Q&A: Microsoft Continues to Invest in Next Evolution of Customer and Partner Focus

REDMOND, Wash, June 24, 2002 — Microsoft Corp. today announced that it will make unprecedented investments in expanding its U.S. sales force in the fiscal year that begins next week, including the creation of more than 450 positions. The investments will be accompanied by a major restructuring of the U.S. sales teams. To explain the moves, the motives behind them and what they mean for customers, PressPass recently spoke with Kevin Johnson, senior vice president of Microsoft Americas.

Kevin Johnson, Senior Vice President, Microsoft Americas

Johnson leads the company’s team of more than 6,000 sales, marketing and services professionals in the United States, Canada and Latin America. Johnson is known for his long-term approach to delivering value by helping customers improve business agility and realize strong financial results. Johnson, who joined Microsoft in 1992, has worked in the technology industry for more than two decades and is a member of Microsofts Business Leadership Team, which is responsible for broad strategic and business planning for the company.

PressPass: What changes is Microsoft making?

Johnson: We are expanding our focus on selling solutions — software and related technologies that meet specific business needs — rather than just software, and we are doing it in several key ways. First, we’re adding solutions groups for several “vertical” industries: retail, healthcare, professional services, media and entertainment, oil and gas, automotive manufacturing and high-tech manufacturing. We are also expanding our sales force to staff these groups.

Two years ago, we started our first five vertical groups; now we have 12. In each group, we’re expanding and concentrating marketing and sales resources into a single-line organization that’s better able to serve its specific market. Our vertical groups that serve geographically based markets — such as automotive manufacturing in Michigan or oil and gas in Texas — will actually be moved to those areas to make it easier for them to serve customers and partners there.

This investment isn’t just an initiative for our largest enterprise customers. We’re also expanding our support to small- and medium-sized customers. We’ve had a lot of feedback from our partners and customers about ways we could be more effective; we’ve listened and responded. For example, we’re making a significant investment to expand the number of partner account managers in the field. These people work with our partners to enable them to stay knowledgeable on our solutions as they work with customers. We’re also expanding our Big Day event program. These events are held around the country and bring together hundreds of people from small- and medium-sized businesses to learn about our solutions, and to meet partners who can help them to implement them.

PressPass: How will these changes affect Microsofts workforce?

Johnson: We are creating more than 450 new sales positions to staff these new and expanded initiatives. That’s a 20 percent increase in field sales and marketing resources — our largest ever one-time increase in the U.S. In fact, this increase is greater than all of the combined increases we’ve made over the past several years. That should demonstrate how serious we are about better serving customers and working more closely with partners.

We’ll begin transitioning the sales team immediately. While the overall sales force in the U.S. will grow more in FY03 than it has over the past 10 years, we will need to redeploy approximately 115 employees nationwide into positions that map to the sales organization’s enhanced structure. I’m very proud of the people we have hired in the sales organization. They’re incredibly smart and they also understand the fast-changing nature of our industry. They’re fluent with change. They’ll do everything possible to help us implement this change, and we’ll do everything possible to smooth the impact on them, as well.

Even after reassigning current staff, we will have a major hiring campaign ahead of us. We’ve already started the process. We expect to complete the hiring over the next six to nine months.

PressPass: Why this change and why now?

Johnson: Everyone in the technology marketplace is at an absolutely crucial crossroads. This isn’t just another upgrade year. After the phenomenal growth of productivity during the 1990s — much of it due to technology investment — companies are once again assessing their technology investments and strategy for the long term for the next decade.

Customers and partners who have taken a good look at the Microsoft .NET Framework are absolutely convinced — as are we, of course — that it will deliver a wave of productivity gains to dwarf what we saw in the last decade. We don’t want customers to be left behind by the .NET revolution. That means we have to be completely focused on demonstrating to customers how .NET solutions can make the pivotal difference in their particular businesses. We want to deliver greater value to customers and work more closely with partners, in both the large enterprise and small- and medium-sized business spaces. That’s the driver behind our sales force expansion and restructuring.

PressPass: Isn’t selling solutions based on their benefits to specific industries and companies different from how Microsoft has operated in the past?

Johnson: This is a major change from how technology companies across the board operate. Typically, technology companies have sold products, not solutions, and they’ve done so on the basis of product features. Customers had to do much more of the work of figuring out what those products meant to them and how they could use them as the building blocks for solutions.

