This is an extract from the book Refresh the Road Ahead, on Microsoft and how to work with Microsoft as a partner.
The last time Microsoft reported headcount in the product support & consulting unit was 2015 and at the time there were 32.000 people. However probably close to 20.000 are in product support. That leaves 12.000 people in MCS selling and delivering digital advisory, consulting projects and premier support.
MCS tends to focus on larger customer engagements and intents to make the market for Microsoft on new technologies or ´bleeding edge´ projects. However, MCS runs a P&L and is bound to the same KPI´s as any systems integrator. They need to sell, have their people be busy and not lose money on fixed price projects.
The premier business, the proactive support business, is at least half of the business and is the business with the highest customer satisfaction and the lowest risk.
Microsoft has made several strategic and operational changes with MCS over the years. At a certain moment in time MCS created IP on their own, then that was abandoned and now they seem to be doing some of that again.
Premier and consulting delivery have been pulled together and verticalized and they now no longer report locally into the services lead but into global domains. At a local level remains sales which has both a vertical sales team and workload focused sales roles. Delivery also has vertical managers who report up to a delivery manager and reporting into these vertical managers are account delivery executives.
MCS is expensive and they have very high rates compared to any Microsoft partner out there. Depending on the country the rate can be from 1,5X to 3X the average partner rate.
Why do customers buy from MCS? There are a couple of reasons. One, for insurance. MCS can never walk away from a project run on Microsoft technology. Two, because Microsoft sales is pushing MCS hard in the customer and is even financing parts via Business Investment Funds. And three, because the technology is very experimental, and it is too risky to work with a partner.
Conclusions
Microsoft services is probably 30% of the headcount of Microsoft and less than 2% of the profit of the company. Services for Microsoft is an investment. The P&L structure of a consulting services company is not as interesting as a P&L of a software or a cloud services company. Microsoft will never make consulting services the biggest part of the organization.
However, with IT buying happening more and more through business decision makers and customers going through digital transformation, Microsoft will need to be more on the forefront of creating new capabilities and solutions at their customers and will have a more vertical and business focused skills. Therefore, expect the services arm to grow in line with this strategy.
Lessons for Partners
Partners sometimes have difficulties in working with MCS. As a partner, if you are a systems integrator and you work on strategic and enterprise accounts, you will come across MCS. There will be co-opetition. Our view is that it is best to be transparent and upfront with MCS and to establish a good governance and active relationships.
For very large SI´s MCS will sometimes be more of a competitor. If you are a smaller SI but you work in the same account space our suggestion is to get close to MCS.
There are different working models with customers. MCS can prime and can contract a piece via fixed price from a partner. They can subcontract resources in T&M fashion. A partner can prime and have a Q&A piece from MCS.
Another angle is to proactively subcontract resources to MCS. The people a partner subcontracts to MCS will in general be working on modern technologies and that way learn on the job.
Opportunities arise as well in subsequent phases of MCS contracts as it is very difficult for MCS to be able to do the maintenance on projects they have delivered due to the very high rates they use.