Microsoft to change the way it sells Azure, enabling small and midsize companies to buy services
Microsoft is shifting more of its Azure cloud services and select third-party applications through its Azure Marketplace, and will encourage small and midsize companies to buy direct through a new Microsoft Customer Agreement (MCA).
The Lowdown: The new MCA provides customers with direct access to a single-offer catalog of products and services under a simplified digital contract. Starting in March, new small and midsize customers will use the MCA contract. Existing customers will roll over to the new contract upon renewal.
The Details: Microsoft isn’t making a big deal out of the change. According to Redmond Magazine, the license and sales model change was quietly rolled out Jan. 10 with an update to Microsoft’s licensing page. Microsoft says customers will experience no interruption in service during the contract transitions.
The Impact: MCA and the availability of products through the Azure Marketplace will essentially cut out channel partners from selling Microsoft Azure services and some related products. How many Microsoft partners will be impacted by the change is unclear. Microsoft says the change is a reflection of the evolving nature of cloud and service sales, and necessary to provide customers with
Background: Microsoft touts itself as a company built through channel relationships and committed to partnerships. However, over the past decade, Microsoft has a mixed record on its direct
While Microsoft sometimes finds itself in conflict with partners’ go-to-market sales models, Microsoft is clear on how it thinks partners can and should make money in and around its cloud — with services. Microsoft consistently says partners should offer the professional and managed services customers need to get the most out of their cloud investments.
The Buzz: “In the last decade, how we do business has changed, so we must evolve the purchase experience to better help our customers innovate and thrive. Built with the needs of our customers in mind, a new digital buying process will streamline the experience customers have with Microsoft,” Microsoft said in a statement to ZDNet. “This model expands and enhances billing and cost management capabilities, and comprehensive subscription and account management features, giving customers greater visibility, transparency, and agility for managing their purchases and subscriptions.”
Counterpoint: While the Microsoft licensing and sales model change may upset and disrupt some partners, the Microsoft partner community may also be part of the reason for the shift. According to The 2112 Group’s State of the U.S. Cloud Channel report (supported by Microsoft and Ingram Micro Cloud), the average channel partner — particularly on the SMB level — represents only three cloud vendors and sells only three cloud products per deal. Moreover, most channel partners focus on less complex, low-level cloud services and shy away from advanced services. Many cloud vendors, including Microsoft, have struggled to get partners to move beyond rudimentary services. Shifting basic cloud services to a direct model, essentially denying partners an easy path, could motivate more to invest in advanced cloud service sales and professional service capabilities.
Channelnomics Point of View: Microsoft moving to a direct and marketplace sales model isn’t surprising given, as the company says, the evolving nature of cloud services and customer purchasing. Many vendors are moving to marketplace models that enable customers to purchase products directly and immediately. As 2112 advised in its “Strategies for Engaging Automated Digital Sales Channels,” less complex products that require no human sales interaction should be sold through marketplaces. Under this model, partners will thrive via professional services, which carry margins of up to 50 percent.