In the early days of cloud reselling, margin was king. A few extra points on a Microsoft license could make or break your profitability. But today’s CSP landscape tells a different story; one where growth, is the more sustainable measure of success.
In the early days of cloud reselling, margin was king. A few extra points on a Microsoft license could make or break your profitability. But today’s CSP landscape tells a different story; one where growth is the more sustainable measure of success. And for Direct Bill Partners now facing Microsoft’s October 2025 updates, the decision increasingly comes down to selecting the right CSP Distributor (formerly Indirect Provider) to support their next stage of growth.
For partners evaluating the future of their CSP model—especially in light of Microsoft’s upcoming changes to the Direct Bill program—the question isn’t just whether you should go indirect. The real question is this:
Are you optimizing for margin and growth? And is your current CSP model truly designed to support both—profitably and at scale?
Margins used to be the end goal
Margins used to be the end goal. Now they’re part of the total profitability package, one of several variables that drive long-term success.
The appeal of the Microsoft Direct Bill Partner model has always been straightforward: get a better discount, keep more of the margin, and maintain what some perceived as a more direct relationship with Microsoft. In reality, many smaller Direct Bill Partners were unmanaged, left navigating program updates largely on their own. And while that logic may still hold true on paper—Direct Bill Partner may receive a slightly higher discount compared to the lower percentage offered through CSP Distributors—the reality is more complex.
But that gap comes with hidden costs that can erode margin quickly, especially under Microsoft’s October 2025 changes, which will require all Direct Bill Partners to:
- Meet a $1 million USD minimum annual revenue threshold
- Pass an annual capability review, including technical skilling and security compliance
- Hold at least one Solutions Partner designation
- Maintain 24/7 certified support infrastructure
- Build and maintain automated billing and provisioning systems that integrate with Microsoft APIs
These aren’t optional upgrades; they’re the new baseline for maintaining direct status. For many CSPs, especially those under the $400K–$500K ARR mark, staying direct may become cost-prohibitive. When you account for:
- Annual Microsoft support plans ($15K–$30K+)
- Internal training and certification programs
- Full-time support and compliance personnel
- Infrastructure investments in billing, provisioning, and Partner Center integration
…the actual retained margin shrinks fast. In an increasing number of cases, partners spend more to maintain direct eligibility than they gain from the higher discount.
The margin illusion: Why “more” doesn’t always mean better
Here’s where many CSPs get stuck: they see margin as static—something you either keep or give away. But the reality is more complex. A higher margin means very little if your operational costs, compliance burden or go-to-market delays are quietly eating into it.
Consider two partners:
- Direct Bill Partner: They have the higher discount but spend $40K+ annually on systems, staff, and support just to stay compliant.
- CSP Distributor: They accept a smaller discount, but offload most of that operational overhead to a provider who handles support, provisioning, incentive optimization and Microsoft compliance guidance.
At $300K–$400K in CSP revenue, a Direct Bill Partner may actually net less than a CSP Distributor—despite appearing to “own” more of the margin.
It’s the classic false economy: preserving a margin that doesn’t scale is still losing money.
Growth is where the real ROI happens
Margin tells you what you make per seat. Growth tells you how many seats you can serve and how fast.
The best CSP partners aren’t just thinking about licensing discounts. They’re thinking about how to:
- Onboard clients faster
- Retain them longer
- Bundle more services into every deal
- Capture incentives and co-op dollars
- Reduce administrative complexity
- Free up time to focus on selling
It’s not just about margins anymore. Direct Bill Partner might start with a better discount on paper, but that edge can shrink fast under the operational burden of staying compliant. CSP Distributors who offer real partner enablement—automated provisioning, expert support, bundled services—can help you drive more revenue, close deals faster, and unlock incentives that outpace raw margin gains
Yes, you might see higher margin on paper as a Direct Bill Partner, but that doesn’t guarantee profitability or growth. Today, it’s the ease of execution that often wins.
That’s why growth enablement is what allows margin to scale sustainably. Thriving partners focus on building the operational capabilities that protect profitability as they grow, rather than clinging to a static margin model that becomes harder to maintain over time.
Direct vs CSP Distributors: Comparing control, cost, and scalability
As partners weigh whether to remain a Direct Bill Partner or move to a CSP Distributor, the trade-offs often come down to balancing operational control against cost, complexity, and scalability.
| Direct Bill Partner | CSP Distributor |
| Slightly higher licensing margin | Shared margin, base discount |
| Must maintain support plans, skilling, systems | Built-in support and billing infrastructure |
| Responsible for incentive tracking, co-op submissions | Partner-led incentive optimization and guidance — without losing access to any Microsoft incentives available to Direct Bill Partners |
| Must manage Microsoft program updates independently | Guided roadmap through Microsoft ecosystem changes |
| Control everything—but at significant cost and complexity | Offload non-core functions to scale faster |
| Must meet Microsoft’s new 2025 requirements: $1M annual revenue, annual capability review, designated support and skilling | No mandatory revenue threshold; partner-focused support and enablement built-in |
The myth that Direct Bill Partners have “more control” is often based on who holds the Microsoft relationship—not on who’s more efficient, scalable, or profitable.
What growth-oriented partners evaluate instead of just margin
When you’re choosing a CSP model (and later, a CSP partner), the questions shift from:
- “Who gives me the best discount?”
to - “Who helps me move faster, close more, and grow smarter?”
Growth-oriented CSPs are asking:
- How long does it take to onboard new clients?
- Can I bundle services easily across M365, security, backup, and Azure?
- Am I getting the incentives I’m entitled to—or leaving money on the table?
- Can my support structure handle scale without burning out my team?
- Do I have a roadmap to maintain my Microsoft partner standing?
Those aren’t margin questions. They’re business model questions. And they point to one truth:
Choosing a CSP model isn’t a pricing decision. It’s a strategic one.
What to look for in a CSP partner when growth matters more
When you reach the point where growth matters more than owning every process, the value of a strong CSP distributor becomes obvious. The best CSP distributors don’t just provide automation—they combine platform efficiency with real human expertise, including dedicated account managers and experienced advisors who support your business growth directly.
The right partner should help you:
- Maintain incentive eligibility without jumping through Microsoft’s hoops
- Offer white-labeled or co-branded bundles to increase your average deal size
- Access 24/7 support for client escalations without hiring internally
- Simplify billing and provisioning through automation and integrations
- Track and improve Microsoft partner standing with visibility into MAICPP, Solutions Partner designations, and security scores
These aren’t “value-adds”, they’re the building blocks of scalable CSP success.
The wrong CSP partner gives you a portal and a ticketing system.
The right one gives you momentum.
Margin is what gets you started—growth is what keeps you in business
If you’re facing the October 2025 Microsoft changes, this is the time to step back and evaluate whether your current model is serving your long-term goals.
Ask yourself:
- Is protecting a few points of margin worth limiting my scale?
- Is my CSP model built for what Microsoft requires today—or what my clients will expect tomorrow?
- And most importantly: Am I trying to do too much just to say I’m doing it directly?
For many partners, going indirect isn’t a downgrade. If you’re facing the October 2025 Microsoft changes, this is the time to step back and evaluate whether your current model is serving your long-term goals.
Growth-minded CSPs are choosing enablement over ownership.
They’re building on partners who simplify the backend so they can grow what matters.
Want to compare your CSP margin to your actual profitability?
Explore how growth-focused partners are scaling faster with Sherweb’s support.
