These are uncertain times in Europe. Companies are navigating challenges stemming from inflation, global supply chain issues, a war on our doorstep, the resulting energy crisis, and ongoing IT skills shortage.
Many businesses are struggling to balance how to optimize operational efficiencies with the pursuit of long-term growth. At Microsoft, we know that customers who invest in technology and innovate through challenges reap the benefits of their digital strategy. We witnessed this during the pandemic, where technology enabled many companies to maintain business continuity and drive innovation, despite tough circumstances.
Further, it’s important to note the importance of innovation to Europe’s overall growth and prosperity. The European Commission estimates that the EU’s data economy will be worth €829 billion by 2025 – up from €301 billion in 2018. Ensuring this trajectory continues is important for the region’s businesses and communities alike.
To better quantify the innovation economic opportunity, we commissioned IDC to perform research among our partner ecosystem across 15 European countries . The study was designed to identify the growth prospects that exist for our partner ecosystem, based on how our customers are innovating to grow, despite economic headwinds.
Partner economic value creation
IDC statistics show European customers are continuing to persevere, if not accelerate, their digital transformation journeys and migrations to the cloud. Between 2021 and 2026 the compound annual growth of total software spending is estimated to be over 10 per cent. In comparison, the growth of public cloud is projected at 22 percent as customers turn to the cloud to support their digital transformation efforts.
As Europe’s businesses continue to innovate, Microsoft partners report a positive outlook. In 2021, partners in Europe experienced 18 percent revenue growth related to their Microsoft business and estimate a further 20 percent growth in 2022.
Those partners who utilize Microsoft’s trusted platform and create unique cloud-based solutions for their customers, are positioned for even greater growth and profitability. One of the key takeaways from the IDC eBook is that for every US$1 of Microsoft revenue, software-led partners make US$7.86 and service-led partners make US$5.75 in economic value.
In conducting this study, IDC’ s Senior Research Director for EMEA Partnering Ecosystems, Stuart Wilson, explained, “These multiples are particularly important in the European theater where Microsoft’s partner landscape is highly diverse, with a blend of established partners and emerging ones focused on specific areas or activities. This partner base is also finding new ways to work together through partner-to-partner collaboration within the wider ecosystem.”
Deeper engagement, stronger outcomes
The data also shows that partners who invest the most in their Microsoft relationship realize the greatest economic benefits. With deeper engagement, companies can create their own intellectual property and take advantage of opportunities to co-sell, co-innovate and develop cloud-based software and services.
While there is a wide variety in partner business models and approaches to teaming up with Microsoft, partners with the deepest engagement levels experience superior economic outcomes. Specifically, partners that derive at least 75 percent of their revenue from their Microsoft-related activities have the highest profitability, with an average gross margin of 30 percent. In comparison, partners with the lowest share of Microsoft- related revenue (1 percent-25 percent) had an average gross margin of 14 percent.
Microsoft Cloud Partner Program
At Microsoft, we are committed to supporting our highly diverse partner ecosystem. We have some 75,000 partners including local partners, ISVs, service providers and global players. Together our aim is to help customers from SMBs to major corporations persevere and achieve their digital ambitions. And this has a positive effect on local economies and societies—so nations can keep developing and improving the quality of life for their citizens, even in turbulent times.
Microsoft recently launched its new Microsoft Cloud Partner Program, an evolution in how it supports customers to develop and extend on the Microsoft Cloud, while keeping partners at the forefront of cloud innovation. A great example is the world’s first AI-created whisky solution developed by Microsoft partner Fourkind – a Finnish technology consultant – for Mackmyra.
With the breadth of the Microsoft trusted platform – from Azure Core, Security, Modern Work, Digital & Application Innovation, Data & AI, and Business Applications; to purpose-built partner offerings, and extensive customer reach – the Cloud Partner Program helps partners to quickly develop and sell best-in-class solutions, services, and cutting-edge devices to customers around the world.
Unlocking value for the customer
A core advantage of partnering with Microsoft is access to a variety of go-to-market resources, including the commercial marketplace and Microsoft Azure Consumption APIs. IDC found that most successful partners engage with these offerings, with a special emphasis on Microsoft field-sales engagement. This helps partners develop differentiated, value-added approaches for customers.
Microsoft’s business success is based on the success of our customers and partners. For me, the findings of this IDC eBook speak to the positive impact of this strategy. And the positive growth outlook of our European partners shows that our customers are seeing clear, compelling, and immediate value of their transformation efforts.
It’s incredibly gratifying to see our partners thrive. Our partners are the change agents that are helping to accelerate Europe’s digital ambition to drive economic growth and real societal progress. This allows us to deliver our mission to empower every person and organization in Europe to achieve more by building resilience for today as well as unlocking growth opportunities for tomorrow.
 IDC eBook, sponsored by Microsoft, Microsoft Ecosystem Value: Partners Paths to Profitability and Growth, (Doc. #EUR149732822, October 2022) survey to 288 partners from Microsoft, with 53 in-depth interviews, in Austria, Belgium, Denmark, Finland, France, Ireland, Italy, Germany, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and United Kingdom.