI. At Inspire, Microsoft unveiled Azure Innovate, which it described as a dedicated, incremental investment that targets the demand for analytics and AI surrounding Microsoft Fabric and the Azure OpenAI Service

Interest in Microsoft Copilot

Partners also expressed interest in Microsoft Copilot, the company's generative AI-based assistant that is working its way into several offerings. At Inspire, Microsoft released Sales Copilot, which automates CRM tasks and is accessible through tools such as Dynamics 365 Sales.

"Microsoft has been talking a lot about Copilot, but there are lots of different Copilots," noted Jared Cheney, vice president of services, North America, at SoftwareOne, a software and cloud solutions provider headquartered in Switzerland.

Differentiation among Copilots lets SoftwareOne focus on creating communities around workloads in areas such as productivity, he said. Sales Copilot, meanwhile, could potentially complement the company's digital workplace team, which has been engaging with customers on interconnected sales and Dynamics workflow.

Cheney also finds Copilot for Power Platform intriguing.

"There's always been that citizen developer platform that is low code/no code and now, with the Copilot attached to that, it becomes even lower code," he said. Users can dictate what they are trying to accomplish to Copilot and the AI tool interprets that and provides guidance on how to do it, he noted.

Other partners cited Copilot technology and other generative AI developments as encouraging.

Pallab Chatterjee, senior director and enterprise solution architect at Movate, a technology consulting and customer experience company based in Plano, Texas, pointed to Sales Copilot and Power Virtual Agent. The latter, he said, augments Movate's cognitive contact center offering, empowering customer service agents with AI.

In addition to those tools, Chatterjee said the Process Mining capabilities in Microsoft's Power Automate will help its high-technology and retail consumer packaged goods clients optimize business processes and improve customer engagement.

Azure OpenAI Services and Llama 2 will strengthen Movate's generative AI offerings and capabilities, he added.

Gartner: Generative AI yet to significantly boost IT spend

Gartner this week forecast worldwide IT spending to reach $4.7 trillion in 2023 -- a 4.3% year-over-year increase. But the market research firm reported no significant influence from generative AI. Over time, enterprises will primarily incorporate generative AI through existing spending on software, hardware and services, according to Gartner.

As for overall IT spending, Gartner's latest update projects a considerably higher growth rate than its January forecast, which pegged 2023 growth at 2.4%. Software helped propel the higher growth rate, with Gartner projecting a year-over-year spending increase of 13.5%. IT services followed software with 8.8% growth expected.

Gartner, however, forecast device spending to shrink 8.6% in 2023 due to inflation dampening consumer purchasing power.

Microsoft partners assess program changes

While Microsoft partners ponder the latest partner program iteration, they continue to work through the previous new-look program. Partners said the Microsoft Cloud Partner Program offers partners greater opportunities to differentiate themselves. But they also see room for improvement.

"The [cloud partner] program has enabled us to be recognized by customers and Microsoft sellers by our specialist areas," said Anita Swann, head of global alliances at Logicalis, a technology services provider based in the United Kingdom.

Logicalis has also achieved Solutions Partner designation status in five of six areas. With last October's program update, Microsoft introduced six solution areas: Data and AI, Infrastructure, Digital and App Innovation, Business Applications, Modern Work, and Security.

Microsoft has been talking a lot about Copilot, but there are lots of different Copilots.
Jared CheneyVice president of services, North America, at SoftwareOne

As for program changes, Swann said she'd like to see the return of broader marketing funds that would support the joint marketing of Logicalis' Global Services Partner status. She said she would also like to have seen solution area specializations become more established before adding further complexity. A solution area specialization offers partners the ability to demonstrate a higher level of technical expertise. Microsoft, she said, intends to layer industry specializations on top of the solution area specializations.

Chatterjee said the Microsoft Cloud Partner Program has provided Movate with a "more focused and comprehensive framework for delivering cloud solutions and services." In addition, the program aligned the company's offerings more closely with elements of Microsoft's cloud specialization strategy, such as Infrastructure, Data and AI, and Digital and App Innovation.

Areas for improvement include streamlining the partner program's requirements and processes as well as ensuring clarity and simplicity across program guidelines, benefits and eligibility criteria, Chatterjee said. He'd also like to see further investments in partner marketing and co-selling initiatives to bolster partner collaboration. He added that he appreciates Microsoft's ongoing enhancements to the program.

Effects on smaller MSPs

Sabharwal said last year's program changes were "aimed at better segmenting partners across their solution areas and encouraging MSPs like us to go all-in and build deeper competencies in specific areas."

The program's revised criteria, however, adversely affected smaller partners, he said.

"While the changes they introduced were rational, the bar was rather high, and it unfairly penalized the smaller MSPs given tall requirements around new customer additions, certifications, and usage growth," Sabharwal noted. "Unintentional or not, it skewed the playing field towards the larger, more established MSPs."

Microsoft, PwC continue industry collaboration

The industry cloud approach ranked among the key themes at Microsoft Inspire 2022. While AI took center stage at the latest partner event, the partner ecosystem's vertical-market orientation remains important as customers look to customize AI and cloud deployments to meet their specific needs.

At last year's Inspire conference, Microsoft pointed to PwC's retail banking offering, which uses Microsoft Cloud for Financial Services, as an example of vertical market collaboration. That partnership continues this year.

Peter Pollini, banking and capital markets consulting solutions leader at PwC, said the companies are working closely in financial services and several other sectors to create offerings that "address the specific features and functionality of evolving business models."

Industry clouds, in general, provide "tailored solutions" that let companies accelerate modernization, he added.

At heart, Microsoft is a more of a channel-oriented company than Amazon or Google, Sabharwal noted. That said, he would like to see Microsoft either lower the certification requirements or provide an expanded runway to let smaller partners achieve those requirements.

Microsoft said last year it would give partners extra time to achieve Solutions Partner status. At the time, the company offered to extend partners' Microsoft Partner Network memberships until October 2023 so they could meet program requirements.

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