MSPs work hard to keep up with the emerging needs and expectations of customers – and with the pace of digital transformation, that's no small feat. The Microsoft CSP program gives partners the opportunity to package their own services alongside Microsoft cloud services and leverage the benefits of a close relationship with the tech giant.
But there have been changes to the minimum requirements partners need to meet to retain their direct partner status. Microsoft is moving the market in a new direction and partners need to react.
New Microsoft CSP direct requirements
Launched in January 2021, you must meet the new revenue threshold for current CSP direct bill partners by your partner support plan renewal date.
Minimum revenue threshold
The new revenue standard for 2021 is at least $300,000 in CSP revenue during the preceding 12 months.
Support contract requirement
Alongside the new revenue requirements, Microsoft has a minimum support requirement for direct bill partners. This dictates that partners must be able to provide the first level of cloud product support to all their customers.
To do this, you must purchase one of two support contract options:
- Advanced Support for Partners (ASfP) Elevated, cloud-focused support to help you grow your business.
- Premier Support for Partners (PSfP) End-to-end managed support for the full Microsoft platform. This is the ideal choice if you want to grow your business and generate new opportunities.
As well as minimum requirements, direct partners take ownership of considerable overheads that indirect partners don’t have to:
Customer billing & provisioning
Microsoft provides monthly consolidated files with all your customer transactions. This consists of 28 columns for each subscription event over the past 30 days. To reconcile these events, direct partners need a billing engine to identify:
- Subscription start and end date
- Recurring charges
Adding to the complexity, Microsoft updates their billing process from time to time, so any billing solution needs to be agile enough to adapt to such changes.
Direct partners must also provide their customers with a provisioning tool that streamlines/simplifies license subscription management.
Successful CSPs do so much more than sell licences because that’s not where the money lives. The real margin is found in a managed service or consultative offering between the CSP as a partner and their customers.
So, in addition to the know-how on programmatic, licensing, and products within the Microsoft stack, direct CSPs need other skills. These include business development expertise, go-to-market knowledge, and other non-CSP skills to support their clients.
Direct bill partners must do more
The CSP direct bill partner model requires you to invest in people, training, platforms, billing engines, and support contracts. This requires a dedicated business model and increases operational costs.
What happens if you don’t meet the requirements?
Partners that don’t meet the new standard are asked to re-enrol as a CSP indirect reseller. Partners who don’t have a business model designed to support the additional CSP expectations are likely to find themselves struggling to keep up in the market.
It's unclear at this stage how strictly Microsoft will enforce this change or how long it will take. But the growing trend appears to be that Microsoft wants partners to move to an indirect model – the incentives and benefits are the same, and the overheads are less intensive. Both direct and indirect partners get the same access to deals, products, and opportunities.
So, for new businesses, the choice is easy. The only question is how current direct partners will respond.
Why has Microsoft changed the CSP direct requirements?
As we discussed in a recent Wirelive episode, Microsoft isn’t going to do anything that might impact its growth and revenue.
They know that looking after MSPs and making sure they have a great experience helps them grow, which ultimately drives Microsoft’s core business. And the key to that great experience is being served by people in their local markets who understand their market needs.
So, instead of going to Microsoft for generic support, they want you to turn to a trusted, specialist indirect provider who has the knowledge and experience that best aligns to your unique customer needs.
Direct vs. indirect: the debate continues
Having a direct relationship with Microsoft doesn’t carry the gravitas it used to. And while some MSPs have secured business off the kudos of being a direct partner, anecdotal evidence suggests that prospective MSP customers just aren’t asking this question.
Ultimately, the choice of whether to be direct or indirect requires a serious internal conversation to weigh up the benefits, consider your business goals, and commit to a path.