1 SureStep Profitability Benchmark OverviewMicrosoft Office 12/1/2017 SureStep Profitability Benchmark Overview © 2012 Microsoft Corporation. All rights reserved. Microsoft, Windows, and other product names are or may be registered trademarks and/or trademarks in the U.S. and/or other countries. The information herein is for informational purposes only and represents the current view of Microsoft Corporation as of the date of this presentation. Because Microsoft must respond to changing market conditions, it should not be interpreted to be a commitment on the part of Microsoft, and Microsoft cannot guarantee the accuracy of any information provided after the date of this presentation. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

2 12/1/2017 Why are we here? The world is changing—now is the right time to transform your business to the cloud! Transformation requires change. To successfully move to the cloud, you might need to: Modify your business model. Balance your cash flow. Train your employees. The best practices help accelerate your journey to the cloud: Assess where you are now. Identify steps that you can take now to transform your business to the cloud. Implement these steps, and start down the road to cloud success. © 2012 Microsoft Corporation. All rights reserved. Microsoft, Windows, and other product names are or may be registered trademarks and/or trademarks in the U.S. and/or other countries. The information herein is for informational purposes only and represents the current view of Microsoft Corporation as of the date of this presentation. Because Microsoft must respond to changing market conditions, it should not be interpreted to be a commitment on the part of Microsoft, and Microsoft cannot guarantee the accuracy of any information provided after the date of this presentation. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

3 Stages on the journey to cloud successMicrosoft Office 12/1/2017 Stages on the journey to cloud success While each partner is unique, there are behaviors and activities that distinguish partners at different points on the journey. New to the cloud Early stage Mid stage Advanced stage Not yet selling cloud solutions Early sales Stable cloud revenue Most profitable cloud partner As an inactive partner, you are: Identifying the initial steps you can take. Starting to sell cloud solutions. Starting to build your online presence. As an early stage partner, you are: Focusing on optimizing cash flow and training. Focusing on transactional and lower-margin activities (such as on-going administration and support). As a mid-stage partner, you are: Differentiating your cloud solutions by building richer offers. Building stable cloud revenue. Continuing to tweak and improve your business to better support the cloud. As an advanced-stage partner, you are: Building long-term relationship with your customers. Focusing on business value and higher-margin activities. Developing strategic partnerships so that you can scale upon demand. Start Grow Optimize © 2012 Microsoft Corporation. All rights reserved. Microsoft, Windows, and other product names are or may be registered trademarks and/or trademarks in the U.S. and/or other countries. The information herein is for informational purposes only and represents the current view of Microsoft Corporation as of the date of this presentation. Because Microsoft must respond to changing market conditions, it should not be interpreted to be a commitment on the part of Microsoft, and Microsoft cannot guarantee the accuracy of any information provided after the date of this presentation. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

4 What characterizes advanced-stage partners?Microsoft Office 12/1/2017 They have embraced the cloud They are more profitable They attach more services (inclusive of differentiated IP) They have strong recurring revenue They get more leads from digital marketing They have sales teams dedicated to the cloud What characterizes advanced-stage partners? © 2012 Microsoft Corporation. All rights reserved. Microsoft, Windows, and other product names are or may be registered trademarks and/or trademarks in the U.S. and/or other countries. The information herein is for informational purposes only and represents the current view of Microsoft Corporation as of the date of this presentation. Because Microsoft must respond to changing market conditions, it should not be interpreted to be a commitment on the part of Microsoft, and Microsoft cannot guarantee the accuracy of any information provided after the date of this presentation. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

