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Microsoft Ending Partner Internal Use Rights (IUR) for Software, Cloud Services

Microsoft partners will no longer receive internal user rights (IUR) for software and cloud services such as Office 365 as of July 1, 2020, the technology giant has disclosed online.

Updated July 12, 2019, 11:29 a.m. ET: Microsoft has backed down and reversed course, vowing to roll back/eliminate the planned changes that upset partners this week.


July 7 Through July 12, 2019: The original controversy, now apparently over, is recapped in our coverage below…

gavriella schuster

Microsoft’s Gavriella Schuster

In a Business Insider article, Gavriella Schuster, corporate vice president and One Commercial Partner channel chief at Microsoft, had previously stated:

“We have essentially let them [partners] run their environment on Microsoft for free. Now, just like every other customer, they’ll have to pay for the services that they use.”
Moreover, additional details about the partner program changes and Microsoft’s reasoning surfaced in this ZDnet article.

The statements and policy change disclosure come one week  before Microsoft Inspire 2019 — the company’s annual worldwide partner conference.

The controversy is also generating chatter this morning at AWS Summit 2019 in New York, where the Amazon Web Services team is trying to win more Windows migrations. Similarly, Google Cloud Platform has spent the past two years or so attempting to win Windows converts.

Microsoft’s New IUR Partner Policy Explained

According to a Microsoft statement about Internal Use Rights:

“Effective July 1, 2020, we will retire the internal use rights (IUR) association with the product licenses partners receive in the Microsoft Action Pack and included with a competency. Product license use rights will be updated to be used for business development scenarios such as demonstration purposes, solution/services development purposes, and internal training.”

According to Microsoft’s own documentation from 2017:

“In Microsoft lingo, MAPS stands for Microsoft Action Pack Subscription. It’s an affordable yearly subscription which can help you unlock unlimited potential. With software, support, and benefits for businesses, MAPS enables you to begin, build, and grow your Microsoft practice in the cloud-first, mobile-first world!”

Microsoft Action Pack: Partner Policy Changes

Boil down the current statement and 2017 statement, and it sounds like Microsoft will still give MAP partners software and cloud services as part of a proof of concept to win end-customer business. But partners will need to pay to consume various software and cloud services internally — including everything from Window 10 to on-premises server software to Office 365 cloud services, Redmond Channel Partner asserts. The Microsoft Action Pack (MAP) perks were similar to “not-for- resale” perks found in rival partner programs.

At first glance, the new policy — again, effective July 1, 2020 — is a painful blow to partners, especially long-time partners that have seen traditional margins squeezed as the market shifts to cloud services and recurring revenues.

But take a closer look at the shifting partner landscape and perhaps Microsoft’s reasoning becomes more understandable. In the world of cloud services, a lengthy list of businesses are both customers and partners. The key example involves MSPs (managed IT services providers) — which consume business management software (i.e., Dynamics 365) to run their own companies, while reselling and/or deploying various Microsoft cloud services to end-customers.

Although Microsoft’s channel team surely wants to keep partners loyal with free or enticing perks from paid programs, it’s a safe bet the company’s financial department wants to maintain healthy margins on subscription services. And that likely involves increasingly charging all types of partners for consumption. We’re not defending the shift in policy — but we are trying to explore the potential financial reasoning behind it.

SaaS Subscriptions and Partner Fees: What’s Your Policy?

We’re checking in with additional cloud service providers — particularly those in the SaaS business application market — to check their subscription policies and fees for partners.

Article originally published July 7, 2019. Updated July 11, 2019 with Schuster’s statement to Business Insider. Updated July 12 with ZDnet story link. Final update made July 12 with Microsoft reversing course.

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32 Comments

Comments

    Don Bentz:

    If you look at the larger picture, how many MAPS subscriptions were not even providers? Microsoft has done a horrible job policing this over the last decade. I had clients whom purchased a MAPS to get free software and Microsoft didn’t seem to care.

    The partner levels which were changed years ago affected the smaller providers, IMO showing that they only cared about big $. I’m sure on the flip side the one man bands ate up a lot of their time, but what about the providers which put effort in and still were kicked to the side.

    Tom Fox:

    There are three primary partner program changes that affect MSPs negatively:

    1. Elimination of internal use rights – we will now need to purchase licenses for our internal servers and workstations.
    2. Elimination of partner support incidents – previously one of the largest benefits of the silver and gold partner levels, these are being eliminated entirely.
    3. Elimination of the Azure monthly credit – partners used to receive $100 per month toward Azure usage.

    Getting rid of internal use licenses might seem like a push to get partners to adopt Azure; however, also eliminating the $100 partner credit isn’t the way to accomplish this.

