No radical changes under new Microsoft Canada president, say analysts

The decision to make Eric Gales Microsoft Canada Co.’s next president reflects the importance of small to mid-market businesses and partners to the company’s strategy, an industry analyst said.

The announcement was made internally to Canadian staff last Friday.

Gales, after spending three years heading the small to mid-market solutions & partners (SMS&P) division for Microsoft Canada, will take over from current president Phil Sorgen.

The fact that 97 per cent of Microsoft Canada’s revenue comes from partner channels speaks to the importance of the company’s partner ecosystem, said Nigel Wallis, research director for application software and services with Toronto-based IDC Canada Ltd.

When looking at whom the SMB market in Canada considers a “trusted advisor” and the provider of their core IT component, “you’d be hard-pressed to find shops that don’t include Microsoft in that mix,” said Wallis.

After three years as president of the company’s Canadian division, Sorgen will return to Microsoft headquarters in Redmond, Wash., to head the SMS&P division. Sorgen will remain in Canada through July to aid with the leadership change.

Wallis expects there to be no radical changes under the new leadership. Gales, he said, will apply his experience in SMS&P to improving what Microsoft Canada is already doing in the Canadian technology sector, platform evangelism and recruiting and sustaining the channel. The fact that Microsoft has put that degree of effort towards not just selling to the Canadian IT sector, but supporting developers is an “important part of positioning Microsoft Canada moving forward as an independent entity and not just a subsidiary,” said Wallis.

According to James Alexander, senior vice-president with London, Ont.-based Info-Tech Research Group Ltd., Microsoft recognizes the need to equip partners more thoroughly to sell integrated business solutions. It’s something that Gales already began to put into action in his previous role as head of the SMS&P division for Microsoft Canada, and will continue to do as president, said Alexander.

“It’s all about moving into a larger solution space and equipping partners to do that,” he said, adding that the partner ecosystem has always been important to Microsoft and will continue to be so.

But it’s a big step, said Alexander, from managing a single business unit to managing multiple business units “and I’m sure there will be lots of transitional challenges with that, particularly for someone who, by his own admission, spent all of his life in the partner and small and medium business community.”

In an e-mail to Microsoft Canada staff, Sorgen wrote: “I am delighted that Eric will take over as President, Microsoft Canada and having worked with him for the past three years, I am confident that his track record most recently in SMS&P and across multiple business areas in the U.K., and prior to Microsoft will serve him well as he leads Microsoft Canada forward.”

Alexander said he was not surprised by the news of the appointment adding that it’s “about time they picked someone with recent Canadian experience for the role.”

That said, Alexander thinks Sorgen did a great job building the business and nothing should be read into his departure besides the fact that “his time is up and he’s gone to his just reward for (building the business).”

After about three years in the role, Sorgen reportedly grew the Canadian subsidiary from US$800 million to $1.3 billion last year. If anything, Sorgen’s experience in a small to mid-market country like Canada will prepare him well for his new role in the U.S., Alexander said.

Gales has some immediate challenges facing him in his new role. Citing the $1.3-billion revenue Microsoft Canada made in 2008, Wallis said the macro economic climate will make it tricky to be nimble because “when you get over a billion (dollars), it’s hard to move faster than the actual market is going just because you are so big.”

Agility is particularly important for the company given customers, in light of tight budgets, will defer purchase of technologies like Microsoft’s operating system and Windows Server. “He must come up with ways to incent partners and channels to come up with efficient ways to get around that, and that’s through financing or other means,” said Wallis.

Mobility will be an important area for Gales to focus on, said Wallis, in light of the myriad announcements surrounding devices like the iPhone and the Palm Pre. While Microsoft is making moves in the mobile arena with Windows Mobile 6.5 later in 2009 and Windows Mobile 7 sometime in 2010, Wallis said it’s “imperative for Microsoft not to fall behind because you can see how much people are bringing along personal productivity through mobile devices.”

Also, the launch of some major products in 2010, specifically Office 2010 and Windows 7 are critically important for the partner base and for Gales, said Wallis.

But in the medium to longer term, focus on Microsoft’s software and services strategy is vital if the company is to prevail over pure cloud-based efforts from companies like Google Inc. and, said Wallis. “I see that as a longer-term battle that’s three to seven years out,” he said, “but that’s an ongoing strategic challenge for Microsoft going forward.”

But overall, Wallis noted that although the bulk of Microsoft’s revenue is Windows Server and Office products, Gales must also give attention, using the company’s huge R&D budget, to emerging technologies or risk Microsoft being left behind.

Alexander thinks that one immediate challenge facing Gales will be to find a replacement for the role he just vacated. He doesn’t expect that Corinne Sharp, whom Gales recently placed as channel chief, would be a possible candidate given her newness to the post.

Gales was not available for comment.

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