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Microsoft middlemen rebel against removal of free software licences

No more internal use rights for channel types – you'll have to pay for them yourselves

More than 2,500 resellers and integrators have signed a petition opposing Microsoft's intention to remove free software licences granted to members of the channel to run their business.

The changes are described here:

Effective July 1, 2020, we will retire the internal use rights (IUR) association with the product licenses partners receive in the Microsoft Action Pack and included with a competency. Product license use rights will be updated to be used for business development scenarios such as demonstration purposes, solution/services development purposes, and internal training.

Beginning October 1, 2019, the product licenses included with competencies will be specific to the competency you attain. Please review the benefits you will receive with your competency in Partner Center at time of purchase. Additional licenses can be purchased through commercial licensing to run your business.

There are a huge number of partners resellers, most of them small businesses, who recommend, resell and support customers running Microsoft wares or services. In 2017, Microsoft said that "our partners employ more than 17 million people around the world".

The barriers to entry are low and companies who sign up can qualify for a range of competencies, starting with an "Action Pack" subscription that comes with a wide range of benefits, such as five Office 365 seats, five Dynamics 365 licences, 2-core SQL Server, ten Windows 10 Enterprise packages, $100 per month Azure credit and so on. The Action Pack costs around £350 per year but represents excellent value if you would otherwise have to purchase the licences. The same is true of the higher levels, Silver and Gold competencies, which command a higher fee but provide a wider range of benefits.

Resellers are not allowed to resell these specific licences, but critically, they do allow use for "internal business purposes". Smaller Microsoft channel firms have been able to operate their businesses, in large part, using these subsidised licences.

That offer is now ending. "We will retire product licenses for internal use purposes on July 1 2020," stated the Microsoft Partner Network (MPN) guide.

There are more changes too, and none of them good for partners. Free support incidents are being withdrawn. "Starting August 2019, on-premise Product Support incidents will no longer be available for Action Pack and competencies," warned Microsoft.

In addition, the matching of cloud benefits to specific competencies means reduced benefits. Dynamics 365 seats, for example, will now only be available to partners with the Cloud Business Applications Competency, instead of being doled out to all.

The financial cost to these third-party sellers could be substantial, and they will need to do some hasty sums concerning benefits like Dynamics 365 seats at £86.70 per user/month.

Disgruntled resellers have created a petition to "disapprove Microsoft Partner Network Changes", which at the time of writing has over 2,500 signatures.

"New changes to the Microsoft partner program, including increased customer acquisition requirements and lower financial incentives have provoked a backlash from its partner network. It must roll back on some of these changes or it will damage its SMB channel," said channel anaylst Canalys in a tweet.

Australian reseller Wayne Small commented:

Microsoft had a history of engaging with partners, to understand what they need to grow their business and sell their products... I believe those days are now long gone... I'd really love to understand why Microsoft thought this was a great idea and would bring value to the partner program.

The common-sense answer may be that Microsoft has added up what it thinks it is losing in revenue versus what it gains from channelites who use its products in anger and are therefore better equipped to sell and support them. Those kinds of sums are hard to do, though, since rather than pay up, current MPN members may look for cheaper alternatives or switch to advocating Google's G Suite. In other words, it is a risky move.

It is also true that Microsoft may now have too many resellers scrabbling for small amounts of business. This could be a conscious effort to slim down the scheme by making it less attractive to the smaller MPN members.

Microsoft's Inspire partner conference takes place next week in Las Vegas and no doubt amid the cheering and whooping there will be attendees who do not waste the opportunity to make their views known. ®

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