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3 Struggles & Opportunities for Office 365 Service Provider Partners

30 Mar 2020 by Russ McKeith

A title image for the struggles and opportunities facing Office 365 service provider partners

Over the years, Microsoft has modified its CSP (Cloud Solution Provider) program, forcing Office 365 service provider partners to adapt their operations accordingly. Major changes to the Direct CSP service provision model were first announced in 2018, but changes to both Direct and Indirect CSP programs have started to become a reality.

One Microsoft partner, AppXite, predicted that only 20% of Direct CSPs would keep their status throughout this shift. Here are some of the changes to the requirements and benefits of the Direct CSP program:

Struggle 1: CSP Program Modifications & Licensing Changes

  • Microsoft support contract required for partners ($15,000/year for ASfP or $50,000/year for Premier)
  • Partners must have infrastructure to support billing and provisioning infrastructure
  • Partners must provide at least one managed service, IP service, or customer solution application
  • Updated incentive rates and direct rebate payments reduced, with 40% going towards co-op fund incentives (impacts both Direct and Indirect)

In 2019, we also saw some partners grappling with change related to the new ‘Microsoft Customer Agreement’ (MCA) model for Azure. At renewal time, the MCA encourages and easily opens the door for customers to purchase their licenses directly from Microsoft, with partner activities consigned to mostly “value-added presales services and post-sale solutions for your Azure services.” Since this is the new approach for Azure, one must wonder if Office 365 will follow.

Opportunity 1: Use it as a Driver to Differentiate

These changes might not sound like the best news for your traditional CSP partner, but they do provide some big opportunities for Office 365 service provider partners, where the business approach is often holistic and already includes services. The next logical step for CSPs is to create unique value-add services around licensing. This approach allows you to build your own margins, which offers more flexibility and provides a better safety net if Microsoft decides to change its CSP programs even further.

Struggle 2: Differentiating in a Crowded Office 365 Market

  • Differentiating is critical to stay relevant, competitive, and stand out in an already crowded Microsoft Office 365 space.
  • In order to capture your share of the market, you’ll need to elevate your offerings.
  • Recently Microsoft began putting a lot of emphasis on ‘unique’ partners, coaching them to ‘find your angle,’ and stressing that you shouldn’t try to be everything to everyone.

Stephen White, Research Director for Gartner said it best, “Microsoft has begun making the line in the sand more visible – providing licensing without services, and lightweight service providers seeking to leverage the transaction may be on the wrong side of that line moving forward.”

Opportunity 2: Bundle Services to Match Buying Behaviors; Find Your Niche 

While Microsoft’s new direction has led Office 365 partners to explore new and expanded service opportunities, a shift in customer buying preferences is also impacting the types of services MSPs are offering. In recent years, we’ve seen a trend developing around large enterprise customers gravitating towards turnkey solutions for all IT needs that fall under the managed services umbrella – licensing, IT services, support, software sourcing, and service desk capabilities. Their preference is to bundle services and work with fewer vendors if they can, to lessen the overhead and burden of dealing with different vendors’ contracts, billing cycles, and SLAs. The operational efficiencies of reducing overhead and the simplified cost is not only highly attractive, it has also become somewhat of a crucial commodity.

Another reality is that customers don’t want more licensing for less money, they want to spend less and use only what they need. The days of selling a surplus of licensing to accommodate new growth are gone. Your customers simply want licenses that make their workforce more productive, and ultimately impact the bottom line. Across the board, it’s in everyone’s interest for licenses to be used – you, your customer, even Microsoft, has recognized this and now aligns seller and partner incentives based on usage and consumption rather than license volume.

Then you factor Microsoft Office 365 into the equation, and how essential the platform has become to everyday operations. Office 365 touches practically every area of a business – every department, user, collaboration, email, and core business function – making it a crucial licensing investment for a large enterprise company. Again, they want to get as much from the spend as they can and ensure that all users are benefitting from and adopting the tool. This creates many areas of focus for an MSP, and a great foundation to build a practice around.

Struggle 3: Scaling & Resource Sourcing

Now let’s say you’re one of those small-medium size CSPs who is at the crossroads of this transformation journey. You see the writing on the wall and realize that if you continue with the business model you implemented years ago, your most profitable days may be dwindling, and you need to transition to a services-based practice. Where do you start, what cornerstones do you need in place first?

  • First, you need the competency – you need the right internal skills, resources, and tools to support your service offerings
  • Second is capacity – you need to be able to scale.
  • If you don’t have the competencies and capacity to fully support an MSP practice, then you’ll need to find a vendor to partner with who does.

