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Microsoft to Discontinue Internal Use Rights for Partners

Microsoft has just announced that effective July 1, 2020, Microsoft Partners will lose their Internal Use Rights (IUR) to use Microsoft products at no charge. The IUR benefit is easily the most valuable partner benefit and is currently received as a component of the Microsoft Action Pack.

As of 2017, Microsoft placed its partner count at over 64,000 and claimed to place partners first as the vehicle to fuel its customers’ digital transformation efforts. Judson Althoff, EVP Worldwide Commercial Business stated, “Our mission is to empower every person and every organization on the planet to achieve more, and our partners bring that mission to life every day with our customers. Our partners employ more than 17 million people around the world, and IDC estimates that Microsoft and its partner ecosystem will garner almost a trillion dollars in revenue in 2017, according to IDC Microsoft Footprint Model 2017…. For more than 40 years, we have been a partner-led company, which is proven by the fact that we generate more than 95 percent of our business through our robust and constantly evolving partner ecosystem.”

My how the tides have shifted a couple of short years later! What is the big deal here and why should Microsoft customers care about how the "middleman" is being treated anyways?

Let’s look at the financial impact of Microsoft’s change on a Gold MPN partner with 200 seats of O365 E5. At the MSRP price of $35 PUPM multiplied by 200 internal users comes out to an $84k bill per year! The math quickly yields potential revenue numbers in the hundreds of millions, if not billions, for Microsoft should it continue with these plans to monetize its partners’ use of the Microsoft technology stack.

Many partners are complaining that Microsoft has been steadily raising the membership fees to partners while reducing program benefits and support. In addition to the rescinding of the IUR rights, Microsoft also plans to remove on-premises technical support starting as early as August 2019.

Source: Technical Support for Microsoft Partners

The support required by partners will now be acquired on a fee basis per incident. Microsoft partners have come to rely on both IUR and support coverage as part of their membership plans for decades. This all begs the question: what will drive organizations to join the MPN or remain a Microsoft Partner?

Microsoft partners are not happy, and the outrage is being felt across the internet. One group has started a petition of partners to request that Microsoft rollback these changes formally. Microsoft does have a change of heart from time to time, as can be seen by the recent flip-flow with regards to dual-use rights of O365 licenses applicable to “from SA” SKUs.

Recommendations

  1. Don’t gauge a Microsoft partner’s quality of service by their Partner tier level. Should Microsoft stand firm on this new partner benefit reduction, many partners will migrate to a lower partner tier level to offset these licensing costs.
  2. Keep your eye on the ball. The “old” Microsoft is lurking just beneath the surface. We have noticed that many clients are not as hyper-focused on cost as in previous years now that Microsoft has upped their game. Yes, the suite bundles from Microsoft are more compelling offerings than ever before, but the ultimate goal for Microsoft is revenue growth.
  3. What lies in store next for Microsoft customers? Microsoft partners are responsible for 95% of Microsoft’s revenue stream via the channel program. If Microsoft is willing to pull the rug out from under its own partners, what will it do to you, the customer? Prepare for a granulize and monetize strategy to be the next business practice when your renewal comes due. Products will be hyper-segmented and de-bundled, resulting in additional fees for previously included products.

Bottom Line

Perhaps Microsoft wants to move away from the channel altogether. Microsoft is launching newer agreement types (e.g. MCA and CSP) aimed at selling directly to the customer as well as encouraging CSP partners to build and create differentiated managed service offerings that are additive in nature to the Microsoft stack. It may be time to say goodbye to the Microsoft middleman.

Check out the Applications Development Data Quadrant on SoftwareReviews: Accessed August 21, 2019


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