Microsoft Licensing Landscape — How License Procurement is Changing

William Nelson
8 min readJun 30, 2021

In Part I of this series (The Changing Landscape of Microsoft Licensing), the theme was very much focused on the unchanging and ever present need to adhere to your license contracts and manage your Microsoft license compliance. However, in the broader Microsoft landscape, the way you purchase Microsoft licenses is changing.

This blog will look at one of those methods of procurement — the Cloud Solution Provider (CSP) programme; the impact on partner / client relationships and the benefits of the programme.

Cloud Solution Provider Programme

The introduction of the Cloud Solution Provider (CSP) programme, which over the last 5 years, has increasingly been referred to as the democratisation of the partner network by providing the opportunity for smaller resellers to gain a foothold into the enterprise market using, at first, the ‘end user’ software subscriptions (namely, Office 365 and Dynamics 365) as the means of entry.

CSP was the first major overhaul of the licensing channel market by Microsoft for some time, allowing resellers to own and manage the end-to-end customer relationship, from contracting to service delivery, including selling Microsoft licenses and subscriptions and providing associated professional services and managed services.

CSP is also one of the three Commerce Experience ‘motions’ through which customers can obtain licenses; putting the customer first and helping to enhance their relationship with the partner(s) of their choice by enabling the direct purchase of licenses and subscriptions from the providers that may know their business best.

A summary of the three Commerce Experience motions:

1. Breadth (CSP) motion — designed for mid-sized and smaller organisations, managed and delivered by partners.

2. Enterprise motion — the primary purchasing motion for the largest organisations, for whom a greater degree of Microsoft involvement is required to support more complex terms of business.

3. Self-service motion — enables customers with the inhouse skillset to purchase directly through the web.

Microsoft’s simplified and streamlined Commerce Experience, as demonstrated below, removes what is currently seen by customers as a constraint on their freedom to choose with whom they transact to allow them to purchase through the motion(s) they desire, ultimately under a single master agreement, the Microsoft Customer Agreement.

‘Optimizing our purchasing motions for customers and partners’ 27th May 2021
 https://blogs.partner.microsoft.com/mpn/optimizing-our-purchasing-motions-for-customers-and-partners/
Microsoft Blog Dan Truax

Reducing the number of licensing channels is intended to reduce complexity rather than choice and with Microsoft’s realigned customer-centric approach, as demonstrated in the following diagram, coupled with the expert and trusted relationship partners have with their customers, the Customer Engagement Framework will allow focus on resolving business problems, achieving objectives and delivering a greater return on investment.

‘Optimizing our purchasing motions for customers and partners’ 27th May 2021
 https://blogs.partner.microsoft.com/mpn/optimizing-our-purchasing-motions-for-customers-and-partners/
Microsoft Blog Dan Truax

Customer requirements and expectations have evolved, and Microsoft is aligning their business model to work towards meeting these needs in the guise of the new Commerce Experience and the three primary purchasing motions: Breadth, Enterprise and Self-Service. This includes the beginnings of change to the methods and channels (or ‘motions’) customers can choose to obtain the licenses they require to use the software products and online services in their organisation.

CSP is a Microsoft partner model, for which participation is essentially available to all resellers, based on threshold criteria and the objectives of each reseller. Similarly, the CSP model has increased choice for enterprise and non-enterprise sized organisations through the availability of enterprise-grade products and services without the level of upfront financial obligation or commitment previously required.

This is applicable to the widening range of products and services available via CSP, including:

· Microsoft Azure

· Microsoft 365 and add-on products (Project, Visio, Power BI, Phone System and Calling Plans)

· Dynamics 365 (both ERP and CRM)

· Windows Server and SQL Server (perpetual and subscription)

Under the CSP framework, a Microsoft Partner may transact the above products and services subscriptions through Microsoft as a CSP Direct Partner or via a CSP Indirect Reseller, thereby incentivising partners to realise the benefits of revenue generation and helping to ‘protect’ their relationship with their customer; however, the latter is essentially a resale model.

CSP Direct Partners ‘own’ the relationship with their customers and are responsible for the billing of subscriptions and licenses as well as first-line support services for platform issues. Direct Partners must also maintain a paid-for annual support contract with Microsoft to enable access to Microsoft Partner Technical Support on behalf of their customers, employ a minimum number of accredited staff and achieve a minimum annual sales revenue target.

Why is this relevant or of benefit to the customer?

The CSP model has helped democratise the Microsoft partner eco-system and introduced much-needed competition to the LSPs from the ‘smaller’ partners, who do not benefit from being allowed to sell Microsoft Enterprise Agreements to large corporate and public sector organisations.

It allows customers to maintain and strengthen a direct relationship with a Microsoft Partner as well as introduce new or extend existing relationships with, for example, niche technical consultancies, without having to involve or consequently, provide a source of zero-effort revenue for an LSP with whom they may have a limited relationship.

The CSP offering has quickly evolved beyond just the supply of Office 365 subscriptions to a platform through which partners can offer a comprehensive, near complete, portfolio of Microsoft products as well as the services they can offer in terms of real value and return on investment for their customers.