Opportunity 3: Consider an SMP Provider

Whom you should partner with ultimately depends on your individual business and your niche. You need to determine what your immediate strengths are, what gaps you need to fill, and where exactly a partner could insert themselves to bring additional value to your practice. Finding a partner with a solid, proprietary and market-leading SMP (SaaS Management Platform) that gives you a competitive edge could be the answer. This will allow you to go broad and deep into an area of your choosing and enable you to create more overall value around Office 365, while focusing on fewer but higher value service offerings.

SMPs for Office 365 support nearly endless customer use cases, but they also create administrative and operational efficiencies for the MSPs themselves. With a secure multi-tenant view across all your customers’ environments, you can more easily manage tenants at scale (without switching between browsers). An SMP also allows you to identify your most/least profitable customers and spot opportunities for adoption, and license lifecycle management services. By providing more value for your customers without increasing their license spend (or even while decreasing it), you establish yourself as a trusted advisor and improve the likelihood that your customer renews with you.

What is an SMP?

Gartner recently created a new market classification for SMPs, which by their definition provides IT administrators with additional tools and capabilities above and beyond the native management consoles that literally everyone has access to. They fill a void where more visibility, control and access to granular data is needed. With this vantage point where you have a holistic view of the environment (or multiple environments), which enables you to see so you can do, your service offering becomes that much more valuable and unique.

According to Gartner, some key features of market-leading SMPs include:

  • Reporting
  • Administration
  • Role-Based Access Control
  • Policy Management
  • License Management
  • IT Workflow Automation

The benefits of a comprehensive reporting engine are innumerable. When it comes to security, being able to run an organization-wide report to show logs, privileges, and who has access to what – can prove under an audit that every precaution has been taken to protect the company and its data. You can also use reporting features to take corrective action to implement or update policies to lower the organization’s risk profile and use the data for faster investigation and remediation of suspicious events.

With licensing, the reports can show at a granular level which licenses are being used, how they are being used, and those that aren’t. This type of reporting gives an MSP leverage with the customer in several ways – one, it can help maximize the customer’s investment and offset the costs of the MSP contract. If the company is over-licensed, some of those licenses could be re-allocated towards other departments for utilization, without the organization purchasing further licenses. Secondly, it gives the MSP the data to see exactly what kind of usage is happening in their customers’ cloud environment, what features and tools they are using, and how that factors into their IT spend so that info can be used to optimize their IT strategy moving forward.

License management capabilities available to Office 365 Service Provider Partners

When it comes to your helpdesk, with the enhanced view and service monitoring provided by the SMP you can pinpoint if you’re getting a lot of tickets for a particular problem, from a particular client or a particular part of your service desk business. You can view the reporting and monitoring data, identify the issues and then begin to proactively optimize your service by getting emails out to your customers letting them know what service is experiencing issues, and that either your team or Microsoft is working on it.

If your SMP is worth its salt it will also have RBAC and policy management, which can be used in a number of ways to maximize efficacy. At Quadrotech, we call this Delegation and Policy Control, or DPC. Organizations can reduce the administrative burden of managing an Office 365 tenant by assigning roles and responsibilities to selected users such as Helpdesk Operators, country-level Administrators, or even to end-users. Tenant Global Admins receive the most benefit as they are relieved of the need to perform day-to-day operations across the entire tenant, freeing up time so they can tend to more important responsibilities like managing change within the tenant or launching a new application, such as Teams or Planner.

Why Quadrotech?

Quadrotech is a Microsoft Gold Partner with a global presence and the most complete and wide-ranging set of enterprise solutions for the Office 365 digital transformation journey. We bring together several software capabilities – Office 365 migration services, and management of Office 365 with our market-leading SaaS Management Platform, Nova. We’re the only vendor with a complete range of solutions that map to the customer journey to and through the cloud.

Office 365 service provider partners can manage their customers’ entire digital transformation to Office 365 with Quadrotech solutions that are designed to reduce risk and allow you to properly scale. We provide you with the toolsets to ‘find your niche’ and create unique value for your customers – something a standard CSP model won’t give you. Our products and toolsets also expand your capabilities as a partner, increasing revenue and improving profits. And with our “fixed price, fixed outcome” business approach to migrations, you’ll find less risk and more trust in an experienced, reliable business partner.

Get in touch today to discuss how an SMP like Nova can create new, strategic, and valuable recurring opportunities for your growing MSP or transitioned CSP practice.


Russ McKeith

Russ McKeith is Partnerships Manager at Quadrotech, working alongside strategic partners to get the best out of SaaS applications and the cloud. With a long-standing passion for IT and the sort of person who pulls the TV apart to see how it works, he naturally gravitated towards the InfoSec side of things. He regularly writes best practice guides for users and corporations.