Over the past 27 years, Microsoft has evolved as a company and evolved in our relationships with our customers. We continually look for ways to improve the value we deliver to customers. Customers, meanwhile, are using our products in new ways — such as using .NET Enterprise Servers for critical line-of-business applications. In turn, this leads our customers to set higher expectations for Microsoft, our sales, service and support. The fact that our business is growing at a rapid rate is a signal from the marketplace that we are on the right track.

PressPass: So today’s announcement is an evolutionary development, not a radical break?

Johnson: This is a step in a journey we started two years ago, when we first recognized that we had the opportunity to add value to our customers by reorganizing our sales structure. We took our first step then to organize around some key vertical market segments — financial services, network service providers, state and local government, federal government and education. In each of these segments, we felt that with the help of our partners we could deliver increased value through industry-specific solutions. Last year, we took the second major step when we reorganized our business groups to also focus on solutions. This year, we’re taking the third major step on this path.

PressPass: What will this expanded vertical focus mean to customers whose businesses don’t fall within one of Microsoft’s vertical groups?

Johnson: The changes we’re making have clear benefits for all of our customers. While we are beefing up our vertically focused sales staff, our geographically focused staff will remain a primary vehicle for serving our customers and partners. Our increased sales investment supports our geographies where we have added new positions such as Business Productivity Advisors to help customers achieve higher levels of knowledge worker productivity, Developer Evangelists to reach out to developers with .NET, and Product Technology Specialists to enable customers to benefit from our server solutions. Also, there will be extensive cross-pollination between the groups, so the key learnings that come from innovative solutions in our vertical groups will quickly benefit all of our customers.

PressPass: You’ve said that the reorganization will enable Microsoft to work more closely with its partners. How do you envision that happening?

Johnson: Let me give you some examples. Many of the systems integrators and independent software vendors (ISVs) with whom we work are already organized by vertical market segments. By aligning ourselves to their structures, we can work more closely with them because members of our sales team can maintain ongoing relationships with members of their teams. This will directly benefit our mutual customers.

We recently helped provide a complete online banking solution for a major New York financial institution. Because our sales team is already aligned to serve the financial services market, our sales professionals there knew exactly how to work with the right ISV, solution partner and hardware manufacturer to provide the ideal solution.

That’s in the large enterprise space. In the small- and medium-sized spaces, we have hundreds of managed partners throughout the United States who work with our partner account managers. They’re based in the same cities; they know each other well. We use that knowledge to route customers to the right partners, for their mutual benefit, and then we support the partners with resources and expertise to ensure the engagement is successful. Small-business customers, meanwhile, benefit from our close relationships with value-added providers (VAPs). Our seminars and events for VAPs enable them to stay abreast of changes in technology and how those changes can form the basis of superb solutions for small business. And when we do our Big Day events for customers, we can use our relationships with VAPs to ensure that we’re bringing the right VAPs together with customers.

PressPass: How does Microsoft’s approach differ from that of its competitors?

Johnson: Clearly, this approach gives us a strategic advantage over our competitors. First, we’re offering a degree of specialization — with special attention for vertical market segments and for markets based on customer size — that many competitors aren’t in a position to provide. Second, in comparison to companies that can specialize, such as IBM, our strategy to collaborate with partners is another strategic advantage. Unlike IBM, we’re not trying to boost profits through a “for-profit” services business. We’re trying to do what we do best — innovate the best technology — and then work with partner companies who are inevitably closer to the customer, so that everyone benefits: the partner, Microsoft and, most of all, the customer.

PressPass: Customer benefit has been a constant theme in your comments.

Johnson: Absolutely. We start from the premise that we have to find new ways to give customers more of what they want and need in order to deliver solutions that are targeted better than ever before to address real customer needs. The result is a Microsoft sales organization that is pumped as never before to turn this premise into reality. In vertical markets, we’ll better understand customer challenges and partner opportunities, and we’ll have better solutions to meet them. In small- and medium-sized areas, we’ll offer equally focused solutions and resources.

But we won’t stop here. We’ll continue to evolve our sales strategy and implementation to meet the needs of customers and partners. We will expand this approach to help support our international partners and customers. We will help provide and support increasingly productive line-of-business solutions that aren’t yet possible. As new applications come to market, we’ll find new ways to bring these solutions to partners and customers to maximize customer value and to make customers as productive as they can be.

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