Greetings! My name is Dan Lohmeyer. I work on Eddie’s team as the Director of the ISV Strategy group. I’ve been at Microsoft for four years, always focused on ISVs. Previously, I was a management consultant at McKinsey and Company (Palo Alto, CA) and an engineer at Lockheed Martin (Lexington, MA). I graduated from MIT with a dual-degree in electrical engineering and computer science. My team is focused on developing the strategies and programs to help ISVs grow their businesses with Microsoft.
One of the questions I frequently get asked is “how does Microsoft work with ISVs?” (aristippus raised this in his response to Eddie’s introduction). Fortunately, I spend most of my time addressing this question… what ISVs should we engage, with what resources, through what programs, with what measurements of success, and so on.
To start, I’ll offer a quick primer on the software industry, which helps explain how Microsoft engages with ISVs. There are around 75,000 ISVs worldwide that drive approximately $250B of the software industry revenue. Here, we define an ISV as any company that generates over $5M in software revenue annually OR any company with >30% of their revenue coming from software. (We adopt IDC’s definition of “software revenue”, meaning any upfront license or recurring maintenance revenue associated with the sale of a software application.)
If you stack-rank all 75,000 ISVs based on their software revenue, you discover that the top 2% drive 80% of the industry revenue. This top 2% corresponds with 1,700 ISVs and includes everyone over $10M in software revenue. So the classic 80/20 rule is 80/2 with ISVs... indicating most of the software revenue is generated by a relatively small number of companies.
Microsoft has four broad categories of ISV engagement: Global, Field, Tele, and Self-Service. I’ll walk through each of those and you’ll see a tight correlation with the industry view.
Global ISVs: There are around 200 ISVs that we engage with directly from Redmond. These companies have a Business Development Manager (BDM) and ISV Evangelist assigned to work with them and be their conduit into Microsoft. We have about 100 people who work full-time with these accounts. These ISVs are selected annually and we look for ISVs over $100M in annual software revenue with a strong international presence.
Field ISVs: There are around 2,500 companies we engage with through our subsidiaries (countries). These companies have a Partner Account Manager (PAM) and ISV Evangelist assigned to work with them. There are around 300 full-time people working with these ISVs and lots more who engage as part of their job (e.g., a PAM who covers an industry and spans ISVs, SIs, VARs, etc). These ISVs are also selected annually. We typically look for ISVs that generate over $15M in software revenue annually, but this threshold varies across countries.
Tele ISVs: There are around 5,000 ISV we engage through our subsidiaries with a scalable approach. These companies either have an assigned Tele-PAM or a call-center they can contact for support. Selecting these ISVs and assigning resources is a subsidiary decision and my team doesn’t get very involved. Some subsidiaries have implemented a $5M annual software revenue threshold. This is also the minimum level of engagement a Certified or Gold Certified ISV receives.
Self Service: This captures all ISVs through a series of programmatic engines. It’s hard to count the number of ISVs we engage through these programs, since these companies often take advantage of our offerings without us knowing or flagging them as an ISV. However, there are some key programs that ISVs can take advantage of here – Empower and INNOVATE ON being two great technical enablement programs. Check out www.microsoft.com/isv for more info on these programs.
Well, that’s the whirlwind tour! In my next posts, I’ll drill down into each of these categories in turn and provide some examples. Please let me know if there are other aspects of our business you would like me to cover.