Bar was set 'too low' for Microsoft's direct CSPs, partner claims ahead of programme changes

Vendor's changes to programme requirements will reduce number of direct partners

Microsoft may have set the bar "too low" for its Cloud Solution Provider (CSP) direct partners, one partner has said as the date for changes to the programme looms.

In May, the vendor announced that changes to the requirements of its CSP partner programme would come into effect from 31 August, raising the threshold to become a direct partner.

Launched in 2014, the Microsoft CSP programme is designed to enable resellers to offer Microsoft cloud Solution, including Office 365, via monthly billing.

Under the programme, partners are broken into two tiers: direct and indirect partners. Direct partners can buy cloud services straight from Microsoft to sell to the end consumer, and indirect partners must go through a distributor to purchase the cloud service from the vendor.

The new criteria coming into effect at the end of the month will require direct partners to provide at least one managed service, IP service, or customer solution application, and then purchase support software from Microsoft to the tune of $15,000 (£11,632).

If partners cannot or choose not to meet this criteria, they will become an indirect CSP partner of Microsoft.

"We are updating our CSP direct bill enrollment requirements to ensure our partners are positioned to address the growing customer demand for cloud solutions," a Microsoft representative told CRN.

"As always, Microsoft provides a long runway to meet any significant changes to requirements which may affect partner status. Microsoft's network of indirect CSP partners are also investing in solutions and support to bring additional value to partners worldwide."

Dan Scarfe, founder of New Signature, told CRN that his company would remain a direct partner, adding that he "can't imagine" a huge number of providers will make the cut to remain direct.

But he added that the impact on those partners moving from direct to indirect with likely be small.

"In this new cloud world, there's a few extra points of margin that you might lose going through distribution - it's not make or break. There's not really much money to be made reselling these things anyway; the money to be made is in the value that you can provide on the top of it," he said.

"This is a new programme for Microsoft; it's reinvented its licensing programme from the ground up and as is always the case with these things, you see what works and what doesn't work.

"Perhaps that bar was a little too low to become a direct provider and customers suffered as a result. [Microsoft] is now just tweaking it to make it more streamlined and leveraging its distribution channel that already exists."

Online reports suggest that Microsoft's 5,000 global CSPs could be cut by four fifths under the new criteria, however when contacted by CRN the vendor refused to comment on exact numbers.

"The number of partners participating via direct bill constitute a very small fraction of the total number (and growing number) of partners transacting via CSP," the Microsoft representative said.

There is also suggestion from the vendor that a revenue threshold may need to be reached in order to retain direct partnership.

"We are monitoring annual performance to confirm that direct partners who meet these requirements are demonstrating steady business growth," they said.

"There are no specific performance goals in place at this time, but Microsoft may implement a performance bar in the future," the spokesperson said.

Alex Tatham, MD of Westcoast, said that distributors are well positioned to help partners switching from the direct to indirect model.

"A lot of resellers signed up with Microsoft because it felt like the right thing to do without knowing what they had to do in order to safely execute on some of the programmes that Microsoft was driving," Tatham said.

"I think this is generally good news because all the distributors have proved themselves adept at helping resellers do their billings, sales and support."

Tatham agreed that Microsoft had initially signed up too many direct partners and that its decision to change requirements is an attempt to cull that number.

"I think it found that because anybody could sign up, it was spending a lot of admin time signing people up for very little business," he said.

"It wanted everyone to make sure that they moved to the cloud, and clearly there is still a great drive to be able to do that. But I think it signed up too many people too easily and had too many accounts to process."

Tatham added that Westcoast would provide a "warm home" to any partner who finds themselves newly indirect after 31 August.

"This isn't necessarily a bad thing. This shouldn't stop them on their journey to take their end users to the cloud."

"It will probably save them time and hassle in terms of who they transact with because they would be transacting with Westcoast in a number of different areas," he explained, adding that the distributor would take the "pain away" for any CSP partner who struggled with Microsoft.