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Microsoft’s channel basics for ISVs

By Sam Worthington
Thu 14 Jul 2016
FYI, this story is more than a year old

The first step to understanding how the channel works is getting to know the different players and the roles they play.

Margie Gradwohl, senior product marketing manager with Microsoft, says that by this stage most companies should have had great success selling direct. 

"It's now time to look into additional business growth strategies and building out your channel is a strategy for you to consider," says Gradwohl. 

Channel sales process:

Gradwohl says that ISVs are the ones that work with cloud solution providers directly. The CSP has multiple partnerships with multiple reseller partners and the reseller partners are the ones that have direct relationships with the 'in customer'.

Cloud Solution Providers (CSP) are Microsoft partners. Their role is to:

  • Sell Microsoft technology, products and services.
  • Manage their own sales channels, directly own the billing relationship.
  • Provide 24/7 technical support
  • Customers (reseller) single point of contact

CSPs sell a variety of Microsoft products but they also sell third party ISV apps. This is through their cloud markets, based on their customer needs.

There are two types of cloud markets:

CSP General Market:

This focuses on the needs of individual users with specific tasks in mind. These are often small-medium business focused. They don’t usually have their own technology or services that they sell. The type of apps they are the most interested in are fully functional stand alone apps.

CSP Specialised Market:

These types of CSP partners often have their own specialised technology on offer. They look for ISV partners who have technology that is complementary with their own offering. The technologies that they sell are usually systems focused, solving problems for complex processes. These providers tend to be more selective and focus on their in depth relationships. More complex, system oriented solutions that exchange data and other apps or services. Most of the customers are in the enterprise space.

Industry verticals:

Gradwohl says that a good starting point is to work with cloud markets that are working in the same or similar industry verticals. 

“Your app will be more attractive to the CSP, and you won’t have to make a huge change to the app to confirm to the business needs of a new industry," says Gradwohl. 

Understanding resellers:

Value added reseller (VAR)

These partners sell directly to companies where the end users work. A VAR offers third party software and hardware to the end user at a mark-up.

Managed service provider (MSP)

These partners operate and maintain customer technologies solutions and services for a set period of time in exchange for a recurring fee.

SI (systems integrator)

These partners build computing systems for clients by combining hardware and software products for multiple vendors. This can sometimes be less expensive for the end user, than sourcing all the technology from a single vendor.

So how is the ISV app sold in a CSP General Market?

Gradwohl says it's extremely important to understand that the direct relationship is with the CSP general market, and that the reseller has a direct relationship with the end customer.

"This is why it is extremely important that you have sales and marketing materials oriented towards the needs of the reseller. The CSP general market will not create those for you," she says. 

Scenario 1

CSP Specialised market may go direct to larger customers, with a combination of their own technology, and your app. This is because the technology being sold are systems focused and require higher levels of service and consulting.

Scenario 2

The app gets sold through a variety of resellers. They sell the app and the offerings from the CSP but they will also add on services and consulting of their own to add to the margin they can make on the deal.

In closing, Gradwohl says it is imperative to always understand the legal challenges in developing a channel business.

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