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Channel Watch

With Office 365, Microsoft's Direct Billing Drama Continues

Microsoft created a new partner category when it launched Office 365 to fix the billing problems that vexed partners with BPOS. But there's a catch.

  • Go here to read more "Channel Watch" columns by Scott Bekker.

Redmond Channel Partner has argued repeatedly that if Microsoft expects partners to carry its cloud services banner into the market, those partners need to be able to bill customers themselves.

Many partners had expressed hope that in upgrading the Business Productivity Online Suite (BPOS) to Office 365 this summer, Microsoft would address this "direct billing" issue.

Well, Microsoft did address it, but not in the way many partners had hoped. With the June 28 launch of Office 365, Microsoft also unveiled a new category of hosters, called syndication partners, that will be able to handle their own billing of customers for Office 365 (see "For a New Category of Cloud Partner, Microsoft Relaxes Office 365 Billing").

It's a fix only for 20 select value-added hosters around the world. For the remaining 15,980 or so of the 16,000 partners that Microsoft says are signed up to sell Office 365, the deal remains the same as it was under BPOS: Partners will jockey to have their customers sign them up as the Partner of Record (PoR) on Office 365 deals. The customers will be billed by Microsoft and the partners will receive their payments from Microsoft on active seats so long as the partners maintain that PoR status.

The new partners will include Office 365 with services such as Web hosting, broadband, security, finance solutions, audio conferencing and mobile services. This worldwide stable of syndication partners consists of AppRiver, Atea, Bell Canada, Central Europe On-Demand, InterCall, Intuit, Jack Henry & Associates, KPN, Mamut, Orange, Premiere Global Services Inc., SKB Kontur, TDC Hosting, Telefonica, TeleiSonera, TELMEX, Telstra, UPC Business, Vodafone and StarHub.

Microsoft officials are making the same arguments they have for a while with cloud billing. Short version: Billing across international markets is complicated and partners should appreciate having someone else handle the hassle of asking customers for money.

While it's true that some partners do appreciate Microsoft handling the billing or have built new business units around the model, it's also true that for most partners who didn't like the billing arrangement in BPOS, not much has changed in Office 365.

The move with the 20 partners suggests that Microsoft for now is only willing to change its internal processes for companies big enough to move the needle on Office 365 sales. Fair enough. But Microsoft of all vendors should recognize that the size of its partner community -- often cited at 640,000 companies worldwide -- can move the needle pretty dramatically, too.

Maybe if the billing aligned better with partners' business realities, Microsoft would have a lot more than 16,000 of its 640,000 partners signed up to sell Office 365. The mix of desktop software and cloud back-end may be a winning combination for Microsoft in its battle against the more pure-cloud Google Apps. But why Microsoft keeps insisting on going into this fight with one hand (its massive and loyal partner base) tied behind its back is a mystery to me.

Does Office 365 change your view of the billing issue? Let me know at sbekker@rcpmag.com or leave a comment below.

More Channel Watch Columns:

About the Author

Scott Bekker is editor in chief of Redmond Channel Partner magazine.

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Reader Comments

Mon, Aug 29, 2011 Matthew Adkins Toledo

If I was allowed to bundle Office 365 in my managed services offerings I would make more money, Microsoft would make more money, and my clients would be even happier. I think it really boils down to Microsoft not wanting to give Partners terms.

Tue, Aug 23, 2011 SpreadSheetNinja norway

Im skeptical to shared ownership over the documents, it would be unfortunate if a challengeing company would get the files if per say fbi or something says a portion of the files microsoft keeps in its could has to be reviewed then as things allways goes whit a completely uncorrupted, babyclean, never has been or never will be a security flaw for themself or others... sarkasm, in anycase i doupt even localy saved documents will be safe from a clone errm "backup" version in case anything were to happend to your unsafe local stored document.. even tought you didnt ask for a backup of a spesific document. ect ect hint hint nudge nudge wink wink

Wed, Aug 3, 2011 Trevor Dierdorff Colorado

When M$ lets me sell this directly to my clients I'm all in. We want to bundle it with our Managed Services offerings. I can't pay my overhead on 6% margins. M$ wants to cut out the channel and have us hand over our customers. Forget it. This is an agent NOT a channel model. This is not rocket science, we bundle and pay for several software packages to include monitoring software, AV, Spam filtering, Anti-Spyware, firewall updates, etc.. Do it like SPLA and let's get to selling!

Wed, Aug 3, 2011 Kevin Fream Tulsa, OK

So unless you are Capjemni, why do you want to be responsible for billing?

Wed, Aug 3, 2011 Scott Bekker Redmond Channel Partner

Thanks Jamison. Great point about the billing arrangement going against everything you've learned to do for clients. Also an update to the post above, which was written for RCP's August issue before WPC ended. At WPC, Microsoft executives said 42,000 partners are signed up to sell cloud services, up from the 16,000-partner figure that the company had been citing for about a year.

Mon, Aug 1, 2011 Jamison West Seattle

Great article Scott, and flawlessly on point. I believe fully in my partnership with Microsoft, and am cautiously optimistic after several conversations at WPC that Microsoft is focused on being a partner based organization and will fix this. For now though, this is a huge problem and represents ongoing challenges for my firm. Microsoft taught us to act like MSP's, which I believe in fully, and this shift goes against everything we have learned to do for our clients. Let's hope Microsoft does the right thing here soon (with fingers crossed...)

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