    MS is also vastly modifying the CSP rebate program (instead of paying out the rebate, a portion is going into a co-op fund).

    With all of these changes, there is little benefit to continuing our involvement in the MS partner program – which, based on the type of changes, seems to be more focused on sales and volume and less focused on the partner’s competency to deploy Microsoft solutions.

    Luis Garcia:

    Echo’ing what Tom just said.

    We have been a Microsoft partner for almost 2 decades. If they are eliminating the IUR and Azure credits, they are greatly reducing the benefits of this program for MCP’s. The included incidents is really the only other incentive to remain a partner. We ourselves will be evaluating going into the end of the year whether or not its worth renewing our Partnership going into next year because of these changes.

    Joe Panettieri:

    Don, Tom, Luis: Thanks for weighing in with your perspectives. I can confirm that Microsoft is reading ChannelE2E (and surely other sites) and gathering the partner feedback.

    Sources say quite a few partner program leaders lost sleep over the extended July 4 weekend trying to figure out how to (A) control the damage ahead of the Ignite conference and/or (B) do a course correction before that July 2020 deadline kicks in. I’ll let you know what else I hear.
    -jp

    Tom Fox:

    Joe,

    If MS were truly viewing our relationship as a “partnership” they would have discussed this with the community ahead of time. The impact of these changes was clearly not well thought out – nor was there consideration given to the impact it would have on their partner’s business.

    I’ve been a Microsoft partner for going on 30 years, and have never felt less like a “partner” than I do after learning of these changes.

    Adam Fadhli:

    We have also been a Microsoft Partner for almost 30 years, and I agree 100% that this policy change by Microsoft is not Partner friendly by any means. We also pay a considerable “program fee” to be a Microsoft Partner. But if we will no longer receive internal use licensing, or support incidents, what is the benefit of being in the Partner program anymore? And what are we getting in return for this fee?

    The other danger is that this will cause a sort of soft mutiny among Microsoft Partners, giving them the incentive to explore other alternatives internally, and then once they mature these alternatives internally, it is only natural that they will promote them to their customers as an alternative to Microsoft solutions.

    I understand that there is quite a bit of MAPS abuse by people who are not true Microsoft Partners, but Microsoft shouldn’t be punishing the entire community just because some abuse the benefit. Figure out how to discern legitimate partners from illegitimate ones so real partners can continue to take advantage of these benefits and continue to promote Microsoft solutions.

    Graeme Freeman:

    Thanks Microsoft for again making partners life’s more difficult.
    Teaching your techs just got more difficult!
    Without IUR to help and give cost effective training without time limits.
    We used to use Technet to train techs on the product ranges, even the ones they didn’t see often, and they killed that.
    Now they’re killing MAPS we will have to find other ways to fund training labs etc!

    Shawn Butt:

    This is absolutely ludicrous.
    We have been paying a hefty sum as a Membership Fees every year to MS over the past 15 years.
    Our biggest benefit out of that are primarily TWO things:
    1. Partner’s IUR.
    2. MS Incident Support Pack and Advisory hours.

    If these Two benefits get taken away then we don’t see the benefit of remaining a MS Silver Partner any longer. The ‘Silver Partner’ moniker has no marketing value and I don’t see the value anymore.

    Though I agree that MAPS may have been (most probably) abused by non-MS Partners, but the true MS Partners should not be rolled up in that category.

    Mike:

    As a Microsoft gold competency partner for 14+ years, and paying the program fee every year it seems Microsoft will paint itself into a corner with this one. and aside from this move by Microsoft my concern is now what other software based companies will follow suit? are our VMware IULs next? We will certainly rethink our partnership level.

    Luis:

    I am seeing now the included support incidents are also going away as part of this MPN shift. There’s really no point in being a partner anymore if this is the case. For the partners that aren’t wrecking havoc trying to get their money back for their MS Ignite tickets, there will probably be some rioting and pillaging going on at the conference next week. No one will care about what they’re announcing new for Marketing & Sales now. Sad thing is I’ve been singing Satya Nadella’s praises these past few years with the Microsoft turn around. This is a great way to get Partners to start turning against you. The entire MPN Eco-system as many partners know has been quite a roller coaster. They are constantly doing updates, moving things around, and making it difficult for partners. Now this? We are the ones that progressed Microsoft to where they are today. When we were the ones pushing BPOS before it was even an itch, nevermind becoming Office 365 and the Azure platform it is today. If Microsoft announced this prematurely for something bigger they were going to announce next week at Ignite, they couldn’t have failed more miserably in execution. To alienate and piss everyone off in the process was not the smart way to go.