5 Advanced-stage partners are more profitableEarn 8× more cloud revenue Cloud-Based Revenue (median) X 8X Current Profit Margin (median) Realize 3× higher profit margins from cloud productivity solutions Grow you cloud revenue—to do that, sell many more services. Bases: Level 2 (217); Level 3 (117); Level 4 (113) Offers and Planning Cloud-performance financial metrics: (Annual company revenue) S7. What was your company’s revenue for the last fiscal year? Your best estimate is fine. (Overall proportion of cloud-based revenue) S8/8A. What percentage of your company revenue currently comes from cloud-based versus on-premises business? (P12M cloud revenue growth) Q5. Earlier you mentioned that [INSERT S8 RESPONSE]% of your revenue is cloud-based. How much, if at all, did your cloud revenue grow in the last year, including revenue from any associated services? (Current profit margin %—cloud-productivity solutions and associated services) Q7. What is your current profit margin on the cloud-productivity solutions and any associated services that you attach to these? (Proportion of cloud revenue that is service-based) Q19. How much of your current cloud revenue is revenue from services? Your best estimate is fine. Solution-specific financial metrics: (Overall proportion of productivity revenue) S12/12A. Now thinking just about productivity solutions and any associated services, what percent of your total company revenue do they generate? If you sell on-premises productivity solutions, you can include that revenue here. Your best estimate is fine. (P12M O365/Compete revenue growth) Q6. You also mentioned that [INSERT S10 RESPONSE FOR MAIN SOLUTION]% of your revenue comes from [INSERT MAIN SOLUTION]. How much, if at all, did your [INSERT MAIN SOLUTION] revenue grow in the last year, including revenue from any associated services? (Proportion of cloud-based solutions sold) S10. Considering your overall business, what percent of your overall business revenue do these cloud-based solutions and any associated services generate? (Number of cloud seats by solution) S11. Thinking about your sales in the past 2 years, what is the average number of seats you have sold per customer on each solution? Your best estimate is fine. (Proportion of revenue focused on adoption services) Q13C. What percentage of your [INSERT MAIN SOLUTION] revenue is focused on adoption services, including adoption planning, working on related IT and business vision, and change management? Select one response. Earn 1.6× more revenue per employee Revenue per Employee (median) X 1.6X

6 Advanced-stage partners have embraced the cloudAre 3× more likely to recruit staff for the cloud Have positive opinions on opportunities the cloud delivers % Hired Staff for Cloud Business Opinions of Microsoft Cloud Solutions Consider training for the cloud to be 1.7× more helpful Effectiveness Index for Cloud Training Activities

7 Advanced-stage partners sell more servicesAttach twice as many services as early stage partners Earn 50% of revenue from services Cloud Revenue from Services (median) Number of Attached Services (median) 5 services 7 9 Use strategic partnerships to strengthen offers Are 1.6× more likely to upsell products Attach/Upsell Products Grow your cloud revenue—to do that, sell many more services Use strategic partnerships to… Handle components of offer Scale upon demand

8 Advanced-stage partners get more leads from digital marketingMicrosoft Office 12/1/2017 Advanced-stage partners get more leads from digital marketing Spend 4× more on cloud marketing Get almost half their leads through digital marketing Have lead-generation partnerships in place % of Marketing Budget for Cloud Solution (median) % Cloud Leads from Digital Marketing (median) % with Lead-Generation Partnerships © 2012 Microsoft Corporation. All rights reserved. Microsoft, Windows, and other product names are or may be registered trademarks and/or trademarks in the U.S. and/or other countries. The information herein is for informational purposes only and represents the current view of Microsoft Corporation as of the date of this presentation. Because Microsoft must respond to changing market conditions, it should not be interpreted to be a commitment on the part of Microsoft, and Microsoft cannot guarantee the accuracy of any information provided after the date of this presentation. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

9 Advanced-stage partners have sales teams dedicated to the cloudAre 3× more likely to have separate cloud teams Are 2× more likely to include cloud quotas in their sales-team compensation % with a Separate Cloud Sales Team Cloud Sales Compensation—Separate Quotas for Cloud Are 3× more likely to sell directly from the web Are 3× more likely to have an cloud-account-manager team % Ranking Unmanaged Web Sales as Top Sales Motion for Leads % with Account Managers

10 The journey to the cloudThe guidance and best practices that follow can accelerate your journey to the cloud and help ensure long-term success for your cloud business. Step 1: Assess where you are now. Step 2: Identify steps you can take now to transform your business to the cloud. Step 3: Implement these steps, and start down the road to cloud success. Even if not all best practices apply to your business, the guidance will prompt new ideas and will start, grow, and optimize your journey to the cloud.

11 Step 1: Assess where you are nowStart your journey to the cloud with the Partner SureStep Profitability Benchmark Assessment Tool. Enter your business information into the tool: Answer five questions that identify your current cloud performance. Answer 13 questions that help predict your business’s cloud potential. The tool identifies which stage of the journey you are currently in: START: New to the cloud partner GROW: Early-stage cloud partner OPTIMIZE: Mid-stage and advanced-stage partner

12 Where are you now? START: New to the cloud partnerYou are starting the cloud-transformation journey. GROW: Early-stage cloud partner You are in the early stages of cloud sales, or you are starting to stabilize your cloud revenue. You might have high potential but room to improve current performance, or you might be performing well now but need to increase your potential. OPTIMIZE: Mid-stage and advanced-stage partner You are transforming your business for the cloud! When you know where you are now, refer to the slides that follow to see the key priorities for your stage of the journey.

