Microsoft rejigs VARs' Office 365 and cloud commissions

Office 365 commissions could be slashed by as much as 50 per cent but Microsoft insists move rewards high performing VARs

Microsoft is reducing referral commissions for Office 365 and Exchange Online for partners in favour of providing greater incentives to solution providers who invest and develop practices around its cloud products. The changes go into effect January 25.

Solution providers became incensed last week when CRN US reported Microsoft was slashing Office 365 commissions associated with the Advisor Enterprise Agreement Deploy programme, through which solution providers earn commission by referring subscriptions to Microsoft for fulfilment. The cuts will reduce referral commissions by as much as 50 per cent, according to the CRN report.

Microsoft confirmed cuts are coming, but would not comment on the actual amounts.

Stephanie Rodriguez, director of channel incentives at Microsoft, said the changes were made based on buying and selling trends of partners, and would only affect a small number of partners - mostly non-transactional partners, or solution providers that only produce periodic sales.

While Microsoft is cutting one Office 365 commission and incentive programme, some by as much as 20 per cent, Rodriguez says Microsoft is focusing its efforts and investments to partners who are building practices around Microsoft cloud products; some programmes are increasing as much as 20 per cent. Microsoft has 15 programmes for incentivising partners selling Office 365.

"When we think about enabling solution providers, Microsoft making the contrast between those who do the right thing to understand the performance outcomes," Rodriguez told Channelnomics.

Over the last year, Microsoft has seen a significant increase Office 365 adoption as more syndication and reseller partners push the cloud-based alternative to its legacy license product. Many solution providers have developed practices around migrating and managing Microsoft cloud accounts. Such professional and managed services tend to generate higher returns than the single-digit margins derived from Office 365 sales.

Microsoft's incentives are shifting towards solution providers delivering volume of deals and size of accounts. However, many solution providers are finding the more lucrative opportunity is where Microsoft said it was going back to the days of its "Software Plus Services" strategy: in the products and services adjacent to Office 365.

As part of our special editorial partnership, CRN is publishing this article from Channelnomics.