Unlocking the opportunities of digital transformation
While economic, health and social factors have reshaped the global business landscape this year, digital transformation has quietly continued to fuel the evolution of entire industries. The widespread shift to remote work has accelerated this transition—earlier this year Microsoft CEO Satya Nadella said our company had witnessed “two years’ worth of digital transformation in two months.” This ongoing advancement offers incredible opportunity for you and the entire Microsoft Partner Network. According to a new Microsoft-sponsored e-book, Digital Transformation 2.0 – The Journey to Disruption, IDC has calculated that for every $1 revenue that Microsoft generates in 2020, partners like you will produce $9.58 of revenue through the services and software you create, sell, and deliver. In total, IDC predicts partners will generate $984 billion in revenue from Microsoft technology this year. By 2024, IDC expects this top line figure to grow to $1.2 trillion, which equates to partner revenue of $10.04 for every $1 of Microsoft revenue.
It’s important to note that these predictions take the impact of the ongoing pandemic into consideration, and the good news for all of us is that IDC expects accelerated growth once the crisis abates. In one IDC survey, 66% of customer respondents forecasted no change or a spending increase globally for 2021. This means businesses will spend $1.3 trillion on IT worldwide across software (24%), services (43%), and hardware (33%).
Over the next five years, IT spending is expected to grow 5.7%, and even greater growth is anticipated from modern cloud technologies such as big data, internet of things (IoT) and artificial intelligence (AI), with double-digit increases projected across the board.
Those areas of increased modern cloud technology market growth are important contributors to the overall economic impact and value of being our partner. When it comes to realizing that value, there is no better way for partners to win business and build revenue than to lead with their own intellectual property (IP). In the IDC survey, Microsoft partners expected average growth of 23% in resale revenue and 27% in IP revenue over the next two years.
Hitting those high growth percentages with IP, however, takes investment. To gain the technology and skills required, 39% of Microsoft partners invest at least 6% of their revenue in developing their own IP, while 29% spend more than 10% on IP.
All of these figures are based on a partner economic value model developed by IDC that provides a quantitative metric for partners to use in defining the value of their Microsoft relationship. The model is derived from the Microsoft Partner Network’s combined revenue and growth, which is validated through a global partner survey and interviews. This value model is described in the new e-book, which looks at the market opportunities inherent in the acceleration of partner digital maturity.
Where transforming partners invest
We’re committed to providing the support your organization needs to meet the evolving needs of your customers, which is why it’s wonderful to see that partners are rapidly adopting Microsoft’s four pillars of digital transformation. In the IDC study, our partners indicated they are ramping up quickly in the following areas:
- Customer engagement: 38% of Microsoft partners now perform very well in their ability to engage the customer lifecycle.
- Employee empowerment: 40% of Microsoft partners perform very well in their ability to hire and train a digital-savvy staff.
- Optimizing operations: 57% of the partners surveyed were able to transform their operations to be more adaptive and agile.
- Product transformation:46% of partners said they are differentiating their offerings with IP that is aligned with their customers’ digital requirements.
For each of these digital transformation focus areas, Microsoft also provides solution development guides to the journey to digital maturity for you and your customers.
As our partners, your success equals our success, which is why we invest in the tools, training and guidance you need to thrive. To assist you with building practices around innovative Microsoft solutions, we publish and update the Microsoft practice development playbooks, which outline the value and opportunity of those individual solution areas and guide you with transforming your own organization. To help accelerate that transformation, we recommend that all partners take the Partner Transformation Readiness Assessment to determine next steps for increasing their proficiencies and their digital maturity. Be sure to watch this video to learn more about the assessment and how it can be used during your business planning.
Microsoft is squarely focused on driving transformation through leading technology, which in turn provides exponential opportunity for you and the rest of the partner network to provide further value to our customers. Together, we’re well-positioned to support our clients along their digital transformation journey, and to unlock greater potential both individually and as a network.
This blog is the first in a two-part series. Look for the next installment, titled, “Partner benefits of pursuing digital transformation.”