13 Step 2: Identify steps you can take nowLearn from partners who have successfully transformed their businesses. Identify business practices that the most successful partners use. Refer to the accompanying SureStep Profitability Benchmark Playbook for details. Post the Quick Reference page that applies to your current stage where you can see it often; this will help you stay focused on the specific steps you can take. NEW TO THE CLOUD EARLY STAGE MID-STAGE ADVANCED-STAGE

14 SureStep Profitability Benchmark Playbook: Learn best practices implemented by successful partnersWhile each partner is unique, behavioral characteristics distinguish partners across the stages. Learn about business practices that successful partners have implemented to transform their businesses to support cloud sales. Use the accompanying SureStep Profitability Benchmark Playbook to get started. The playbook provides specific steps to take as you move through the stages on your journey to the cloud.

15 12/1/2017 START: Key priorities for partners getting started on their cloud-transformation journeys Build your first cloud-service offer. When building it, attach a set of services, opt for a recurring pricing model, build a unique value proposition, and make sure it is repeatable and scalable. Use small-scale pilot projects to start selling cloud solutions and to develop and test domain expertise and your unique IP. Build your online cloud presence through blog posts, Microsoft Pinpoint, and a basic website. Enhance your credibility with customer references. Train and develop your staff to deliver cloud solutions. Introduce a specific cloud-sales process. Motivate your sales force with cloud incentives. © 2012 Microsoft Corporation. All rights reserved. Microsoft, Windows, and other product names are or may be registered trademarks and/or trademarks in the U.S. and/or other countries. The information herein is for informational purposes only and represents the current view of Microsoft Corporation as of the date of this presentation. Because Microsoft must respond to changing market conditions, it should not be interpreted to be a commitment on the part of Microsoft, and Microsoft cannot guarantee the accuracy of any information provided after the date of this presentation. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

16 GROW: Key priorities for early-stage partners12/1/2017 GROW: Key priorities for early-stage partners Prioritize growing your cloud customer base. Listen to business needs—add cloud workloads, attach new services and IP. Drive down costs by automating your processes and increasing staff efficiencies. Generate leads from inbound marketing by building your digital profile: have online demos and return-on-investment (ROI) tools, improve search-engine optimizations (SEOs), and use social media, etc. Expand your solution offerings by establishing partnerships that help you deliver a more comprehensive solution. Sell to the business decision maker (BDM), move to prescriptive selling, and hire new staff. Implement a cloud-sales plan with quotas and revenue goals for your cloud-sales team. Include incentives to drive up managed-services as well as packaged IP sales © 2012 Microsoft Corporation. All rights reserved. Microsoft, Windows, and other product names are or may be registered trademarks and/or trademarks in the U.S. and/or other countries. The information herein is for informational purposes only and represents the current view of Microsoft Corporation as of the date of this presentation. Because Microsoft must respond to changing market conditions, it should not be interpreted to be a commitment on the part of Microsoft, and Microsoft cannot guarantee the accuracy of any information provided after the date of this presentation. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

17 OPTIMIZE: Key priorities for mid-stage and advanced-stage partners12/1/2017 OPTIMIZE: Key priorities for mid-stage and advanced-stage partners Become a “one-stop shop” for your customers’ cloud-solution needs. Leverage your vertical expertise to differentiate your offerings. Strengthen your digital profile as a cloud thought leader to help ensure a consistent flow of inbound leads. Scale your cloud solutions upon demand through strategic partnerships. Consider channel or geo expansion. Be an early adopter and monitor trends as the industry continues to evolve. Add account managers or customer-success managers to deepen relationships. Engage in activities that drive up customer adoption, and focus on cross-selling. © 2012 Microsoft Corporation. All rights reserved. Microsoft, Windows, and other product names are or may be registered trademarks and/or trademarks in the U.S. and/or other countries. The information herein is for informational purposes only and represents the current view of Microsoft Corporation as of the date of this presentation. Because Microsoft must respond to changing market conditions, it should not be interpreted to be a commitment on the part of Microsoft, and Microsoft cannot guarantee the accuracy of any information provided after the date of this presentation. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

