Changes to Microsoft’s Tier-1 program starting march 1, 2019

Big changes affecting Direct (Tier-1) and Indirect (Tier-2) Microsoft Cloud Service Partners (CSP) were announced in August 31, 2018, and have became effective on March 1, 2019. That means, that as a direct CSP partner, if your anniversary date falls after March 2019 you will need to work with an indirect provider with the appropriate infrastructure, support and services to conduct all Microsoft CSP business.These changes force everybody to rethink the business model in terms of what to offer and how to interact with customers. We need you to be 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.

What is new?

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.

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.

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 Distributors.
  • 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 PartnersIndirect 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.