Optimizing our purchasing motions for customers and partners
Update June 29, 2023: We have adjusted our approach for the partner incentives that optimize economics for partners transacting in CSP discussed in this blog post. The new approach will align to FY24 CSP incentives, which will be implemented beginning October 1, 2023. Margins will not be affected, and partners will not need to make engineering changes. More information can be found on the Microsoft Commerce Incentive Resources gallery.
Update September 8, 2022: We have updated the timing for implementing the new commerce-specific partner incentives that optimize economics for partners transacting CSP. These changes will not be implemented in calendar year 2022. By the end of January 2023, we will provide partners with an update on the design of the optimized economics. As we are planning this next step, we are including adequate time to provide partners with the information they need to prepare for implementation in advance of implementing the changes.
Update May 23, 2022: We are updating the timing for implementing the introduction of new commerce-specific partner incentives and pricing changes that optimize economics for partners in the breadth motion. The earliest these changes will be implemented is late calendar year 2022, and our plans include giving partners time to understand how the changes affect them and what actions they will need to take to prepare.
Update December 20, 2021: An update to the timing we shared in May 2021 for implementing the introduction of new commerce-specific partner incentives and wholesale pricing changes that optimize economics for partners in the breadth motion. The earliest these changes will be implemented is July 1, 2022. Partners should continue to prepare for the general availability of seat-based offers in January 2022, and we’ll provide additional information and next steps for partners following that.
With how fast the business world is evolving, it can feel like a never-ending race just to keep up. While the pace of digital transformation brings challenges for practically every organization, it also opens exciting new opportunities for our partner ecosystem. Our customers across the globe are relying on partners to help them become more connected to the cloud and to successfully navigate the next steps in their own journey.
Now more than ever, our partners are essential. Your tech intensity has become even more critical in helping customers transform their organizations and build resilience. Microsoft is deeply committed to equipping you with the right resources and support to help you meet the needs of your customers. And, as I’ve shared previously, we’re transforming our commerce experience to ensure customers and partners have an optimal experience during this process. Once it’s fully launched, it will enable faster, simpler transactions. As part of this evolution, we’re focusing on three primary areas:
- Putting customer needs first to ensure the best purchasing experience and outcomes.
- Creating clarity on our primary purchasing motions, which are aligned to support customers’ needs.
- Recognizing the partner opportunity in every motion to help customers get the most value from their technology investment.
Let’s take a closer look at each of these areas, and what they mean for partners.
Putting customer needs first
We all know that our success is dependent on our ability to meet the needs of our customers. We’re committed to prioritizing the individual needs of our collective customers – regardless of how they choose to purchase. Whether they decide to engage Microsoft directly, through a partner, or via a marketplace or third-party offer, we’ll assist them with finding the right solution and connecting with the right partner services for their situation. And, in many situations, partners and Microsoft sellers co-sell together to provide customers with the optimal experience.
Creating clarity through purchasing guidance
One of the primary reasons we’re providing purchasing guidance for partners and customers now is to clarify the differences between the breadth and enterprise motions, and to define which is most likely to be the best fit for different customers. We’ve listened to feedback from partners, customers, and Microsoft sellers regarding when the most appropriate customer purchasing might be the Cloud Solution Provider program, the Enterprise Agreement, or other programs.
While this guidance should help outline the best purchasing motion for most customers, some—regardless of size—will have unique needs that make them a better fit for a different motion. At the end of the day, customer needs and preferences are the most important deciding factors for which purchasing motion to choose.
From engaging executives and the board to help design a blueprint for the future, to providing onboarding support for new users and helping customers truly adopt and use the technology solution, partners play a critical role in every step of the purchase experience—no matter the size or scope of the customer. By homing in on the unique needs and expectations of the customer, partners can unlock significant opportunities to maintain and grow their customer base. The key for partners is to bring a full-service approach to customer service through four specific ways: advising, selling, building, and managing.
Recognizing the partner opportunity in every motion
Partners can earn revenue from the value-added services and solutions you provide to customers across all purchasing motions, and you can also earn revenue from Microsoft depending on the role(s) you play in each purchasing motion.
Evolution of our commerce experience
Currently, we make offers available through our various licensing programs and platforms, but this purchasing experience for our customers and for partners is fractured. Each licensing platform has its own unique contracting experience and terms and conditions, as well as disparate customer, partner, and field management console experiences. Looking ahead, the purchasing experience will evolve to improve our overall picture of the customer position and our ability to advise the customer about logical next purchases.
Our vision for the future is to provide a single, connected platform experience for customers – regardless of which purchasing motion they buy through:
- With an expanded offer catalog, the new commerce experience will allow us to bring Microsoft and partner offers to market faster – however, customers choose to transact with us.
