Big changes affecting Direct (Tier-1) and Indirect (Tier-2) Microsoft Cloud Service Partners (CSP) were announced in August 31, 2018, and they became effective on March 1, 2019. These changes force you to rethink your business model in terms of what you offer and how you interact with customers.

Whether or not you are prepared, as soon as your partnership anniversary month passes, your company will need to comply with the new Direct Partner requirements. Otherwise, you will not be able to add new customers or services.

Let’s take a look at everything you need to know about these partnership changes.

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New Microsoft Customer Agreement

If you are an existing partner, whether direct or indirect, the new requirements may take you by surprise. One major change is the new MCA (Microsoft Customer Agreement) that will substitute the MPSA (Microsoft Products and Services Agreement Enterprise Agreement). Up until July of 2018, this was the method corporate and enterprise customers used to make purchases.

The new MCA will be the primary way to make purchases. Partners will be able to purchase some third-party products directly from Microsoft. The MCA will be a shorter, 11-page contract and will be completely digital, making the transaction process more efficient and simpler for Microsoft customers.

Indirect Partners, or Tier-2, will conduct business as usual and continue to add new customers and subscriptions without fear of service interruptions. The only tangible modification they will see is to how billing is done.

Do These Changes Affect Customers?

Before we get into specific changes and new definitions affecting both Tier-1 and Tier-2 models for Direct and Indirect CSPs, it’s worth noting that the reasons that compelled so many customers to use computing services in the first place have essentially remained unchanged.

Customers still need servers, storage, databases, networking, software analytics, and intelligence, as well as flexibility, speed, and low operation costs, to be able to grow while maintaining an efficient and reliable infrastructure.

Cloud computing technologies (and Cloud Solution Partners) offered all of the above and more. They provided a roadmap and transition to a new platform that could combine all data and operations into one environment.

Over the past few years, many partners around the world have worked relentlessly to acquire customers and help them adopt Microsoft technologies. Initially, the process to become a partner had fewer requirements. Since then, the number of partners has increased exponentially and in a relatively short period. Direct Partners have effectively become the point of communication between Microsoft and end users.

In short, cloud computing technologies created new business models for partners (think of all the “as a service” companies), and they still do today. So if you’re worried about these changes, don’t be.

New Requirements for Direct and Indirect Partners

Following the evolution of the CSP program, Microsoft has now established new requirements for companies to maintain or acquire Direct Partner status. The new program takes into consideration how much investment a partner needs in order to support their cloud business and remain competitive.

Direct partners now have to offer added value services tailored to the needs of each specific client. In return, they will have access to:

  • A single offer catalog containing first- and third-party Microsoft products and services through a new marketplace experience.
  • A new, simple 11-page Microsoft Customer Agreement presented, accepted, and stored through a completely digital experience.
  • Consistent purchasing and management experiences, whether the customer chooses to buy through partners, the web portal, or directly though their Microsoft account teams.
  • The possibility of having higher margins, bonuses, and incentives.

Let’s look at the specifics for the two new models and how they differ from one another.

Direct CSP (Tier-1) Partners must:

  • Offer managed solutions with CSP-incorporated licenses.
  • Purchase a support contract (Premium or Advanced).
  • Provide automated billing.
  • Provide at least one managed service or intellectual property.
  • Increase their purchase volume.
  • Purchase directly from Microsoft.
  • Offer IT support.

Indirect (Tier-2) Partners will:

  • Purchase indirectly from Microsoft resellers.
  • Have lower margins but the same incentives as Tier-1 partners.

The benefit for Indirect CSP partners is being able to concentrate and grow business models that are based on core strengths like managed service offerings, consulting services (assessments to implementations, migrations, etc.), or the sale of IP solutions.

Cloud Service Partners: Direct vs. Indirect

If you’re still wondering which tier is suitable for your company, here are some other things to consider:

Direct Partners Indirect Partners
  • Does your company have enough CSP licenses to support the new financial agreement?
  • Have you built a strong intellectual property and are you already using Microsoft products as a core technology?
  • Do you have a considerable number of clients and expect your business to grow in the future?
  • Do you prefer to enjoy the advantages of a Direct Partner without incurring elevated system integration costs so you can focus on your company’s growth?

 

This means many changes are coming for some customers. Indirect partners will not be seeing a change since they are already dealing with a reseller. Direct partners on the other hand, could have to change their status sooner than later to ensure they give uninterrupted services to their customers. If you are a Direct Partner and have to transition to an Indirect Partner status, be sure to take a look at our CSP program.

Written by Mathieu Pipe-Rondeau Marketing Communications Specialist @ SherWeb

Mathieu is responsible for SherWeb’s blog content and organic social media. Highly conscious of branding and related communications, he’s constantly on the lookout for new and better ways to showcase SherWeb to the world. Mathieu has ten years of communications and marketing experience, including expertise in knowledge management, process creation and improvement, technical writing and content strategy. When he’s not producing engaging content, Mathieu enjoys cooking, singing and skateboarding with his son.