Changes to the Microsoft Partner Program
In dynamic operating environments where participants are always seeking their own competitive advantage, investment in partner-to-partner engagements makes sense for ICT Managed Service Providers (MSPs) wanting to position themselves for success in the indirect provider-reseller two-tier model. By leveraging their infrastructure to take care of customer billing and support and enabling MSPs to offer a broader selection of Microsoft’s services and solutions to their customers. Through their Global Partner Program, Microsoft has built a global network of qualified indirect MSPs by allowing their partners to focus on building their reseller business.
Announced in March of 2022, Microsoft is making major amendments to their partner program updating it from the Microsoft Partner Network to the Microsoft Cloud Partner Program. Part of these changes includes the replacement of legacy Gold and Silver competencies with a single Solutions Partner designation. Starting in October of 2022, Gold and Silver competencies will no longer be valid. However, partners that have a legacy competency by the end of September 2022 will continue to receive legacy benefits until their next anniversary date. For partners with an anniversary date from October onwards, Microsoft will provide options to continue to purchase legacy benefits after that time. Meaning you can pay the fee and still be eligible through October 2023, until attaining a Solutions Partner designation will be required to be eligible for incentives as legacy competencies and legacy benefits will no longer be recognized. These changes affect all Microsoft partners, whether they customise, sell services, provide software solutions, or sell devices. Microsoft partners will soon be prompted to differentiate themselves in at least one of six solution areas.
Partner changes are resulting in a flurry of increased M&A activity amongst MSPs at a global, regional, and local levels as competitors consolidate in response to the escalating costs of doing business.
Reflecting the shift in focus from traditional software as a service to cloud based solutions. Microsoft has streamlined solutions designations into 6 different areas. These new strata represent a significant simplification of the nearly 20 Microsoft partner competencies previously available in both Gold and Silver tiers. The level above the Solutions Partner designations is Advanced Specialisations. To be able to win more business and market specific services. Advanced specializations show a higher level of technical expertise in each area and are a great indicator of a partner’s capabilities. Any MSP achieving the Solutions Partner designation can qualify for an advanced specialization, but those who do not obtain Solutions Partner status will not. Partners will need their employees to obtain specific certifications to demonstrate their expert-level status and qualify for advanced specializations. These accreditations usually involve advanced training and passing exams to prove expertise.
When you look deeper into the new growth metrics associated with these new Solution Partner designations, it is evident Microsoft wants “all in” partners focused on increasing Microsoft Recurring Revenue. These changes are Microsoft’s way of weeding out partners gaming the system, as more partners achieved Gold and Silver accreditations diluting their impact as a recognisable industry distinction. It is envisioned that the designations and advanced specializations will provide a better definition of each partner’s areas of expertise, allowing customers to better assess a partner’s services. As the changes ensure that partners are truly qualified and have the capabilities and capacities to deliver promised services. Not only will partners be able to work on cloud-based solutions, but they will be adept at working specifically with Microsoft products.
As the previous competencies have no impact on qualification for the new designations, and the Solutions Partner fees are priced at where the Gold competency used to be. Many partners have felt a negative impact from the partner program changes and the response from many MSPs has been strongly adverse. With no direct mapping enabling partners to qualify as a solution provider under the new programme. Partners potentially could go from Gold to not being a qualified partner at all. The new Solutions Partner designation requires a higher level of qualification requiring improvements to qualify, putting pressure on existing Silver and marginal Gold ratings in reaching the threshold for Solutions Partner status. Organizations earned Silver (regular) or Gold (expert) status based on the number of certified employees, monthly revenue, and product adoption where professionals providing the Microsoft services and expertise had to take exams, meet performance benchmarks, and show customer growth in their competency areas to attain their status.
The new Solutions Partner designation requires a higher level of qualification requiring improvements to qualify, putting pressure on existing Silver and marginal Gold ratings in reaching the threshold for Solutions Partner status.
To qualify for this new designation and subsequent incentives, Microsoft is adding new growth metrics across customers, certs, and usage, that will make it more difficult for MSPs to meet the new Solutions Partner standards. It will be massively challenging reaching these thresholds as some partners do not focus solely on Microsoft solutions, and in smaller regions you often serve the same customers and they do not count as net new. Microsoft audits for specialisations are particularly challenging and large MSPs have struggled with completing competency specialisations as people need to take additional time out to execute accordingly. With these tougher requirements it will mean that there are likely going to be fewer Microsoft partners as Microsoft are making the award criteria much higher and across fewer categories.
Whilst challenging for partners, partnership programs are great way for customers to be able to better understand partner capabilities and find the right partner for implementing or managing a particular Microsoft technology or solution. To remain competitive and ensure the continued monetisation of their customer base. MSPs will need to weigh up the benefits of realizable business development with increased customer reach and expanded training and enablement offered by being a partner with or without specialisations with Microsoft, against the ability to qualify, required investment, and Microsoft continuing to impose more interfering restrictions on how partners communicate and deal with the customer relationship.
The looming question facing MSPs preparing for the changing operating landscape, should you undergo recertification to remain relevant, or should you consider selling your business?
With these partner changes are already resulting in a flurry of increased M&A activity amongst MSPs at a global, regional, and local levels as competitors consolidate in response to the escalating costs of doing business. Further activity is expected to escalate as we rapidly approach the October 2023 sunset date. MSPs operating in the Microsoft partner-to-partner model should seriously consider their options including mergers, acquisitions, and strategic partnerships to mitigate any negative consequences of the transition. The looming question facing MSPs preparing for the changing operating landscape, should you undergo recertification to remain relevant, or should you consider selling your business?
