Summary:
Microsoft has created a new Small and Medium Enterprises (SME) and Channel Partner organization mid-fiscal year following execution challenges in Azure for SMBs.
Becoming a Solutions Partner has become more difficult, with stricter requirements and more prescriptive incentives, despite an overall increase in incentive payouts.
Microsoft's partner organization has shifted to favor enterprise partners over SMB-focused ones.
Microsoft may have overestimated SMBs’ capacity to adopt the latest technologies.
Expect greater empathy for smaller partners, including new solution designations, incentive adjustments, and increased support.
Microsoft’s SMB Execution Challenges
During Microsoft’s Q2 earnings call, CFO Amy Hood acknowledged Azure consumption challenges, particularly among SMBs, attributing them to go-to-market execution issues:
“Growth in non-AI services was slightly lower than expected due to go-to-market execution challenges, particularly with customers that Microsoft primarily reaches through scale motions, balancing near-term non-AI consumption with AI growth.” In the Q&A session, Hood elaborated: “On the non-AI side, the challenges were in what we call scale motions—customers we reach through partners and indirect selling. These customers are trying to balance AI workloads with ongoing migrations and other fundamentals. We adjusted our sales motions in the summer to strike this balance, but these changes take time to materialize.”
In response, Microsoft announced the formation of a new Small, Medium Enterprises and Channel Partner organization. While some publications framed this as a channel restructuring, our understanding is that Ralph Haupter will oversee the overall SMB business alongside a separate channel organization.
Mid-year organizational changes at Microsoft are rare, suggesting the urgency of the SMB execution issue.
A Brief History of Microsoft’s Partner Organization
Microsoft’s last major channel reorganization occurred in FY18 (July 2017), when it consolidated various partner teams into a unified One Commercial Partner (OCP) group, now known as Global Partner Solutions (GPS).
Before FY18, partner engagement was fragmented across:
Enterprise Partner Team – Focused on large system integrators.
Public Sector Partner Team – Managed government and education accounts with limited resources.
OEM Partner Team – Worked with large hardware vendors.
SMB Partner Team (SMS&P) – Managed small, medium, and corporate accounts and the broader Microsoft Partner Network.
Global ISV Partner Team – Focused on software vendors.
This consolidation simplified partner engagement but also centralized decision-making, limiting flexibility at the field level.
Microsoft’s Three Sales Motions
Microsoft’s sales strategy is divided into three distinct sales motions:
1. Enterprise (200-300 accounts per country)
Directly managed by Microsoft’s largest sales teams.
Supported by:
Account Managers (AMs)
Account Technology Strategists (ATS) (CTO-like role for accounts)
Specialist Sales (STU) – Workload-specific expertise
Customer Success Unit (CSU) – Cloud architects and customer success managers
Microsoft Consulting Services (ISD) – Now integrated into broader cloud transformation efforts
75% of Microsoft’s field resources are allocated to Enterprise customers.
2. Corporate Accounts (200-500 accounts per country)
Similar sales motion as Enterprise but with reduced coverage.
1 Account Manager per 50+ customers, with limited STU support.
No dedicated ATS or CSU teams.
3. SMB (The Rest)
Majority of businesses fall into this segment.
Top SMBs get limited direct attention, while the rest rely on:
Digital Sales (outsourced lead generation)
Workload-focused partner managers
Distributors, who are transitioning from transactional sales to partner enablement
Over the past two years, Microsoft has shifted partner support in SMB to distributors, but many distributors are still evolving in their service and support capabilities.
Shifts in Partner Engagement
In Enterprise, Microsoft collaborates closely with large system integrators and a select few managed partners (those with an assigned Partner Development Manager).
However, Microsoft has:
Dramatically reduced the number of managed partners in recent years.
Shifted engagement to distributors and digital-led scale motions.
Limited direct support for non-managed partners in Corporate and SMB segments.
This has left many SMB-focused partners feeling unsupported, particularly as partner incentives and competencies have shifted.
Tighter Partner Certifications & Incentives
The transition from Silver and Gold competencies to Solution Partner designations has reduced the number of partners eligible for benefits.
New designations require not just technical certifications but also dynamic sales performance metrics.
Microsoft claims incentives have increased, but:
Non-Solutions Partners receive no incentives.
Some programs now require specializations, making qualification even harder.
The Result?
More funding for fewer partners.
Stricter performance expectations.
An intentional shift favoring high-performing, larger partners.
For non-managed partners in Corporate and SMB, the whitespace opportunity is massive—but so is the lack of Microsoft direct support.
The SMB Technology Adoption Gap
Microsoft, as a product-first company, expects partners to rapidly adopt and sell the latest technologies. However, this assumes:
SMBs have the expertise to implement AI and cloud solutions.
They can allocate budget and resources for new IT investments.
The return on investment is significant enough to justify the transition.
The Reality?
SMBs often lack in-house IT expertise—most focus on keeping systems operational rather than innovation.
AI adoption is slower for SMBs than enterprises, which have dedicated innovation teams.
Cloud-first strategies are common in large businesses but require more education and support for SMBs.
For Microsoft to succeed in SMB, it must:
Educate customers on cloud and AI benefits.
Provide SMB-friendly incentives and programs.
Support partners in making the transition easier.
Conclusion: What’s Next?
Microsoft’s mid-year reorganization signals a serious execution challenge in SMB. This shift follows five years of evolving partner strategy:
Stronger qualification barriers (Solutions Partner requirements).
Increased funding for select partners, while others are left out.
Fewer directly managed partners.
Relying on distributors who are still evolving.
Overestimating SMBs’ ability to adopt new technology.
Predictions for the Future
More empathy for smaller partners – Expect lower requirements for SMB-focused designations.
Adjustments to incentives – More funding for smaller partners and mid-market solutions.
Expanded SMB enablement programs – Microsoft may strengthen distributor support or reintroduce some direct touchpoints
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