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Microsoft sets minimum sales levels for ERP VARs

Next year, the company will raise training requirements for VARs selling ERP and CRM.

VARs authorized to sell Microsoft Dynamics ERP and CRM software next year will have to hit minimum revenue numbers to maintain their ability to sell that software.

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As of March 1, 2011, they will have to "generate a minimum of $20,000 in total revenue net to Microsoft every 12 months since signing the SPA." SPA is the Solution Provider Agreement that all Microsoft ERP VARs must have. Microsoft did not mandate a minimum revenue level before.

Those Microsoft Business Solutions [MBS] partners that don't make their number in the first 12 months of the two-year SPA will be terminated. If they fail in the second 12 months, they will not be able to renew. ERP VARs that thus fall out of compliance can re-enroll after 12 months or sign a referral agreement that will enable them to collect a small fee if they bring a customer into Microsoft ERP or CRM.

Some Microsoft Business Solutions VARs welcomed the change, which they say will curb the number of "lifestyle" resellers selling Microsoft Dynamics GP, NAV, AX or SL ERP software packages. Lifestyle is a derisive term for VARs that sell just enough software to stay authorized and maintain customers but do not actively market themselves or push for that golden standard in software sales: "net new customers."

Other ERP vendors (NetSuite and Oracle for example) push their partners hard to win new customers and pay margins on those sales. NetSuite margin levels are set based on that net new sales number. Oracle takes most upgrade license sales direct.

"This could get rid of the riffraff," said one MBS VAR that was unaware of the changes.

The $20,000 floor is just one of several changes to how Microsoft is dealing with ERP resellers.

Another change mandates that partners certify two people on whatever ERP solution they sell and support. The goal there is for partners to field deeper expertise in their areas. Those changes were outlined early this year in a Microsoft blog.

That is a meaningful change because many of these VARs now certify one person across several products. "If your organization does multiple products, your people cannot [now] cross products, meaning different people need to be authorized on CRM than on [Dynamics] GP. This was not a requirement earlier when one person could theoretically be authorized on multiple products," said one California-based MBS VAR.

A Microsoft spokesman confirmed the $20,000 bar and noted that that number covers all revenue, not just net new license sales.

Several MBS VARs suspect that Microsoft will soon follow the lead of other software companies and base reseller margin levels on net new sales and that the top VARs that bring in the most new business could see top margin limits rise beyond the current 52% to 60%. Microsoft had no comment on that.

All of this news is percolating just before Microsoft Worldwide Partner Conference 2010 kicks off in Washington D.C. in two weeks. Microsoft is always tweaking its partner program and is now in the midst of transitioning to its new "Microsoft Partner Network," which will see a new boss arriving July 1. Allison Watson, who led the worldwide partner effort for eight years, is moving over to marketing and will be replaced by Ian Roskill.

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