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Alternatives to partnering with Microsoft

Industry veterans look at two other giants that VARs can team with and finds them wanting

(The following is an excerpt from “Partnering With Microsoft: How To Make Money In Trusted Partnership With The Global Software Powerhouse” by CMP Books)

Many IT firms have also partnered with Microsoft’s principal competitors, including IBM and Oracle. But they generally prefer the advantages and the mechanics of partnering with Microsoft.

A few comments about the differing partnering models of IBM and Oracle are in order. Despite IBM’s vaunted investment in its partner programs, IBM limits the revenue opportunities of its partners to hardware and software sales. IBM sells its hardware through channel partners and its software through qualified resellers.

Regarding services, IBM Global Services owns its client relationships and tends to commoditize the services that its services partners can provide, relegating them to subcontracting assignments that IBM itself cannot deliver profitably. In addition, IBM has a cradle-to-grave approach for its enterprise clients. That is, IBM can serve a wide range of IT needs for any client from inception through its lifecycle and demise, with multiple solutions and services at any given time. IBM thinks globally in this respect. Consider its name: International Business Machines. IBM makes machines and delivers services for them to businesses around the globe. IBM’s business focus is not differentiated, as its name suggests; unlike Microsoft – which builds software for microcomputers, as opposed to mainframes and mid-range systems that IBM built its business on – IBM thinks in terms of any machine that can be used as a business computer anywhere in the world.

This apparent lack of distinction extends to IBM’s partners, too, which IBM tends to view as peripheral mechanisms for getting IBM hardware, software and services to market. In any event, IBM is the driver and chief beneficiary of its partner relationships. Although IBM appears to have many business partners, in fact, it has only 11 per cent of the total number of partners in Microsoft’s channel. Most ISVs and services firms prefer to partner with Microsoft because their revenue opportunities are more expansive.

In fact, many services partners worry about partnering with IBM because its services arm, IBM Global Services, accounts for roughly 50 per cent of the company’s revenues and employs a whopping 180,000 people. Microsoft Consulting Services, by contrast, continues to be run as a not-for-profit center and has a headcount of between 4,000 and 5,000, representing approximately 12 per cent of its total headcount. Oracle is even more restrictive than IBM. Again, its name – “Oracle” – suggests an all-knowing entity, such as the Oracle of Delphi. Oracle’s product line, not surprisingly, is eponymously presumed to be unapproachable in terms of its capabilities (although not in its market share). In short, Oracle positions itself as the software supplier with complete end-to-end solutions, which is not to say that is has all of the answers, and the best capabilities for manufacturing and selling database software products as well as providing services for them.

Accordingly, Oracle only sells software directly – not through a reseller channel – and mostly sells consulting services directly, only rarely working with and through its services partners. That is, Oracle vertically integrates all applicable software into its product set and controls its intellectual property to the point of excluding its partners. With Oracle, there is very little room for lucrative partnering.

These two Microsoft competitors also share a reputation for inconsistent partnering. In contrast to Microsoft’s consistently partner-friendly policy, with rare exception, the partnering strategies of IBM and Oracle fluctuate with changing economic conditions and executive temperament. The message that IBM and Oracle thus send to their partners is unfavorable to them: IBM and Oracle own the opportunities and will dole them out as they deem fit, with little give and take, to whomever they please. This is not so with Microsoft, as many successful partners have found. While there can be tensions in partnering with Microsoft, especially in the enterprise and corporate accounts space, the company’s culture itself is very favorable to the partner model. Microsoft’s culture has given rise to the Microsoft Partner Ecosystem, which has no reliable or lucrative analogue at IBM or Oracle.

Editor’s Note: In Canada, Oracle sells largely through the channel.

Look for more installments of “Partnering with Microsoft” later this year in CDN This Week.