Microsoft Partners Fuming At Surface Slight

Microsoft solution providers Monday said they are upset over the software giant's continued refusal to let them sell the Surface tablet.

Microsoft's decision to sell Surface through 10 large account resellers (LARs) and not through solution providers has succeeded in "isolating and alienating" the very partners that have made Microsoft successful, said Majdi "Mike" Daher, the CEO of Denali Advanced Integration, Redmond, Wash., No. 114 on the SP500 with $180 million in sales.

"What I read into this is they are desperate; they are trying to gain market share by partnering with the big guys, but they have a lot of ground to make up," said Daher. "They don't understand that they need to start at the grass roots of the business. Microsoft doesn't understand that it is the value-added partners and regional partners like Denali that are driving the deals and generating demand. We are the ones helping the customers make the [tablet] buying decision."

[Related: Tablet Tease: Microsoft Surface Channel Debut Bypasses Bulk of Partners ]

Denali, for its part, will sell more than 30,000 tablet computers this year with vendor partners like Apple and Samsung, both of which have robust and mature tablet-based channel programs. "Microsoft needs to stop putting walls up and obstacles in our way and reasons on why we can not sell the [Surface] product," said Daher. "Microsoft should be excited that channel partners are upset. We care! We want Microsoft to be successful. We have been partners with Microsoft for over 20 years. We care. That is why we are upset."

Daher, a Windows 8 user who runs the operating system on a phone, tablet, desktop and laptop, said his message to Microsoft CEO Steve Ballmer is simple: "Windows 8 is a fantastic product. Microsoft just needs to enable partners like us to take the great Windows 8 story to our corporate and commercial accounts and just let us sell. Allow us to sell the complete story. When we sell the full portfolio of Microsoft, whether it is infrastructure, Office 365, SharePoint, Windows, it is a great story that we can take to our customers comfortably. They don't have to change applications or build new code for an OS they are not used to. It is Windows. It is very easy to sell if we are allowed to sell it."

PCPC Direct COO Joe Vaught wants to ask Ballmer directly why LARs were given the green light to sell the Surface tablet and not partners selling Microsoft business technology solutions. He wants to know who at Microsoft made the decision to exclude solution providers.

"Inquiring minds want to know," said Vaught. "Is this the first sign of encroachment? Encroaching is so easy. You take one step, and if no one says anything, you take more steps. You have to nip it in the bud if you can. It jolted me when I read that Microsoft is selling Surface through LARs and not giving it to systems integrators."

Microsoft Monday said it had authorized LARs CDW, CompuCom Systems, En Pointe Technologies, Insight Enterprises, PC Connection, PCM, Softchoice, Softmart, SHI International and Zones to sell the Surface tablet under the new Microsoft Devices Program. Several Microsoft partners said they were surprised by the decision to just give the product to LARs. They said they expected Microsoft to make Surface generally available. Microsoft, for its part, has said it will authorize additional partners in the future.

Partners, however, said that vague pledge is not good enough.

NEXT: Partner's Holler And Scream About Surface Decision

PCPC Direct's Vaught, whose Houston-based company sells Microsoft's high-performance clustering software, said it is up to partners like PCPC Direct to "holler and scream" and let Microsoft know where "they stand" with regard to the Surface distribution strategy. "That's the only way Microsoft will know what not to do," he said. "I don't know what the hell is wrong with them. It is almost like they have some kind of bean counter marking the [channel] decisions."

Vaught speculated that Microsoft's Surface distribution strategy is focused heavily on keeping the cost of sales low by only selling it through a few partners. "It is a larger-order, fewer-transactions channel strategy," he said. "If they gave it to everyone, there would be lots of partners placing orders. They are limiting it to a smaller set of big partners. That is my guess."

One top executive for a large Microsoft enterprise partner, who did not want to be identified, said the decision to not let partners sell Surface is going to be a hot issue at Microsoft's Worldwide Partner Conference in Houston next week. "It's a bad decision," said the executive, who had been led to believe that partners would soon be able to sell Surface. "I am getting beat up on this from my sales reps. They are selling Samsung and Apple tablets. This is the first product we have not been able to sell from Microsoft in 16 years."

The top executive said he expects a significant backlash from the LARs-only Surface decision. What's more, he said, Microsoft may have misjudged just how much traction partners are getting with Apple and Samsung tablets. "We aren't going to wait for Microsoft," he said.

The CEO for a large Microsoft enterprise partner, who did not want be identified for fear of alienating Microsoft, said the software giant has a myopic view of the channel that favors fulfillment partners rather than solution providers selling business solutions.

"Microsoft has obviously decided that the benefit of having a focused and limited channel of LARs is better than having a value-added solution provider channel," said the CEO, who is attending the Microsoft partner conference next week. "They don't have a full appreciation of the capabilities and power of the value added channel," the CEO said.

The question Microsoft must grapple with as it builds out its Surface strategy is whether they want to compete en masse with its solution provider partners, said the CEO. "If they intend to be a significant player in the hardware side of the business and sell a lot of these things as well as add-on products, they need a real channel strategy," said the executive. "They are going to have limited success with this channel model. It is only going to go so far. I don't think it will make or break our strategy or our [sales] year as to what Microsoft chooses to do, but it will make or break their success with Surface depending on how they choose to collaborate, work or not work with the channel."

The CEO said Microsoft at its core does not "get" the benefits of the value-added solution provider channel. "That means Ballmer doesn't get it," said the CEO. "This is not unusual behavior for Microsoft. I don't build my business around Microsoft, what they do and how they value and treat partners. Microsoft's view of a partner is what can you do for me. It's not a good channel strategy."

Bob Venero, CEO of Future Tech, a Holbrook, N.Y.-based Microsoft partner that recently closed a 2,500 iPad deal with JetBlue, said he is "dumbfounded" by Microsoft's "slap in the face" to its solution provider partners in favor of LARs.

"Instead of leveraging the channel that helped make it successful, Microsoft decided to initially sell Surface direct itself, which didn't go well," said Venero. "Now they are going a different route to LARs, which again ignores the power of its more than 100,000 VARs in this country. Why not leverage those partners to sell Surface? It doesn't make business sense."

PUBLISHED JULY 1, 2013