A clear signal from Microsoft
Microsoft has confirmed a big change to its CSP incentive program for FY27, which runs from July 1, 2026 to June 30, 2027. The message is clear: Microsoft is moving its investment away from flat, run-rate volume and toward growth and premium products.
We know changes of this scale can feel unsettling, and for many partners the instinct will be to focus on what’s being taken away. Our aim with this update is to give you the facts clearly, and to show you why, with the right approach, this is a real opportunity to grow the value of your base.
What’s changing with the FY27 CSP incentives
The core change is a shift in where incentive is earned. Rewards are now weighted toward higher-tier, security-rich and AI-enabled products, and toward the partners who grow. Across the core programs, the earning opportunity is up to 19.5% on Modern Work and Dynamics 365, and up to 15% on Azure.
- The flat run-rate rebate on Modern Work (Microsoft 365) and Dynamics 365 is being retired.
- Incentives now flow through Strategic Product Accelerators (premium products) and a Growth Accelerator that rewards year-on-year growth.
- Low run-rate SKUs, particularly on Modern Work, no longer earn incentive.
- Azure is structurally unchanged, and continues to reward consumption and growth.
| Program | Where incentive is earned | Up to |
|---|---|---|
| Microsoft 365 (Modern Work) | Premium SKUs + year-on-year growth | 19.5% |
| Dynamics 365 | Premium SKUs + year-on-year growth | 19.5% |
| Azure | Consumption + growth accelerators | 15% |
A margin change to plan for in October 2026
Looking further ahead, from October 2026 Microsoft will also reduce partner margin by 5% on a number of legacy and standalone products. It’s worth planning for now, because it reinforces the same direction of travel: the value in the older, standalone base is reducing, and the opportunity is in moving customers up. The affected products are:
- Office 365 E1
- Office 365 E3
- OneDrive Extra Storage
- SharePoint
- Exchange Online
- Microsoft 365 Apps for Business
- Microsoft 365 Apps for Enterprise
What it means for you and your customers
This is where the opportunity lies. Every seat in your customer base is now a candidate to move up, and moving up is exactly what earns under the new model.
- Make Business Premium your baseline. Position it as the minimum security standard for every SMB customer. It protects the end customer and unlocks premium incentive at the same time.
- Build a Frontier mindset with Copilot. Lead with Copilot bundles on top of Business Premium in SMB to open the AI conversation early.
- Think E5 and E7 for larger customers. In the era of Copilot, mid-market and enterprise customers are the E5, E7 and Copilot opportunity — the top of the incentive structure.
- Lean into growth. The Growth Accelerator rewards net-new and upsell, so a proactive plan to review and grow your base directly grows your incentive.
How Sherweb can help you make the most of it
Change like this is easier with a partner beside you. Over the coming weeks our team will be briefing partners in detail through webinars and events as Microsoft publishes the remaining specifics. We’ll walk you through the accelerators, the practical plays and how to protect and grow your incentive under FY27.
As your distributor, we bring the support, expertise and enablement to help you reshape your offers and build the pipeline that earns in the year ahead. Keep an eye out for our upcoming webinar dates, and if you would like a one-to-one session in the meantime, get in touch with the Sherweb team. We’re in this with you.
