What's Next for Microsoft CSPs: Unanswered Questions

During the special RCP editorial webcast Wednesday on "What's Next for Microsoft CSPs: Partners' Top Moves for 2019," the attendees had more great questions than we could answer during the session. I want to hit on a few of them here, as well as provide some better answers for some of the questions we did address.

For those of you who didn't attend the live event, the presentation centered on 11 key decisions that Microsoft partners need to make in 2019 and early 2020 around their participation in the Microsoft Cloud Solution Provider (CSP) program. A few highlights involved making the Direct Bill versus Indirect Reseller decision based on the new support plan purchase requirement, selecting among Indirect Providers if you go that route, whether to chase certain incentive,s and how much to emphasize developing your own intellectual property (hint: a lot). A replay of the session is now available here.

First, let's look at a few questions that we covered in the session, but that I have a little more detail about.

Do you know how a partner can switch easily from being a Direct provider to being an Indirect Provider?
Since much of the session focused on the new expenses around being a Direct Bill CSP partner, and whether it's time to consider switching to being an Indirect Reseller, one really good question that came up was about how difficult it would be to switch. I have a consultant's answer on this one: It depends.

Mainly, it has to do with how much the partner already invested in the infrastructure required to become a direct partner, the ongoing expenses of being a direct partner, how many customers the partner has under the model and how their contracts are structured. All that aside, all of the Indirect Providers are extremely aware of this opportunity and many have competitive programs to help Direct partners make the switch into their Indirect programs.

One thing that I didn't mention Wednesday that was brought up by an Indirect Provider participant in an e-mail exchange after the call is to think of it as a process. Expect that customers will move from one model to the other at different rates.

Can you do Indirect for Azure and Direct for everything else?
A related question was about mixing and matching the CSP business models. I wasn't entirely sure until pretty late in the call about the answer to this question. A Microsoft rep attending the call kindly confirmed that partners can be both Direct and Indirect. To clarify, it's not just Azure for Indirect and everything else for Direct. You can do Dynamics, Azure, Office 365 or any of the CSP products in whichever model suits your business.

Do you have rough figures for the price of ASfP or PSfP?
The new requirement that Direct Bill CSPs pay for a support package involves an annual expense, either for Advanced Support for Partners (ASfP) or for Premier Support for Partners (PSfP). There was a question about how much each package costs. ASfP is the less expensive option at about $15,000 a year in the United States. It costs less in some geographies. PSfP is much more customizable, but Microsoft documentation shows it starting at nearly twice the price, about $28,000 in the United States. The Microsoft rep also provided this link to a partner comparison page for the service plans.

Next, there were a few questions that I completely missed in the Q&A session.

Can you describe what makes up the investment costs for Direct CSP? I've seen this ROI slide before, but what exactly are partners spending $50,000 to $1 million on?
The reference to the ROI slide was a Microsoft slide that shows how the time to profitability for Direct averages about 22 months, while Indirect is about five months. The question is about an estimated cost that Direct partners tend to spend $50,000 to $1 million. As far as I know, the source for those investment figures is an IDC e-book sponsored by Microsoft called "Partner Choice for Cloud Success: What IT Solution Providers Need to Know about the Value of Microsoft's CSP Licensing Program and the Choice of Relationship Models."

The IDC e-book describes the investments as consisting of several things. One is building a billing and provisioning model using the Microsoft APIs or paying a third-party platform for a white-label version. Another is building first-level customer support capabilities, including hiring support professionals. It can also include either building out a customer-facing cloud marketplace or paying a third-party provider to use a marketplace platform. The range is so large because it goes from managed service providers who may already have some of those capabilities in place to distribution partners who are setting themselves up to be Indirect Providers with their own networks of Indirect Resellers.

Note that the e-book predates the requirement for Direct CSPs to buy support packages.

Which margins are moving from 8 percent to 6 percent?
My slide deck focused a little too much on using the Halloween-related Chiller font in an effort to be entertaining and not enough on the relevant details. Sorry about that. I was talking in that slide about the change coming to the incentive rates for Core Office 365 for Indirect Resellers, starting in January. That rate was 8 percent paid on billed revenue from July through December. It will be 6 percent from January 2019 to June 2019.

Finally, there were a handful of questions that came in through the console that I didn't tackle because I didn't know the answer. I'll be looking into these over the next few weeks. If you have any thoughts or information about them, let me know at sbekker@rcpmag.com.

• How are CSPs managing cash flow risk? I.e., end client does not pay, Microsoft is still owed?
• I thought the 10 percent incentive on Azure RI has gone. Can you provide the Microsoft reference doc around that?
• Our company has ASfP. It's been very difficult opening tickets that are routed to the right support engineers at Microsoft. Does anyone have the proper way to open advance or premium support tickets?

Thanks to SherWeb for sponsoring Wednesday's session and to everyone who participated! Again, check it out here if you missed it. Looking forward to keeping the conversation going about this critical and evolving partner program.

Posted by Scott Bekker on November 01, 2018