Channel partner programs, Content

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...

Microsoft Channel Chief 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 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.

Joe Panettieri

Joe Panettieri is co-founder & editorial director of MSSP Alert and ChannelE2E, the two leading news & analysis sites for managed service providers in the cybersecurity market.