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Microsoft Partner Network licensing changes put channel on alert

Some MPN members question Microsoft IUR policy changes, but other channel execs see the product licensing shift as business as usual in the reseller and service provider space.

Pending Microsoft Partner Network policy changes affecting product licensing have alarmed some partners, with more than 5,000 people signing a petition to register their disapproval.

A key area of contention is Microsoft's plan to eliminate the internal use rights (IUR) association with product licenses included in Microsoft Action Pack and those included with a competency. Action Pack gives partners access to product licenses and technical enablement services, through which they can create applications and develop service offerings. Microsoft positions Action Pack, which ranges from OSes to business applications, as a way for new MPN members to get started. Competencies are business specializations in areas such as cloud business applications and data analytics.

The revised IUR association policy will compel Microsoft partners to pay for licenses they have been using in-house under the current Microsoft Partner Network membership terms. The new policy goes into effect July 1, 2020.

Paul Katz, president and chief software architect at EfficiencyNext, a software developer in Washington, D.C., said the policy change will cause the company to purchase five Office 365 Enterprise E3 seats. In addition, EfficiencyNext stands to lose the Microsoft Azure credits the company uses to run its website, although Katz said the policy change's effect on the Azure benefit is somewhat ambiguous at this point. The licensing fees coupled with the potential loss of Azure credits would result in an annual net cost of about $2,400 a year, he added.

"That's a thorn in the side, but it doesn't change our world," Katz said.

The stakes are much higher, he said, for larger partners with more licenses they will need to pay for. A partner with 100 Office 365 E3 licenses, for example, would need to shell out $24,000 annually, based on the $20 per user, per month seat fee.

Charles WeaverCharles Weaver

Charles Weaver, CEO of MSPAlliance, an association representing managed service providers (MSPs), said he found out about the Microsoft policy change when a board member sent him the online petition. "It's going to sting most of them," he said of the licensing shift's effect on service providers. "It is probably not going to be received well by the rank-and-file MSPs."

The partner petition, posted on Change.org, stated Microsoft's policies represent unfair treatment, noting partners "have been so loyal to the Microsoft business." Microsoft couldn't be reached for comment.

Microsoft Partner Network: Policy consequences

Katz advised partners to "get licensed up" in light of the IUR change, noting that Microsoft has been aggressive in the past with software asset management engagements.

Weaver, however, said he hopes that won't be the case.

"I can't think of anything more destructive to the relationship between Microsoft and the channel than that," he said, noting the audits software vendors pursue tend to target large customers, where millions of dollars are at stake.

People don't want to come to terms with the fact that we are resellers and we don't, in any way, shape or form, control the products.
Stanley LouissaintPresident, Fluid Designs Inc.

In addition to causing some partners to incur higher licensing costs, the Microsoft IUR policy shift could also hinder partners' use-what-you-sell strategies. Resellers and service providers that use a vendor's products to help run their business gain technology experience, which they can transfer to end customers when deploying those products.

Katz said "dogfooding" -- as in, eating one's own dog food -- is the best way to test products, especially for companies that can't afford to set up a separate test environment.

But the restriction on IUR would discourage this approach and could cause Microsoft to miss out on opportunities down the road.

Weaver pointed to a potential unintended consequence of Microsoft's action: "They stop the freeloading of MSPs from using their software, as they look at it, and they lose potentially thousands of MSPs who no longer try that stuff out and no longer have access to it and may go to different vendors and different solutions."

Update: Planned MPN policy changes rolled back

Microsoft has rescinded planned changes to its MPN IUR policy.

Gavriella Schuster, corporate vice president, one commercial partner, Microsoft, announced the policy roll back in a July 12 blog post. The post states, "partners will not be subject to reduced IUR licenses or increased costs related to those licenses next July as previously announced." Additional details available here.

A part of doing business

Stanley LouissaintStanley Louissaint

Stanley Louissaint, president of Fluid Designs Inc., an IT services provider in Union, N.J., said the MPN policy changes don't affect his company but noted the unease among partners. Louissaint suggested changes in vendor policies are simply part of doing business as a channel partner.

"People don't want to come to terms with the fact that we are resellers and we don't, in any way, shape or form, control the products," he said. "If [Microsoft] changes how they want to deal with us, it is what it is."

Louissaint said the bottom line is Microsoft wants partners to become paying customers when using the vendor's products to run their businesses. As for creating test beds to assess products, channel partners still can download software on a trial basis -- for up to 180 days, in some cases, he added.

Jeff Aden, executive vice president of marketing and business development at 2nd Watch, a Seattle MSP, said the new policy "is not going to change what we do" unless there is an unforeseen effect. 2nd Watch is a Microsoft Gold partner and an AWS Premier Consulting Partner.

EfficiencyNext's Katz said the licensing changes don't mean Microsoft is greedy. He noted Windows Insider members can download preview versions of Windows for free, and there is a community version of Visual Studio that is free for up to five users in nonenterprise organizations.

"They are still a great company, and we are still happy to be working with them," he said.

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