Asked on Monday what it will take for partners to qualify for Advanced Competency status in the newly updated Microsoft Partner Network, Microsoft channel chief Allison Watson smiled, held her index finger up and said simply, “Excellence.”

How does Microsoft define partner excellence? That’s still being assessed, Watson explained, but a few things are certain: Customer satisfaction levels will be crucial. The ability to demonstrate proven, highly skilled expertise in one or more solutions areas also will be key. Revenue targets will matter, especially for volume and transactional partners.

“We want to grow our partner base in every country and in every competency,” Watson continued, speaking at the Worldwide Partner Conference in New Orleans this week. “But we must keep the bar at a level that when [partners] are in front of our customers and carrying our brand it’s in a way that our customers expect and partners are proud of.”

It has been just two days since Microsoft unveiled wholesale changes to its partner program that will include new qualification requirements and a laser-like focus on attaining competencies. The deadline to meet the requirements necessary to qualify for the two top program levels, Advanced Competency and Regular Competency, doesn’t arrive for 18 months, but the proverbial race is on. Microsoft partners will need to quickly begin evaluating how the changes impact them and what level of investment they are willing and able to make.

Practically speaking, not much is mandated in the short term, but a few early actions should be noted:

• Gold Certified partners enrolling or re-enrolling in the partner program for 2010—which is December as Microsoft is on a July 1-June 30 fiscal year—must have participated in Microsoft’s customer satisfaction survey (Customer Satisfaction Index) with the last year.

• Microsoft is urging partners today to update their marketing collateral to highlight the skills competencies and designations they’ve attained in the current partner program, while for now also continuing to use Gold Certified and Certified logos. The 2011 re-enrollment period will mark the transition to the new Microsoft Partner Network logo and the updated set of competencies. The company will retire existing logos six months after that.

• Microsoft plans to send advanced notification of updates and changes as they are implemented over the course of the 18-month period, but partners can also access information now at the Microsoft Partner Portal.

The biggest takeaway from the new program is how competency-centric it is. Microsoft is reducing the number of competencies it currently has from 46 to 30 and will be changing some of the categories to better reflect from a customer perspective what skills they represent. For example, today’s Information Worker competency, which encompasses skills in Office and Windows clients, is going to be renamed Desktop Platform, a moniker Microsoft believes needs less explanation to an end customer.

The newly aligned competencies, which Allison says she wants to map to the varied business models of partners, will go into effect in December. In order to qualify for the Advanced Competency, those partners that are already Gold Certified or aspire to be are going to have to demonstrate an even higher level of technical competence in their respective areas than they do today to prove both customer satisfaction on Microsoft’s annual survey and deliver customer reference proof points, and to commit to meeting specific joint direct revenue or influence revenue quotas, Watson said.

“Of the 640,000-partner ecosystem [worldwide], we have many different business models, so how some partners make money is very different from how others do,” she explained. “Our intent is to be able to equalize the best of the small partners, the best by partner type, all so customers understand the differences. It’s tricky on how to do it right.”

Some partners have reacted favorably to the program’s emphasis on specialization.

“In our experience, most of our customers showed interested in engaging us based on the competency or subject matter excellence that we had rather than the Gold status,” said Shiv Kumar, executive vice president at ZSL, in Edison, N.J. “So we are happy about the changes that Microsoft is making and giving importance to the competencies which would help both solution providers and customers to stay focused and get the value.”

Kumar said that ZSL is going to pursue the Advanced Competency level of the partner network and that he hopes in the end his organization gets a better return on its overall Microsoft partnership investment.

But not all partners are jumping for joy about the changes—some are downright wary. One Gold Certified partner that specializes in complex custom application development projects worries that its specialized area might not be served well in the new structure.

Other partners just hate change, period. One longtime Gold Certified partner, in response to a Channel Insider story on the new program, wrote: “Get people running the partner program that know what the real world is like and stop changing the program just when it starts to get remotely close to working. This is the 5th major change in 8 years. This is absolutely crazy.”

Watson said partners provided feedback that the Gold Certified status was diluted and not necessarily giving them advantage in the field. Today there are 16,700 Gold Certified partners worldwide, with 4,500 of them residing in the United States, according to Microsoft. Watson said the more stringent skills requirements of the Advanced Competency will help partners stand out.

“Partners pushed us on this because they wanted to be differentiated in the marketplace,” she said. “We are bringing customers to partners in increasing numbers and bringing partners into more of Microsoft’s general business advertising. So a partner should ask, ‘If I invest earlier and deeper, shouldn’t I be differentiated from those that don’t?’”

Investment, of course, is going to mean training, certifications and dollars spent, which is why partners need to determine where they fit in the program as soon as possible in order to meet the deadline—or opt out, if the case may be.