18 Step 3: Implement the steps most appropriate to your businessThe slides that follow detail specific business practices that the most successful partners use. Use these practices to accelerate your journey to the cloud! NEW TO THE CLOUD EARLY STAGE MID STAGE ADVANCED STAGE START: Foundational activities to start selling cloud solutions GROW: Incremental activities to grow your cloud business OPTIMIZE: Additional incremental activities to optimize your practices and help ensure the success of your cloud business

19 Build your offer Build your first cloud- service offer UpsellMature cloud partners focus on understanding the customer’s needs and building a comprehensive set of offers inclusive of fist party IP and Managed Services to meet them. On average, they double the number of attached services per sale of cloud solutions such as Office 365. START GROW OPTIMIZE Build your first cloud- service offer When building your first cloud-service offer, attach an initial set of services, opt for a recurring pricing model, build a unique value proposition, and make sure the offer is repeatable and scalable. Aim to attach five services within 30 days of sale. Attach services such as: Pre-deployment services Deployment and migration services Ongoing management and administration Help-desk support Use small-scale pilot projects to start selling cloud solutions and to develop and test domain expertise and the unique IP. Improve your services’ efficiency and monitor key performance indicators (KPIs) such as utilization rate and gross services margin. Upsell Work to become a trusted advisor by learning your customers’ business needs. Attach cloud workloads and services to further build your IP: Collaboration solutions Conferencing solutions Storage solutions Aim to attach seven services (average) to each sale within six months of sale. Attach additional recurring services: Managed services End-user training Change-management consulting External IT services/CIO services Customization projects On-going retainer hours Use strategic partnerships to extend/handle components of the cloud-productivity offer. Improve your services efficiency and monitor additional KPIs: managed services attach rate, utilization, etc. Become the trusted advisor Become a “one-stop shop” or virtual CIO for your customers’ cloud-solution needs. Use your vertical expertise to differentiate your offerings. Attach additional workloads and services to further build your IP: Enterprise social networking Customer-relationship management (CRM) Attach additional recurring services: Business-process re-engineering IP solutions Consulting solutions Use strategic partnerships so that you can scale upon demand—consider channel or geo expansion. Drive down costs by automating your processes and increasing staff efficiencies.

20 Market your offer Generate awareness of your cloud offersAdvanced-stage partners have established a strong digital profile. They leverage their thought leadership to strengthen their credibility and generate more leads. START GROW OPTIMIZE Generate awareness of your cloud offers Allocate 13 percent of your marketing budget to the cloud. Experiment with inbound digital marketing. Collaborate with Microsoft to generate Microsoft Pinpoint leads. Monitor marketing KPIs: Number of leads Marketing-conversion rate Search-engine traffic Aim to engage in four marketing activities, such as: Community and other in-person events marketing and search-engine marketing Blog and social networking presence Build your online presence with a few customer references and blog posts. Start building thought leadership by publishing industry-related and solution-related content. Generate more leads for cloud solutions Allocate 25 percent of marketing budget to the cloud and aim to generate 25 percent of cloud leads with digital marketing. Have one marketing full-time employee (FTE) and agency or two to five marketing FTEs. Establish partnerships with other cloud partners to generate leads. Monitor additional marketing KPIs: Marketing-conversion rate Advocacy and usage Engage in five marketing activities (average). Types of additional marketing activities include: Optimize your Pinpoint profile Peer-to-peer platforms Search-engine marketing Community and other in-person events Enhance your website with sales presentations for your customers, in addition to online demos and ROI tools. Build an editorial calendar for social media. Strengthen your thought leadership Allocate 50 percent of your marketing budget to the cloud and aim to generate 44 percent of cloud leads with digital marketing. Have 2.5 marketing FTEs agency or six cloud-marketing staff. Partner with PR and marketing agencies to generate leads. Monitor additional marketing KPIs, including: -open rates Digital-marketing spending Unique website visitors Participate in thought leadership: Publish blogs and white papers. Speak publicly about cloud solutions. Collaborate with key opinion leaders. Engage in six marketing activities (average). Types of additional marketing activities include: Paid search, online advertising, and peer-to-peer platforms Social-media and search-engine marketing Comm unity and other in-person events Advanced CRM engine in place.