- Partners can help customers in every purchasing motion to get the most value from their technology investments. In the breadth motion, partners will manage all aspects of their customers’ purchase, deployment, and use of technology across all stages of the customer lifecycle. In the enterprise motion and self-service motion, partners will provide customers with the services and solutions they need to succeed.
All customers will sign the Microsoft Customer Agreement – with terms and conditions that scale to the ways they buy.
- Breadth motion – The breadth motion is the primary purchasing motion for mid-sized and small corporate organizations who typically do not require unique contractual requirements beyond price negotiation. They are serviced primarily by partners in the Cloud Solution Provider program, which is the optimal licensing construct for the breadth purchasing motion due to its consistency and scale. Partners in the Cloud Solution Provider program manage the end-to-end customer relationship from contracting to service delivery. You have full discretion over pricing, and the support services and value-added services you deliver. The breadth motion is where most Microsoft customers purchase, and we rely on our partners to lead engagement with customers, accelerating digital transformation at scale. It is here that partners are equipped to fully serve these customers and Microsoft can provide best-in-class partner economics including wholesale pricing and incentives. We will continue to invest in a Qualified Referral Program to enable that bridge to be more effective and to scale our efforts in providing great customer experiences.
- Enterprise motion – The enterprise motion is the primary purchasing motion for our largest customers as we have found these deals generally require a high level of Microsoft involvement to support the complex terms needed for these digital transformation deals. These complex terms can require special approvals to provide dual use rights, lead status SKUs, multi-tenants, multi-affiliate, and more. These scenarios require in-depth conversations between Microsoft and the customer to better understand how the changes help and meet the customer needs. The enterprise purchasing motion is serviced by the Enterprise Agreement. It also includes Microsoft Customer Agreement (MCA) transactions quoted and contracted by Microsoft sellers, where partners continue to play key roles in both pre-sales and post-sales activities. Partners are involved in the enterprise purchasing motion today, and will continue to be, especially as it relates to building solutions, consulting, and advising our customers on their technology needs as well as in the deployment and integration scenarios and ongoing managed services. Partners are critical in the pre-sales and post-sales activities, workshops, and proof-of-concepts, and work with Microsoft to accelerate customers’ digital transformations. When customers contract through Enterprise Agreements (EAs), partners may also be involved in invoicing, collections, foreign exchange, and supporting licensing compliance with customers.
- Self-service motion – Self-service scenarios exist across all sizes of customers, large or small, individuals or individual departments, and they exhibit specific technology purchasing needs. In these cases, the individuals procuring the products know exactly what they want and how they intend to try or buy the services. These customers prefer to make purchases online via a web portal or through an assisted self-service purchase motion via a Microsoft Seller; but all customers intend to self-serve the ongoing management of their subscriptions, new trials and/or future additional purchases. These customers may also require services from a partner on specific workloads or other web advisory services and will be instructed on how to engage with a partner.
While we’re not making any changes to the current Enterprise Agreement or Cloud Solution Provider program incentives today, we will implement future changes to align how we reward and pay partners. Timing for the introduction of new commerce-specific partner incentives and wholesale pricing changes that optimize economics for partners in the breadth motion (see figure below) is still to be confirmed, but as of today, the earliest these changes will be implemented is March 2022. We’re providing this information to help you start to plan appropriately for your business. As business priorities and market dynamics necessitate these shifts, we’re committed to providing advanced notice and more information via our standard program updates – as it becomes available.
With the future changes, we will align wholesale pricing and incentives to the way we will sell Microsoft Azure and seat-based Microsoft Online Services in the new commerce experience. Incentives will be graduated through the purchasing motions, and we will have a different set of incentives for partners to continue to engage in the enterprise purchasing motion. Partner economics in the breadth motion will be optimized for deals below 2400 seats for new commerce seat-based online service offers, or Azure deals below $1M USD annualized consumption. Partners can sell to larger customers through the Cloud Solution Provider program (above 2400 seats or $1M USD annualized consumption), yet the underlying deal economics on the additional seats or revenue will be less compelling. There are no mandatory conversions between motions, but the economics on the transaction will change as the size of the deal increases – moving more to enterprise-like from breadth. When concessions are needed to meet customer requirements, we will do that through the enterprise motion.
Over time, we will make the Cloud Solution Provider program—where most of our collective customers reside—our primary breadth motion. I recommend not only accounting for these changes in your current Cloud Solution Provider business, but also for future growth potential as Enterprise Agreement contracts that are eligible for the Cloud Solution Provider program expire.
We will continue to invest in evolving our commerce experience and providing the tools and resources you need to successfully meet these challenges and drive business growth. I want to thank you for your ongoing partnership, and I encourage you to check back regularly for updates and additional guidance.