fbpx
Automate101, Level 27, PwC Tower 188 Quay Street Auckland 1010 sales@automate101.com

Disclaimer: This is my opinion, and I recommend you reading the supporting materials and make your own decisions.  If there are any corrections, please let me know, If you are from Microsoft and want to add or discuss anything please reach out.

Confused that Microsoft Azure isn’t the same as Azure Plan?

In the past few weeks, it’s become apparent that some Microsoft Partners are not aware of the changes to the Azure resale model under the “Modern Commerce” or “Azure Plan” branding.

Much of the communications on Azure Plan, have centred on the “Customer Agreement” – this will mean a lot to Microsoft, but probably not quite as much to the rest of us. 

My theory is that after getting through the first few paragraphs about Microsoft agreements, most of us conclude as not relevant, and get on with our day, blissfully ignorant of the nuggets of impacting information we missed…

The Microsoft Modern Commerce experience was introduced in 2019 which aims to address the challenges and learnings from the systems that transact Azure services at scale through the Microsoft channel.

Modern Commerce introduces the “Azure Plan” offer – this is the preferred mechanism for purchasing and delivering Azure services through the Microsoft partner channel. 

The older mechanism uses the “Microsoft Azure” Offer.  Product naming is harder than making products – It is easy to confuse these, documentation isn’t clearly segregated and as Azure Plan also delivers Microsoft Azure services, it’s easy for us to get the two mixed up. 

The key impacting changes are around margins and incentives/rebates, the Customer Agreement is a change, but one that is pretty straightforward to deal with.

This table summarises some of the differences:

 

 

Microsoft Azure “old”

Azure Plan “new”

Margin

Up to 15% margin for Direct Partners. Varies for indirect partners, but generally <15%

0%

Subscriptions

Created and owned by CSP partner.  Subscriptions created in PartnerCenter

One “Azure Plan” per Partner for each customer – can have multiple subscriptions. Subscriptions created in Azure

End Customer Pricing

Retail prices are set by the CSP Partner

Pricing is standardised across partners and channels at Microsoft retail rates

Rebates

Rebates/Incentives vary depending on current promotions

Partner Earned Credit (PEC) replaces margin and is dependent on partner maintaining delegated admin rights over subscriptions.

Cost Management/Visibility

Up to the Partner to come up with a solution to share cost management with customer.

Controlled feature within Azure Portal that exposes consumption costs based on retail rates.

Billing Period

Each CSP partner may have a different billing period start date (e.g., 8th of the month) – which was set when they first joined the CSP programme (May differ for indirect partners)

Billing is aligned with calendar months.

The timeline

Azure Plan is not a new thing, but to date it has been possible to continue with the old commerce model.  Things are changing quite soon:

Phase 1

21-July-2021

All new Azure CSP Business will be transacted through Azure Plan.  

From this point you will not be able to create new subscriptions using the old Azure offer. 

Existing subscriptions with the old Azure offer will still work.

Phase 2

TBC but Sometime during Calendar year 2022

All incentives and partner margin will be removed from Azure services sold through the old Azure offer.

Phase 3

TBD (but 6mths notice will be given)

All old subscriptions will be migrated to Azure plan

The most recent announcement on Azure Plan timings

Partner Earned Credit (PEC)

Partner Earned Credit is replacing margin, this is verified by the permissions you (CSP Partner) retain over each tenants Azure services. 

  • You need to make sure you retain administrative permissions in order to earn the credit. If these are removed, then you will not receive the credit.
  • Documentation says you need to hold permissions 24×7 to gain PEC, but it is calculated daily. This is slightly contradictory, but I believe what this means is:
    • PEC is calculated daily including weekends (7 days)
    • Each whole day (24 hours) where you hold permissions over the resource will gain credit.
    • Any day where you have less than 24 hours permissions over the resource, will not gain any credit.
  • PEC does not apply to
    • Azure Reserved Instances
    • Third party products in the marketplace
    • Azure Spot Virtual machines
  • PEC is a credit against spend with Microsoft, it is not a cash rebate. This may differ to how previous incentives have worked.

The incentive intends to reward partners who are adding value to Azure through their professional management of the customers Azure Services.

Read more on Partner Earned Credit:

Detailed article on the permissions needed for Partner Earned Credit

Explanation of how Partner Earned Credit is calculated and paid

How to move to Azure Plan

The technical transition is in theory straightforward – the following article explains how to move customers from current Azure offers to Azure plan – Partner Center | Microsoft Docs

Visibility of Costs

Once on Azure Plan, all customers are able to view their consumption within the Azure portal – The Pricing view in Azure has to be enabled by policy, but it will then let customers get a nice view of their spend within Azure without needing a third-party tool.

Consistency of pricing enables this feature to be (easily) possible, it’s something that Customers could get if purchased directly from Microsoft but was unavailable when purchasing via CSP – in a way, purchasing through a partner was a compromised Azure experience.  Azure Plan fixes this.

Here is the info on Azure Cost Management: https://docs.microsoft.com/en-us/azure/cost-management-billing/costs/get-started-partners

Summary and Recommendations

My key takeaway for CSP partners is to get across this soon and work out what it means for the commercial arrangements you have with your customers.

Get a plan in place for transitioning your existing subscriptions, the actual transition will be easy, but it may mean you have to renegotiate/break your customer agreements.

Be aware that continuing to mark-up your costs may mean that you are charging above the market rate.  Conversely, discounting prices may lead to you losing money!

Opinion:

These changes may seem unfair or not truly partner friendly.  In my mind the partner is taking on collection risk and there should be some share of the pie for this.  The margin I guess is still there, but there are some strings attached, Microsoft want partners to be delivering value to help make Azure more successful for customers – I think this is the intent behind the changes.

Beyond giving Microsoft a general increase in reported Revenue :-), it will solve the pricing/reporting issues that make purchasing through a partner an inferior experience than buying directly via credit card. 

Here is the main start page for Azure Plan, there is a good amount of documentation in here : Azure plan – Buy Azure at pay-as-you-go rates – Partner Center | Microsoft Docs