21 Sell your offer Start building a cloud-sales planAdvanced-stage partners have a comprehensive customer acquisition and retention strategy. They focus on building long-term relationships with their customers. Each upgrade and renewal date is a sales opportunity. START GROW OPTIMIZE Start building a cloud-sales plan Dedicate 10 percent of your sales team to cloud customer acquisition. Provide incentives to drive sales of cloud solutions. Monitor sales-related and account-management-related KPIs: Deal-conversion rates Revenue per deal Number of seats per deal Average revenue per customer Customer-renewal rates Identify sales opportunities with existing customers. Introduce a specific cloud-sales process that is structured in Qualify, Proof, and Close phases. Prioritize growing your cloud customer base Dedicate 25 percent of your sales team to cloud customer acquisition. Create a separate cloud team. Implement a specific cloud-compensation model including renewal rate. Focus on selling to the business decision maker. Monitor additional sales-related KPIs, including: Active usage/deployment rate Churn rate Number of managed services sold per salesperson Monitor account-management-related KPIs including customer-renewal rates. Use direct, unmanaged sales. Move to prescriptive selling. Develop a programmatic approach for consumption, with tools and processes in place to drive customer engagement. Maximize your cloud sales Dedicate 50 percent of your sales team to cloud customer acquisition. Have separate quotas for cloud solutions including usage KPIs such as percent of assigned seats or percent of services utilized. Include incentives to drive up managed-services sales.. Monitor sales-related KPIs, including: Consider adding the number of managed services sold. Include incentives to drive up managed-services sales. Add account managers or customer-success managers to deepening relationships. Engage in activities that drive up customer adoption. Monitor account-management-related KPIs, including: Add the number of assigned seats or cloud consumption. Direct, unmanaged sales provide a prominent source of new revenue. Strategic partnerships to scale on-demand solutions.

22 Embrace the cloud Develop a long-term cloud visionAdvanced-stage partners’ leadership is passionate about the cloud. They hired new employees for the cloud, and they have provided cloud training to their current staff. START GROW OPTIMIZE Develop a long-term cloud vision Engage in training activities, including: Actively training staff on cloud solutions Internally deploying the cloud services that you are selling Gather feedback from staff to gauge training effectiveness. Hire new staff to support the cloud. Invest in training and staff Engage in training activities, including: Train your staff on selling to the business decision maker. Expand training activities to include: Watching online, on-demand training videos Attending in-person training events Reading online materials about new products Reading customer case studies Aim to raise training effectiveness by 50 percent; measure it using performance tests and an internal questionnaire. Hire new staff to support the cloud. Maximize your potential Be an early adopter and monitor trends as the industry continues to evolve. Expand your training activities to include: Reading white papers Attending live webinars Aim to raise training effectiveness by an additional 30 percent. Hire new staff to support the cloud.

23 Leading indicators To help make sure you stay on course during your journey, here is how the best partners perform against the key indicators. Start Grow Optimize Services Performance Gross services margin 35% 40% 45% Managed services margin 50% IP services gross margin 57% 65% Percent of revenue dedicated to marketing (excluding marketing headcount) 2% of revenue reinvested in marketing 5% of revenue reinvested in marketing 8% of sales reinvested in marketing Sales Performance Percent of headcount compensated directly on cloud revenue 30% 60% 85% Net-new customers added in the last 12 months 1–3 3–24 25+ Direct sales cost (percent of topline revenue) ~15% ~10% ~8% Financial Performance The annual number of touch-bases with customers, including marketing and service connections 6+ per customer 8+ per customer 12+ per customer Percent of revenue from recurring sources 15% 33% Earnings before interest, taxes, depreciation, and amortization (EBITDA) 8% 12%

24 Next steps Check out the SureStep Profitability Benchmark Assessment Tool. Refer to the accompanying SureStep Profitability Benchmark Playbook. Post the Quick Reference page that applies to your current stage where you can see it often; this will help you stay focused on specific steps you can take. Share your feedback!

25 12/1/2017 © 2015 Microsoft Corporation. All rights reserved. Microsoft, Windows, and other product names are or may be registered trademarks and/or trademarks in the U.S. and/or other countries. The information herein is for informational purposes only and represents the current view of Microsoft Corporation as of the date of this presentation. Because Microsoft must respond to changing market conditions, it should not be interpreted to be a commitment on the part of Microsoft, and Microsoft cannot guarantee the accuracy of any information provided after the date of this presentation. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION. © 2012 Microsoft Corporation. All rights reserved. Microsoft, Windows, and other product names are or may be registered trademarks and/or trademarks in the U.S. and/or other countries. The information herein is for informational purposes only and represents the current view of Microsoft Corporation as of the date of this presentation. Because Microsoft must respond to changing market conditions, it should not be interpreted to be a commitment on the part of Microsoft, and Microsoft cannot guarantee the accuracy of any information provided after the date of this presentation. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.