    Luis:

    *Correction, I mean’t MS Inspire not Ignite*

    Luis:

    I see this has been trending on Reddit as well. Someone started a petition for partners to sign against these decisions:
    https://www.reddit.com/r/msp/comments/ca0ryb/disapprove_microsoft_partner_network_changes/

    Joe Panettieri:

    Luis: Whoops. I made the same mistake (originally referencing Ignite rather than Inspire). Yes, the story is still trending across the web…
    -jp

    Pat Martin:

    I just spent $5K to renew my Gold Partner membership. Over the last two years I have spent over $20,000 training and providing incentives to get my engineers certified because of competency changes. If I did this type of thing to my clients they would fire me. One of my biggest advantages as a Gold partner are the support incidents. I’ve been a partner for a long time and I’ve watched the partner program steadily decline over the years. I used to have a dedicated representative that helped me increase my sales and provide guidance on the new licensing options. All of a sudden I was on my own without a representative and the relationship was gone. Then my preferred competency was eliminated and I found myself scrambling to get my engineers re-certified. What is my incentive for being a partner?

    Clint Hirschi:

    The Microsoft Partner relationship has just lost most of it’s value to many of it’s partners. Between the IURs and the support incidents, the annual $5,000 partner fee was worth it. With the removal of that, especially for MS app developers, there is little other reason to continue to be a part of the program.

    Jeff Weinman:

    It appears Microsoft is out of touch or doesn’t want to work with small MSP’s or IT service providers anymore. Maybe that’s their intent.

    Here is an interesting perspective (opinion) from reddit on a possible reason why Microsoft is doing this. It is from someone who works for a very large Microsoft partner. It speaks to one (of a possible many) reason why my comment (opinion) above may be accurate:

    https://www.reddit.com/r/msp/comments/cazy63/a_different_perspective_on_the_ms_partner_program/

    Joe Axne:

    A friend of mine works for the largest MS Partner in US. They close $3 Million Microsoft solution stack deals 10-12 times a year. That would take 300+ SMBs to get $10,000 deals 10-12 times a year. They are focusing in on the big partners (big fish). I saw this coming and frankly doesn’t surprise me now that Microsoft has a direct connect back to our SMB clients through O365/Azure/etc if they really want to start to direct market to them will be next step, that is my prediction. We gave up on the partner program 7-8 years ago as far as value. Team up with Pax8 now as our wingman for MS support and escalations as reseller and first line of support. Just my $.02

    Joe Panettieri:

    Update: Microsoft’s official response to partner concerns about the program change. From Business Insider.
    -jp

    Tom Fox:

    This is behind a paywall…

    Tom Fox:

    Some key quotes from the article:

    Partners will no longer be able to use Microsoft software internally in their own businesses for free as part of their annual subscription to the partner program. “We have essentially let them run their environment on Microsoft for free. Now, just like every other customer, they’ll have to pay for the services that they use,” Gavriella Schuster, corporate vice president and One Commercial Partner channel chief at Microsoft, told Business Insider.

    TF: We are not customers, we’re “partners…”

    “You have to start paying for something we’ve been giving for free for a long time,” Schuster
    said. “It’s like when your kids turn 20, and you tell them they have to pay rent. We have all
    our teams on standby working with partners to come up with the best licensing solution for
    the organization.”

    TF: Microsoft equates their “partners” to children in need of an economics lesson.

    Joe Panettieri:

    Hey Tom: I’m not condoning Microsoft’s strategy shift. But I think the shift reinforces the thesis of my blog above. Microsoft is starting to view all partners as service providers. Mini-Verizons if you will. And service providers pay for their software.

    Still, I think Schuster’s comments will hurt the situation more than help. Microsoft has essentially given partners a full year to rethink (A) their financial models and (B) their vendor alliances.

    No doubt, Microsoft rivals are working up plans to win partner converts. At the AWS Summit today in New York, Amazon is making an aggressive pitch for running Windows on AWS. Google has been making similar pitches…

    On a potentially related note, as Joe Axne points out above, some distributors could be the winners here, essentially becoming the support arm for Microsoft’s partners. -jp

    Luis:

    That response from Microsoft is essentially a middle finger to partners. It’s been a long run but times are changing and Microsoft has invoked the “My way or the highway” attitude.

    I am curious as to Joe Axne’s suggestion about using Pax8. Are you saying team up with Pax8 and not renew the Microsoft partnership to let them support everything?

    Don Bentz:

    Gavriella Schuster – Not much of a “Channel Chief”. Channel Chiefs “Promote” the channel. Maybe they should reach out to Ted Roller for some education.

