On November 1, Microsoft’s recently unveiled “standardized” pricing for online software purchases made through its volume licensing programs for all partners will take effect for new contracts. As that deadline approaches, it would be a smart idea for smaller channel partners – who will be most affected by seeing their long-established discounts disappear – to plan for their impacts, several IT experts and analysts told ChannelE2E.
Under its August 12 announcement,
Microsoft notified channel partners that it will standardize the pricing of online software purchases for all Price Levels A to D under its Enterprise Agreement, which removes previously available 6% to 12% discounts and forces purchases to be made at higher Level A list prices.
The increases will take effect at a customer’s next agreement renewal, according to Microsoft. Any new purchases after November 1 will also come at the higher prices. Prices for Microsoft software bought under on-premises pricing will not change, the company said, nor will prices under U.S. government and worldwide education price lists. Under the changes, Microsoft’s largest customers will retain their discounts because of their much larger sales volumes.
In a reply to questions from ChannelE2E, a Microsoft spokesperson said that “this action allows us to deliver more consistent and transparent pricing and better enable clear, informed decision making for customers and partners."
Channel Partners Must Figure Their Response Strategies, Says Analyst
For channel partners, these changes will require planning and preparation, and they need to quickly determine their individual response strategies,
Anurag Agrawal, founder and chief global analyst with Techaisle, told ChannelE2E.
“This move will have a significant impact on the channel, particularly for partners whose primary value proposition has been navigating the complexities of Microsoft's licensing and securing favorable pricing for their clients,” said Agrawal. “This pricing standardization will profoundly reshape the channel by eroding price-based differentiation, a traditional cornerstone for many partners. The change effectively levels the playing field for online services, but in doing so, it removes a key competitive advantage, particularly for Large Account Resellers (LARs) who have historically focused on large enterprise agreements.”
In response, channel partners, including MSPs, “must inevitably shift away from license resale and toward the delivery of value-added services,” said Agrawal. “This accelerates an existing trend, compelling partners to emphasize their expertise in high-demand areas like cloud migration, managed security, and specialized consulting.”
Agrawal said he agrees with critics who argue that Microsoft’s pricing shifts are designed to help the company further grow its competing Microsoft Cloud Solution Provider (CSP) program revenue and “simplify a licensing landscape that has long been a source of customer confusion.”
The CSP program “fosters a more direct Microsoft relationship with end customers for better data and usage insights and also solidifies an important recurring revenue stream,” said Agrawal. “By guiding more customers to this model, Microsoft strengthens its financial predictability, a move highly valued by Wall Street. So, while the stated goal is ‘pricing consistency,’ the underlying strategic objective is to streamline the path to the cloud and the CSP program, which is Microsoft's preferred vehicle for cloud service delivery.”
No More ‘Bigger Discounts for Selling More’
But while that may be good for Microsoft, the program changes for many partners will likely be jarring.
“The traditional model of ‘the more you sell, the bigger the discount’ is being phased out for online services,” said Agrawal. “The new standard for partner excellence will likely be based on a combination of factors, starting with deep technical expertise demonstrated through advanced specializations and certifications in high-growth areas like Azure, security, and AI. Beyond technical skill, partners will be increasingly measured on their ability to drive customer success and adoption, ensuring that clients are not just purchasing licenses but are actively using and deriving tangible value from their cloud services.”
Ultimately, Microsoft “will likely place a premium on partners who develop their own intellectual property (IP), rewarding those who build unique solutions and applications on the Microsoft platform as a means of creating new revenue streams and fostering deeper customer engagement,” said Agrawal.
All of this means that partners have to change what they sell because lower margins on license sales is a losing proposition, he said.
“The most critical pivot is toward becoming a services-led organization, building out robust offerings in managed services, consulting, and support to create recurring revenue streams that are independent of licensing,” said Agrawal. “A further step in this evolution is to develop and sell proprietary intellectual property, creating unique solutions that address specific industry needs or business problems, which is where the real margin and long-term value can be found.”