The elephant in the room does need some attention.

LSPs have, over the years, invested in Microsoft to attain a level of status that enables them to transact Enterprise Agreements; so what benefits will the new Commerce Experience and democratisation of the Partner channel (and the rise of the smaller resellers as CSP Direct Partners) offer LSPs?

Well, the CSP model is also available to LSPs and offers a clear opportunity to win new small to medium-sized business customers and increase their market share — after all, they already benefit from economies of scale when compared to smaller resellers.

The new Commerce Experience should be tailor-made to benefit LSPs and their appeal to a larger audience through it’s intended design, to:

· Reduce complexity

· Shorten order-to-delivery lead times

· Increase agility

· Create a better customer experience with multiple, specialist partner relationships

· Achieve higher adoption rates

· Increase consumption of Microsoft products and services

However, there are still key differentiators, which can favour LSPs and more closely align with the needs of enterprise customers, but the following key areas show this is not necessarily still the case:

· Enterprise Server Products:

o Namely the Core Infrastructure Suite (CIS) — Windows Server and System Centre Datacenter Editions are not available through CSP but can be obtained through the Open Value and Open Value Subscription agreements for any sized-organisation as perpetual or 3 year licenses, whilst SQL Server Standard and Enterprise Editions and Windows Server Standard Edition are available as perpetual licenses, and 1 year and 3 years subscriptions through CSP.

· Software Assurance (SA):

o Is defined as a set of unique features that helps boost productivity across an organisation by enabling the opportunity to get the most from Microsoft software. Using these benefits can help an organisation improve productivity and help IT efficiently deploy and manage Microsoft technology throughout the lifecycle.

However, the rewards previously exclusively associated with SA are diminishing, for example, Azure Hybrid Use Benefit, which is now included as standard with the (limited set of) server products available through CSP.

· Tailored Contract Terms:

o EAs offer customers the opportunity to negotiate specific contract terms with Microsoft, which is not facilitated through the new Commerce Experience and the Microsoft Customer Agreement (MCA); although, the customer-centric focus of the new Commerce Experience enables customers to select the purchasing motions of their choosing, to align their needs to the motions most favourable to them.

· Price Discounts:

o Negotiated, lower and fixed-term price points are available for EA customers and I don’t think there is too much of an argument that the more you buy, the better the price; however, whilst price should always be a consideration, so should the level of associated value-added services that may be available outside of an EA.

EA or CSP?

There is a degree of price flexibility available with CSP; evidenced with Microsoft’s recent announcement that EA customers with less than 2,400 seats and/or $1m annual Azure spend should seriously consider moving to CSP at the time of their EA renewal because of the parity of pricing, increased flexibility and more closely aligned partner relationships they can receive through CSP.

The 3 year term of an Enterprise Agreement has often led to ‘agree and forget’ until the annual ‘true-up’ reporting and end of agreement renewal process.

Under an EA, the customer owns the responsibility for managing their Microsoft licenses and without clearly defined processes and procedures for managing software assets, there is a risk the window of opportunity to realign and revise licenses paid-for under the EA, can be missed, leading to the potential of compliance creep and over or under-utilisation of licenses.

There is also the consideration that the duration of a 3 year term may not align with the changing needs of a business and the rigidity and inflexibility of an EA to not allow scaling-down or removal of products completely, may lead to wasted expenditure.

Considering, in balance, the complete flexibility of the month-on-month agreement of CSP and the freedom and choice of the customer to scale-up and scale-down licenses and products upon demand and without penalty, coupled with the unrestricted rights to have multiple CSP partners simultaneously and move their entire CSP estate to different partners at any time, the customer is in control of the supplier-relationship.

And so, the new customer Commerce Experience is born.

Summary

The introduction of the CSP programme by Microsoft facilitated a change in how resellers manage the relationship with their customers; from contracting to service delivery, including selling Microsoft licenses and subscriptions, and providing associated professional services and managed services.

This new programme also changed the supplier marketplace and introduced much-needed competition into the field allowing more resellers to offer services not available to them previously.

From a customer perspective, the frameworks available for the procurement of Microsoft software products and services requires careful consideration of current and future deployment, future technology platform plans and how best to manage cost and risk. Seeking impartial advice and guidance in this complex area would reap significant benefit.

Version 1 is vendor-agnostic to ensure technical advice and recommended solutions are impartial, objective and align to the unique business needs of each customer.

Where value can be added, for example, as a leading Microsoft CSP Direct Partner with multiple Microsoft Gold Competencies and Microsoft Advanced Specialisations, to help customers realise and optimise the benefits available from Microsoft’s new customer Commerce Experience framework, we will.

To take advantage of Version 1’s expert Microsoft Software Asset Management services, which are wholly applicable at any stage of a Microsoft agreement lifecycle, contact the SAM Practice, because compliance isn’t just for anniversaries and renewals, and optimisation can’t be applied retrospectively.

For more information, go to our website or contact us.

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William Nelson

I’ve been successfully selling IT solutions and services for 20 years and now focus on my area of expertise: Microsoft Licensing and Software Asset Management.