“It was just an email that was sent that kind of had the deadline in there, but they really didn’t give us a specific reason,” he says.
According to Microsoft, however, the added requirements are meant to ensure that everyone in the CSP program with tier 1 status is equipped to drive consumption of cloud licenses and provide strong customer service.
“We are updating our Cloud Solution Provider (CSP) direct bill enrollment requirements to ensure our partners are positioned to address the growing customer demand for cloud solutions,” said a Microsoft spokesperson in a statement emailed to ChannelPro. “Aligning our CSP program to meet the needs and priorities of customers, particularly around cloud usage, enablement, and support, creates more targeted opportunities for partners, and further enables partners to unlock the digital transformation opportunity for customers. Cloud enablement services are a critical element of Advanced Support for Partners, making this offering essential to help grow cloud businesses and achieve more active, satisfied customers.”
According to Khan, many CSP members believe more practical considerations were a factor in Microsoft’s decision-making too. Higher qualification criteria for tier 1 status means fewer tier 1 resellers, which in turn means fewer partner invoicing relationships to manage.
“We kind of all think that they’re just trying to reduce the number of CSP tier 1 partners,” Khan says. “That way they don’t have to deal with a lot of people on the billing side.” The business logic makes perfect sense, he adds. “It’s just a little disappointing not getting that type of feedback from them.”
Renee Bergeron, senior vice president for global cloud at Irvine, Calif.-based Ingram Micro Inc., which is a CSP distributor, suspects as Khan does that Microsoft is looking to prune the ranks of its tier 1 partners.
“Microsoft onboarded a lot of CSP partners,” she said in an interview with ChannelPro last month during Microsoft’s annual Inspire partner conference in Las Vegas. “I think what they’re seeing right now is there’s a long tail. That long tail is better served by indirect partners like Ingram.”
Indeed, what’s bad news for at least some Microsoft partners giving up tier 1 status may prove to be good news for CSP distributors like Ingram, who stand to pick up new customers.
“We have a program for those Tier 1s that are starting to realize that this has got an impact on their profitability and there’s a much better way to operate,” Bergeron says. “We’ve had a number of Tier 1s that have moved already.”
Hosting and cloud services provider Rackspace also sees opportunity in the new regulations. The San Antonio, Texas-based vendor is both a tier 1 and tier 2 CSP partner, but has put little energy into attracting indirect business to date. That may be about to change, however.
“We’ve just been focusing on getting our direct business off the ground and growing it as fast as we can,” said Duan van der Westhuizen, general manager for Microsoft Azure at Rackspace, in an interview with ChannelPro last month in Las Vegas. “This seems like a good point in our business to start to inject that tier 2 model.”