Another strategy for partners might be to “consider embracing a multi-cloud strategy, as providing expertise across various platforms like AWS and Google Cloud will be in high demand for customers seeking the best-fit solutions, regardless of the vendor,” he said. “The partners who thrive in this new environment will be those who see this not as a margin squeeze, but as an opportunity to move up the value chain.”
More Reactions and Advice from Analysts
Another observer,
Paul Nashawaty, principal analyst for AppDev and modernization at theCUBE Research, called Microsoft’s decision to standardize online services pricing for Enterprise Agreements at one pricing level “a double-edged sword for MSPs and channel partners.”
Instead of simplifying things, “it raises the financial bar for partners and customers who have historically relied on tiered discounts within EA structures,” said Nashawaty. “For many MSPs serving midmarket and smaller enterprise customers, this change essentially squeezes margin flexibility and complicates deal-making at renewal.”
Microsoft’s actions reflect a broader trend being tracked by theCUBE Research, he said, where hyperscalers are systematically steering customers toward CSP programs to consolidate purchasing under their preferred models.
“By raising EA requirements, Microsoft is effectively signaling to partners: if you want flexibility, scale, and rebates, the CSP path is the future,” he said. “That creates opportunities for large, well-capitalized MSPs but puts smaller players in a bind.”
So what can channel partners do to fight back?
“While some may consider ‘partnering up’ [with others] or aggregating customers to reach EA thresholds, Microsoft’s program design is not built to reward consortium-like behavior,” said Nashawaty. “Instead, the realistic options are to absorb the cost and risk of higher renewal pricing, migrate customers more aggressively into CSP programs, or diversify into multi-cloud and adjacent services where they can differentiate outside of Microsoft’s licensing orbit.”
Ultimately, though, “Microsoft knows the gravity of its ecosystem, and partners who do not align with CSP will be competing uphill,” he said.
Nashawaty agreed that the longer-term play for partners is strategic repositioning of their businesses.
“Channel partners will need to evolve from being license resellers to being service and value creators to maintain margins and customer loyalty as Microsoft tightens its grip on licensing economics,” he said. “Microsoft is betting big that predictable, standardized pricing tied to its public cloud model will outweigh the channel disruption it creates.”
Robin Ody, an MSP, MSSP and channels specialist analyst with Canalys, told ChannelE2E that in a world where change is constant that some Microsoft partners are usually happy while others are not as happy.
“Microsoft though, seems to be antagonizing everyone” lately, said Ody. “It is taking away business at the top end, forcing its CSPs to take business further into smaller end customers and competing with smaller MSPs. It is also a making it harder for those CSPs to build better margins around their Microsoft businesses as it tries to [vacuum] up more of the end-user value for itself.”
The software and services giant is “also making it harder for smaller partners to do business directly with it while continually cutting financial incentives,” said Ody. “It is banking on its gravitational pull and near monopoly status to convince its partners both large and small to build more business around it. It will almost certainly continue to grow enterprise value over the next decade, but it is doing so in a way which will only serve to convince all partners to diversify as much as possible.”
Shelly Kramer, principal analyst with Kramer&Co., said that Microsoft’s changes are “clearly a move by Microsoft to boost revenue per user, eliminating the somewhat significant volume discounts long enjoyed by many enterprises. Beyond enterprise customers, this move should have an outsized impact on MSPs. The elimination of tiered, volume-based discounts means that MSPs will likely face higher baseline costs and could easily face increased customer churn as customers try to lock in best pricing options.”
Another analyst,
R. Ray Wang, principal analyst and founder of Constellation Research, said he has been “hearing a lot of grumbling by MSPs, channel partners, and VARS” that do business with Microsoft. “While there is a good lock on customers, the partners are finding it harder to work with Microsoft and many have built practices with other companies as a result from Google to Amazon to Sage To Zoho.”
