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The Microsoft CSP New Commerce Experience is coming to Seat Based Offers – what does this mean to you as a CSP?

Earlier this year, it became apparent that many Microsoft Partners were not aware of changes made to how Azure subscriptions are transacted, I wrote this article for Microsoft CSP partners selling Azure services to help partners prepare for the change.

Now Azure Plan has been delivered, the Microsoft team is busy delivering a New Commerce Experience for license-based subscriptions – that is all Microsoft 365, Dynamics 365, Power Platform, and Windows 365 product sets.

The current CSP system has run for 5 or so years, during that time volumes have dramatically increased and constraints within the system have likely caused pain for Microsoft and the partners within the ecosystem.  It’s good news that this key system used by CSPs is being redesigned, but changes within such a large ecosystem will not come without challenges.

As a side note, those of you that have built your own automation and integration for CSP processes will need to reinvest in code to cope with these changes. Partners like Atria alleviate this type of change, we do the heavy lifting, so your team can focus on additional, differentiated automation.

So – as a partner what do you need to know, and what action do you need to take.  Here in an all-new Q&A format is my high-level perspective…

NOTE – All material used in this article is freely available on the internet, my opinions may not be aligned with Microsoft and I might have got some things wrong, very happy to receive comments and feedback!

How will this impact my business?

From a business standpoint, the big change is in subscription terms.  In “classic” CSP, user based subscriptions have an annual term, but it has never been enforced, so nobody has really cared much about it.  If you removed a user or suspended a subscription, any costs associated with the subscription would stop instantly. Great!

With the new experience, when a subscription is created, a commitment is made for the term that cannot be broken – it’s like a real commitment!  You can increment counts, but you can’t reduce the license quantity until the term renews.

Terms can be monthly, annual, or three years – a term for everyone!

As a reseller, you take on the credit risk, not a problem when you can turn off a subscription and stop paying for it, in the new world of commitments – you are committing up the chain and will have to pay for the service regardless.

We have some ideas about how we can help mitigate this:

  • When removing a user prompting if the license is to be deleted, and paid for, or if it’s to be held
  • We already use any available license, across subscriptions ensuring new licenses aren’t accidentally purchased
  • We are considering calculating whether it’s better to buy monthly or annual licenses based on subscription length
  • We are considering a facility to automatically have a set % of monthly licenses vs annual so users can be removed with no penalties.

So for an annual term – does this mean we have to pay upfront?

Customers have the choice of paying upfront, or continuing to pay monthly, so for an annual term you can still have monthly payments, you just can’t reduce the quantity (or if you do, you will still pay for them regardless of whether you use them)

What if my customers need the flexibility to change quantities month to month.

A monthly term is available, however like other SaaS products, the benefit of a monthly term now comes with a significant price premium (20% higher than the annual term).  Or being positive, the annual subscription comes with a discount over the new monthly price.

How are pricing changes handled?

Once you are signed up, pricing stays the same for the term selected – so if your term is one month, and the price changes in the middle of the month, when your monthly subscription renews at the start of the next month, you will pay the new price from that point.  Given that prices rarely reduce, this incentivizes signing up for a longer-term.

Does billing change?

As part of the change, billing will become aligned with calendar months – previously it was a different day of the month which caused a few headaches in reconciliation for Direct Partners and Distributors.  Being aligned in month terms is how the MSP market and business operates and this should simplify billing.

That said, if you are a direct Microsoft CSP partner – your systems will need updating and you will need to consider how you will manage mid-term changes to subscriptions and the processes you will need to support them.

With these changes, we are revisiting how Atria can support your billing processes, either by adding the data to our standard billing output, or providing the user level data to back up the Microsoft data.  

Does anything else change with subscriptions?

Yes, the way subscriptions work is also changing – one of the big problems with the old system was Add-on subscriptions – they were hard tied to parent subscriptions and I think this model no longer fits some of the products sold as add-ons.   Not going into detail, but add-ons have a neater construct that makes more logical sense.

We will adapt how subscriptions are managed in Atria, we are considering how we can make the process easier for customers to make changes while ensuring they are aware of the term commitment and cost implications. Multi-Subscriptions (Part annual and Part Monthly) are also an option we are considering.  This is a good time to share any requirements.

Should I panic, cry, or do something else?

Do something else; although this is a big change, you have time to get your head around it and come up with a plan.  No panicking required.

The commercial impact is going to be transferred to your customers, nobody likes potential price increases, but think positively about this:

    1. You are there to help customers through the change, you are the messenger, you may get a few shots fired in your direction, but ultimately the commercial terms are set by Microsoft and not you – all CSP partners are in the same boat.
    2. If your customers aren’t contracted to a term – use this opportunity to get them signed into a term – this makes your MSP business more valuable and is ultimately why Microsoft is also doing this – it makes them more valuable!
    3. Your CSP related revenue should be more predictable and likely larger – there is only an upside to this from your Microsoft CSP licensing dollars.
    4. This is a good topic for a conversation with your customers! – get onto it before somebody else takes the opportunity.

If you have already been struggling managing CSP licenses, and are concerned it is well worth investigating tools to help. We at Atria are 100% MSP focused, please have chat we’d love to share how we can help.

We’ve got used to the old experience, Why can’t I just stay as we are?

That would be nice, but New Commerce will happen, you can carry on using the old system for a while, but Microsoft have a range of “carrots and sticks” to be used to herd CSPs away from old experience and into the new world.  So in short, there is some leeway, but you can assume that Microsoft will be warmly encouraging distributors and partners to start enjoying the new experience ASAP, mainly in the form of incentives – when and how they are applied.

We expect there to be bedding in of the new processes and systems, you will be able to continue using Atria to manage existing subscriptions, we will work out how to support you with the transition.

Anything else I should know?

A big factor in play is pending price increases for a number of commonly used Microsoft SKU’s, these come into effect in January 2022.  Transitioning subscriptions before this date will mean that your pricing is locked in for the term selected, postponing the inevitable price increases.

You’ve written all this, how does it impact Atria?

Good question, Atria is currently integrated with Partner Center and automates the provisioning of subscriptions as well as allowing customers to make their own changes.  We are excited at the opportunity to work with our customers to help make New Commerce a better experience.

If you are a direct CSP who would like to use this opportunity to cease building your own interfaces to Microsoft Partner Center, we are open for a friendly chat to see how Atria might be able to help you with this change, or even just to share experience or ideas  – don’t hesitate to get in touch.

If you are an indirect CSP, there is less of a challenge with Subscriptions as your Distributor will to deal with much of the technical changes, you will however need to be aware of the term changes.  Atria can still help you to manage licenses and administer your M365 services.