Microsoft’s New Cloud Partner Program, What does it mean for you?

Starting October 2022, Microsoft is introducing changes to their partner model, now called the Microsoft Cloud Partner Program.  Partners will be recognized for competencies across six different solution areas.

• Business Applications
• Data & AI
• Digital & App Innovation
• Infrastructure
• Security
• Modern Work

The goal for partners is to achieve the highest score possible, up to 100, in your area of expertise.  If you achieve a score of 60 or more, you get a Silver badge for that solution area, 80 or more you get a Gold badge.

What is the Cloud Partner Program Score based on?

• Performance Indicators: Net new revenue, Net new customer adds
• Capability Indicators: Functional consultants, consultant growth, Developers
• Customer Success: New Large Deployments, Monthly active user growth

There are maximum scores for each indicator.  This Microsoft article does a great job explaining how this all works.

Why is Microsoft making changes to the Partner Program?

Presumably for a couple reasons.   First, this is a much better alignment to how Microsoft is going to market with their modern enterprise products.  Second, it will make it easier for customers to identify qualified partners, and for qualified partners to better differentiate themselves from other partners as the new program makes it harder to achieve badges across competencies without market performance.

Breaking down the changes to the Partner Program

If there was any doubt that Microsoft is focused on enterprise customers, this program stops that discussion straight in its tracks.  The program rewards the partner that is successfully building a business by targeting enterprise accounts.  The Customer Success performance indicators alone make up 45 of the possible 100 points.  Customer Success is really defined as new large deployments and monthly active user growth (which really can only be achieved with large deployments).

In the current program, slow growing partners are rewarded by having large technical teams willing to invest in and write certifications.  Microsoft is are clearly pushing down the value of this type of partner.  Going forward, only 20 points can be gained from having certified teams.  15 points is for the growth in number of functional consultants from the October 1^st baseline which is really just another growth indicator.  Only 20 points is available for adding new logos or new net revenue.  So, even if you were a good sized partner adding new logos and revenue, the most points you could get are 40 to 55 points.  The only way to get to Silver is by adding ‘large deployments’ (read enterprise customers) and growing their user counts.

So if you are a capable partner with 50 employees, profitable, but slow growing, and going after mid market deals, it will be nearly impossible to achieve a badge.

How do the changes to the Microsoft Cloud Partner Program impact your business?

 The real question is, are you penalized by not achieving these statuses?  Lets look at the impacts:

• The Badge. Microsoft is presuming customers will value the badge color.  A partner that has a Gold badge is better than one with a Silver, or a Silver badge over no competency.  However, we don’t actually believe this will make a difference to customers at all as most customers are already confused about the program.  Yes enterprise customers may want to work with Gold Partners.  Or, they may not want to work with Gold Partners.  This is an easy objection to get over, simply by stating this fact:  “The reason we are not a Gold or Silver partner Mrs Customer is that Microsoft recently made a change to the program that rewards partners that sell to and support Enterprise accounts.  Our business focuses on mid-sized companies like yours and we are proud and privileged to do work with your organization”.
• Margin. This does not directly impact your margin, though it could impact back-end incentive program eligibility or payout.  Microsoft already made changes to the CSP program on the margin front.  If you are working with an Indirect, you are likely limited to 20-25% margins on software deals.  You’ll need to make money on professional services, managed services subscriptions, or your own intellectual property.  Mind you, there is tons of opportunity there given that a CSP generates up to $10 in revenue for every $1 in software revenue (I’ll find the stat and source it shortly).
• IUR.  Your Internal Usage Rights to free Microsoft software will take a hit. When it comes time to renew your competency, and if you go from Gold to Silver, or Silver to no competency, you will likely be using your IUR that gives you either 60 or 12 free licenses of Office 365 E3, Dynamics 365 CE, and other great products.  This means you might have to pay for this stuff going forward.  No biggie on the Office front, the licenses are relatively inexpensive and provide high value, easy to justify the spend.  However, what about other business applications like Dynamics 365 Customer Engagement?

Is paying for Dynamics 365 CE Licenses worth it?

If your organization is using D365 Customer Engagement, you may question its value if you need to start licensing it moving forward.  Partner’s IUR includes the now unlisted ‘Customer Engagement’ SKU which gives you a bunch.  D365 for Sales Enterprise, the old PSA, Customer Service, and more.  The equivalent license would start you at $95 assuming you are only using the sales functionality, if you are using support and projects, the attach license equivalents start rocketing upward.

However, are you actually getting value from this CRM platform?  For many companies we work with, the answer is barely, when its free, but if it’s no longer free, it might be time to question if this is the direction you should continue with in the future.

Enter TekStack, a Power Apps alternative to Dynamics 365.  TekStack provides technology companies with an end-to-end business system complete with standard business processes, and reporting so that you can focus on growing your business with good data.

Imagine every aspect of your business supported by an app for your employees, completely connected so that you can see every step in your customer’s journey with you.  All invoicing and financial transactions automated.  All the reporting you need to make great decisions and show that you are a sophisticated company.  And the best part is that you can tell your customers you run end-to-end on the same Microsoft technology you are providing to them each day.

TekStack is build on Microsoft products like Power Apps and integrates to your existing tools like Microsoft Outlook, Teams, SharePoint, OneNote, Power BI, and more.

Want to learn more?

TekStack has migrated dozens of Microsoft partners off an underperforming Dynamics 365 CE implementation onto TekStack with immediate impacts on their business’ performance.  Want to learn more?  Get in touch today and we can have a discussion about your business goals, show you our product, and provide pricing information.