Microsoft’s strategy reminds Wang of similar behaviors by U.S. automakers in the past. “This is how auto manufacturers used to squeeze their dealers by leaving them little room for pricing discounts and working with their customers,” he said.
Jack Gold, president and principal analyst of J.Gold Associates, LLC., said that Microsoft has been increasing cost thresholds for EA agreements for some time to raise revenue and to push smaller partners to sell more. “This is not all that surprising given that smaller clients are less attractive to Microsoft and cost more to support,” said Gold. “I would expect to see this type of cost [hikes] continue.”
MSPs Can Work Together to Fight Back
One of the most strategic moves that partners can make right now in response is to join together to get better pricing and consolidate some of their dwindling power in the marketplace, said Techaisle’s Agrawal.
“I expect to see a significant increase in partner-to-partner collaboration and even consolidation in the coming years,” said Agrawal. “This collaborative strategy makes strong business sense for several reasons, primarily as a means for partners to adapt and scale in the evolving Microsoft ecosystem. For many smaller partners, achieving the advanced specializations that Microsoft now emphasizes can be prohibitively difficult, but by pooling their resources and expertise, they can collectively meet these stringent requirements.”
This can show real results, he said.
“We are entering an era of ‘co-opetition’ in the Microsoft channel, where partners will compete in some areas but collaborate in others. The lone wolf approach will be increasingly difficult to sustain. Strategic alliances and partnerships will be essential for survival and growth.”
MSP CEO Offers Advice
Microsoft’s pricing changes provide clear evidence that EA “is becoming less viable for smaller and mid-sized customers,”
Colin Knox, the CEO of Gradient MSP, told ChannelE2E. “The thresholds to qualify for meaningful discounts are now harder to reach, and the value proposition for EA is shrinking unless you are servicing very large enterprise accounts.”
For MSPs and other channel partners, the best reaction is to “double down on CSP, where MSPs can layer in their own value-added services, bundle solutions, and control customer relationships without being boxed out by rigid EA requirements,” said Knox. “This is not about Microsoft being anti-partner, it is about Microsoft being pro-CSP. The company is aligning all incentives to drive partners there. For MSPs, that means the smart play is not to resist these changes but to adapt. Those who invest in CSP as their primary Microsoft motion will find they have more flexibility, more alignment with Microsoft’s roadmap, and ultimately more opportunity to profit from managed services on top of licensing.”
Fredrik Filipsson, co-founder and director of software licensing and advisory services for licensing negotiating specialists Redress Compliance, told Channel E2E that the November 1 EA price hikes “are some of the most aggressive we have seen in years. They are positioning this as a routine adjustment, but for large enterprises it is a budget shock.”
For a 30,000-employee global organization, the increases will mean that a business pays an extra $1.2 million to $1.4 million in additional costs each year for exactly the same licenses, said Filipsson. “If they are also being upsold into Microsoft 365 E5 or Copilot, the incremental exposure can quickly push into the $5 million plus range per year.”
For MSPs and other partners, the bigger story is the ongoing business environment in the age of the vendor-driven price squeeze, he said. “Microsoft, Oracle, SAP, they dictate terms, lock customers into their ecosystems, and normalize relentless increases,” said Filipsson. “CIOs have less leverage than ever, and the only real counterweight is to seriously evaluate alternatives and make vendors defend their footprint.”
So what can MSPs and other partners do in response?
“Customers can “interrogate the math and model their total cost of ownership across three to six years, not just until the next renewal,” he said. In addition, they can clamp down on optional spending and push back on buying extra-cost Copilot and E5 bundles unless their ROI is clear, while using any renewal price leverage that they might be able to muster, he added.
“This is not the worst [Microsoft price] hike ever, but it is the most strategically timed,” said Filipsson. “Microsoft knows that enterprises are cornered by compliance and collaboration lock-in, and they are monetizing that position.”
