Microsoft's New Commerce Experience: Cloud resellers concerned
Who benefits from changes to the Partner Network? Well, it's not partners... or even their customers
Microsoft has "evolved" its Partner Network, but changing the name to the Microsoft Cloud Partner Program has done little to dispel concerns over the company's New Commerce Experience (NCE).
NCE is the latest iteration of the Cloud Solutions Provider (CSP) program, giving resellers new tools to manage subscriptions. It has a per seat model for Microsoft 365, Dynamics 365, Windows 365 and Power Platforms. The program debuted this month but not everyone is happy with it.
During a Q&A session at the end of a briefing given last night by Microsoft, questions over NCE repeatedly came up. This was despite the company's best efforts to focus on other changes starting from October 2022 that will result in multiple levels of partner capabilities based on scoring of their technical expertise.
Specifically, Rodney Clark, Microsoft CVP for Global Channel Sales, was asked about the risk being passed onto channel partners by Microsoft as part of the NCE.
As a reminder, as well as some eye-watering price rises for customers, Microsoft's NCE makes cloud solution providers (CSPs) liable for future subscription payments over the lifetime of a contract.
In an Ask Me Anything (AMA) session [PDF], Australian distributor and reseller Dicker Data explained some distressing facts behind NCE that could unnerve CSPs considering reselling the product. In a nutshell, if a customer (who had the agreement with Microsoft) doesn't finish the payment of a contract (in the event of bankruptcy, for example) then the partner will be on the hook for the remainder of the contract.
Clark's response? "Partners in our ecosystem are in the best position to assess the credit risk of their customers," he said. "Credit risk has always been a part of our ecosystem.
"What we're saying to partners is, hey, if there's a question as to whether or not a customer has the ability to manage, you know, beyond month to month, [then] they should be on a monthly subscription versus an annual."
That should make for some spicy conversations as CSPs start performing credit checks. Credit risk has always been a part of the ecosystem, but that risk had historically been shouldered by a tech giant.
With NCE, there is a 20 percent premium (over an annual commitment) for monthly Microsoft 365 (and other platform) seats. There is also a 36-month subscription, which works in a similar way to the 12-month subscription, with customers having to wait until the end of the term before removing seats.
As noted during last night's Q&A, the risk of those lengthy contracts is therefore loaded onto the resellers. While Microsoft might take action against a non-paying customer by disabling services, the partner will keep being billed by Redmond regardless.
One source The Register spoke to on condition of anonymity warned that this move would force Microsoft's resellers to take a closer look at the credit worthiness of potential customers before signing anyone up. However, our source also reckoned that such a move might play better for resellers in the longer term, with the potential to stop customers shopping around as regularly.
Another concern, a source said, is lack of awareness regarding the changes. The impending price rises are eye-catching, but some are unaware that from this month all new agreements will be under NCE terms, and from July all renewing agreements will be under NCE.
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Distributor Westcoast Cloud blogged about the issue last year, noting the potential liability for CSPs and remarking that while one of the joys of cloud computing is the ability to flex up and down, such flexibility would be denied to customers outside of the 72-hour window after signing up.
There is also no price protection for customers determined to pay the premium for a monthly term.
Westcoast Cloud likened it to a streaming service subscription: "Further increases could therefore become a regular (Netflix-like) occurrence," it said.
"It does feel like the benefits are stacked in Microsoft's favour," the company noted.
Alastair Edwards, chief analyst at Canalys, told The Register: "Channel frustration is understandable. With NCE, Microsoft is once again making changes that are designed predominantly to benefit Microsoft, not its partners (or in some cases, even its customers)."
Increasing prices and passing on risk and cost to partners might do wonders for Microsoft's revenues, but "undermines efforts by its partners to move customers towards flexible subscriptions and managed services," according to Edwards.
"41 percent of Microsoft partners we surveyed globally at the end of last year are dissatisfied. Only 18 percent see it as an improvement."
Is Microsoft becoming complacent with regard to its resellers? It certainly looks like it to some. "Microsoft is behaving less and less like a partner-centric vendor, which is a big concern for its channel," Edwards told us.
And the Windows vendor is not without its competitors, all keen to woo resellers bruised by the NCE thumping.
"As Microsoft pushes a growing proportion of its partners into services-only roles," noted Edwards, "their reliance on Microsoft also diminishes.
"Regaining trust, listening to its partners and re-prioritizing the channel should be top of the agenda for Microsoft in 2022."
Or just slap on a new name and hope partners won't think too hard about the implications of NCE. ®