Microsoft Raises Bar for Direct CSPs

Microsoft this month is informing partners that requirements and costs to participate in direct billing for Cloud Solution Providers (CSPs) will be increasing, starting this summer, and that revenue requirements are a likely next step in the evolution of the program.

In an e-mail sent to direct CSPs on May 10, Microsoft introduced two new direct-bill requirements that partners must meet before their next enrollment period after Aug. 31. According to the e-mail, which was confirmed as authentic by a Microsoft spokesperson, direct CSPs must now purchase a support plan from Microsoft and demonstrate a few key capabilities.

The support plan options are Microsoft Advanced Support for Partners or Microsoft Premier Support for Partners. The Advanced Support plan will cost U.S. partners $15,000 a year and provides break/fix problem resolution, promised response times of less than an hour for critical issues, and the ability to manage support incidents on a customer's behalf. Premier Support is a more expensive and higher-end offering that is customizable and can cover multiple geographies.

There are also two key capability requirements. One is that partners provide at least one managed service, intellectual property service or customer solution application. The other is that the partner must demonstrate a billing and provisioning infrastructure.

The e-mail also suggested partners should expect CSP-related revenue requirements later. "While there are no specific performance targets associated with these updates, your performance will be considered as a key success component in the future," the e-mail stated. Given that the effective start of the program is Sept. 1, which is partway into Microsoft Fiscal Year 2019, it seems likely that any revenue requirements wouldn't take effect until FY 2020, which begins July 1, 2019.

Microsoft declined to make a partner executive available for an interview. The company did provide an e-mailed statement in which it presented the changes as aligning the CSP direct-bill enrollment requirements with the needs and priorities of customers.

"Cloud enablement services are a critical element of Advanced Support for Partners, making this offering essential to help grow cloud businesses and achieve more active, satisfied customers," the statement said, highlighting a partner-focused element of the lower-tier support package.

Microsoft also presented the rollout of the program as plenty of time for partners to get ready, with partners whose re-enrollment date falls prior to Aug. 31 having 15 months to prepare. "As always, Microsoft provides a long runway to meet any significant changes to requirements which may impact partner status," the statement said.

In its statement, Microsoft also referenced the increased investment and emphasis in the last two years on its network of indirect providers in the CSP program, those partners who sit between Microsoft and about 90 percent of the company's CSP partners, known as indirect resellers. In the United States, there are more than a dozen indirect providers in the CSP program, including Ingram Micro, Tech Data, Synnex, SherWeb, AppRiver and others. Direct CSP partners only make up about 10 percent of CSP partners, company executives have said. "Microsoft's network of indirect CSP partners are also investing in solutions and support to bring additional value to partners worldwide," the Microsoft statement said.

One partner who takes issue with Microsoft's claim that it's providing a long runway is Joel Pippin, president and CEO of Secure Network Administration Inc. in Durham, N.C. A longtime Intermedia and Rackspace partner, Secure Network Administration made the cutover to being a Microsoft CSP enrolled in direct billing about a year ago when Pippin felt the partner program and the Microsoft products had reached sufficient maturity.

Now Pippin fears his renewal will fall right in the earliest wave of the Sept. 1 program, meaning the new requirements will hit his company within about three months.

"As a business owner, I feel cheated. If they were saying, 'We're going to bill you $3,000 or $4,000 a year,' OK. But $15,000? Now Microsoft says pay to play. If they had said pay to play upfront, we would have said we'll stay with Rackspace," Pippin said.

Pippin speculates that Microsoft has calculated the requirement partially in an effort to reduce the number of direct CSPs and herd smaller companies like his into becoming indirect CSPs.

"They're going, 'Ah, we've got too many of these, we've got to weed them out.' They're smart, they probably know exactly where the weed line is in the next couple of years," he said.

For Ric Opal, a vice president at SWC Technology Partners, a large Microsoft partner with a direct billing CSP relationship, the raised requirements and support expenses won't be much more than a blip.

"Unquestionably, customers have to get value from the partner channel. Those two [support agreement] vehicles afford excellent support mechanisms for partners to use if they understand how to amortize that cost over the install base," Opal said. "The intent of the CSP program is to allow partners to be creative with their solutions. I see what they're doing, and it kind of lines up with the intent of the program."

Another group of partners who are unfazed about the immediate set of changes are those who have come to the CSP program from the Dynamics and business applications side, where buying support agreements from Microsoft is a longstanding programmatic requirement.

Julie Lathrop, director of operations at Edgewater Fullscope in Alpharetta, Ga., says that company has maintained support agreements with Microsoft since their partnership started in 2001, and throughout the two years it has acted as a direct CSP. "The changes will not impact us as we already have and use both support offerings with our customers very successfully," Lathrop said in an e-mail interview.

Lathrop says an upside is that any partner involved in the program will have access to Microsoft support beyond the baseline Microsoft Partner Network (MPN) benefit support if an issue arises that the partner can't solve. Indeed, the requirement to spin up a first-line support operation had already been an obstacle to many partners considering enrolling as direct CSPs.

To Lathrop, Premier Support is also an opportunity for direct CSP partners. "Premier was always offered to the larger customers or to customers that could afford it. Many small customers could not take advantage of it and had to take a lower level of support. Now with the partners being able to offer Premier to their customers, the smaller ones can also benefit from the same high quality of support," she said.

She added that Fullscope has built an internal support center and leverages Microsoft to backfill the complex issues: "Our customers expect us to have an outstanding working relationship with Microsoft and, in fact, it is part of our offerings during our sales process. We let our customers know that we can provide them with Tier 1 support and, if necessary, we can escalate it to Microsoft. Great selling point."

Another Microsoft business applications-side partner enrolled as a direct CSP is BroadPoint Technologies in Bethesda, Md.

Andy Gordon, vice president of business development and partnerships at BroadPoint, says the company already maintains an Advanced Support agreement with Microsoft, and is seeing strong gains as a direct CSP partner.

"Through the CSP program, Microsoft has allowed us to be the front line and be the invoicing partner," said Gordon, adding that the company has more than doubled its percentage of recurring revenues by leveraging CSP. "We're slowly but surely turning a corner, and the CSP program has really helped with that."

Given those gains, Gordon says BroadPoint is ready to handle administrative, cost and other back-end changes to the program: "Whatever we have to do, we're on board."

Here's the full text of Microsoft's e-mail to partners:

Here's the full text of Microsoft's e-mailed statement to RCP:

Posted by Scott Bekker on May 17, 2018