    Joe Axne:

    I’d advise connecting with Pax8 directly. Below is our rep who could get you in the right direction based on your region in the USA. Essentially Pax8 is the CSP (Cloud Services Provider) but we the MSP own the billing relationship with the client that syncs to our Autotask PSA for billing. Pax8 became our primary point of support for Office 365 and Azure tenants instead of going direct to MS. We get support in a matter of hours vs days now with Pax8. If there is something they can’t assist with and need escalation they have direct access to Microsoft’s higher tiers to get things resolved. They are more than Microsoft and have a boat load of other distribution (software and cloud services) that you may or may not be using already. We primary use them for MS O365 and Azure currently. Hope this helps

    Dylan Rampa | Cloud Solutions Advisor
    drampa@pax8.com
    Direct: (719) 399-0931

    Frank Ballatore:

    I’ll echo what most others have said here. This is absolutely ludicrous. Microsoft “Partners” have been a sales force for Microsoft, especially in the SMB space that many of us focus on. I’m sure Microsoft will say we get compensated for those sales, but what; pennies on each dollar? We’ve been in the partner program for many years and paid tens of thousands of dollars for the “privilege”. At least we received some benefits in return. Now, I don’t see the value. And my clients sure as hell don’t care if we’re a Microsoft partner. I can’t remember the last time that came up in a sales call. “Oh, you’re a Microsoft partner? Well, why didn’t you say that earlier? Where do we sign!?!” And as others have said, I get the MAPS abuse by non-IT companies. That’s Microsoft’s fault for not policing that at all. So the answer is to screw the legitimate, hard working IT professionals who work extremely hard for Microsoft. Nice.

    I’m sickened by this.

    Frank Ballatore
    The New England Computer Group, Inc.

    Dan Foote:

    The demotion of “partner” to “consumer” makes a mockery of staying in MPN. How many “consumers” drive new customers to MS for products and services? While I’m sure there’s a percentage, I’m equally sure it’s a very small percentage.
    What MS is doing may have a direct impact on other vendors. You, as a partner, will get the benefit of a price reduction. At the same time, they’ll be offering deals to consumers that negate those reductions. Case in point: Dell and their unethical treatment of Deal Registrations; SonicWall and their channel program that competes w 3rd party vendors that undercut any margin a channel partner can make–which leaves partners to a service-only model.
    There are very few company’s that truly take “Channel Partner” to heart. One of the most successful that I know of is Datto. Sadly, most vendors fail to understand the value of a channel-only program that focuses on what the possibilities that can be delivered through true channel partnerships. (For those that don’t know, Austin McChord built an international company and a Unicorn in under 10 years w their channel-only structure.)
    Until now we’ve avoided going w Pax8. Given the above comments, it’s time to rethink that notion.
    Community anger at Microsoft isn’t a new notion, yet it’s amazing how they continue to fan the flames of animosity.

    Vince Tinnirello:

    Just so I’m clear, this affects competency holders too? I get dumping action pack only subscribers, but I’m confused by the competency holder loss as these are partners who have proven their ability to sell and deploy these solutions.

    Frank Ballatore:

    You got it Vince.

    ““Effective July 1, 2020, we will retire the internal use rights (IUR) association with the product licenses partners receive in the Microsoft Action Pack and included with a competency. “

    Bill Blum:

    I sent this to my MS rep:
    Please express our extreme displeasure with this decision to the folks up the chain. The only reason we are so successful selling their solutions to our clients is because we eagerly adopt nearly everything that we can bring to our clients. We then spend a lot of time learning how to use it, including suffering through the early adopter pains, of which there are many! Only then can we show our clients how it makes us so much more productive and profitable. That In turn creates a demand pull through for the folks sitting in front of their spreadsheets in Redmond. Not fair……
    We are rethinking the investment to be a “Partner”. we no longer feel like one. As they say in their press release we are a “customer” now.

    Joe Panettieri:

    Hey Folks: Thank you for all the comments, feedback and direction you’ve shared.

    Request: If you’re attending the Microsoft Inspire 2019 conference and pick up any new buzz or perspectives on this story please email me: Joe@AfterNines.com.

    Thanks again to each of you for being ChannelE2E’s eyes and ears in the industry.
    -jp

    Joe Panettieri
    EVP, After Nines Inc.
    Content Czar, ChannelE2E & MSSP Alert

    Clint Hirschi:

    So.. they backed down:
    https://blogs.partner.microsoft.com/mpn/updates-program-change-announcements/
    Reverting all planned changes!

    Joe Panettieri:

    Clint: Thanks for sharing the link.

    Three quick items for all ChannelE2E readers and/or Microsoft partners:

    Thank you everyone.
    -jp

    Joe Panettieri
    EVP, After Nines Inc.
    Content Czar, ChannelE2E and MSSP Alert.
    Joe [at] AfterNines [dot] com