Market Forces

Microsoft Extends CSP to Dynamics CRM: A Partner's Perspective

For the first time, Dynamics partners can take advantage of the biggest change to Microsoft's cloud business model.

Of all the topics at the Microsoft Worldwide Partner Conference (WPC) this year, the one that seemed to generate the most discussion and excitement was the Cloud Solution Provider (CSP) program. For Dynamics partners in particular, the CSP program is a dramatic departure from previous business models, so I turned to a voice of experience for some advice.

For 18 months, Jim Sheehan, COO and managing partner of PowerObjects, provided input to Microsoft on the CSP program for Dynamics through Partner Advisory Council calls. Historically, Dynamics ERP and CRM were excluded from the billing, provisioning and management engines that were available to Office 365 and Microsoft Azure partners. The impact on partners would be significant.

"There was a lot of work to be done to determine how the CSP program would affect Dynamics partner business models," Sheehan says. "On monthly calls we provided input on things like compensation and support to help Microsoft design a program that would work in the Dynamics channel."

During the WPC, Microsoft sent a clear message that Dynamics is moving from the shadows and into the spotlight. During one session, Microsoft CEO Satya Nadella told Dynamics partners, "That complete notion of business transformation is something that only Microsoft can do. That's why I care so much about the mainstreaming of Dynamics. It's not about Dynamics on its own. It's Dynamics at the center of the company."

Appropriately, during the week of the WPC, CSP was opened for Dynamics CRM Online customers.

In a nutshell, the CSP program allows partners to package Intellectual Property (IP) and services with Microsoft cloud services for a single, subscription-based offering to customers. Partners own the complete customer lifecycle through billing, provisioning, management and support.

There are two levels of participation for CSP partners. The 1-Tier model is designed for high-capability partners who will purchase licenses directly from Microsoft and take full responsibility for billing and supporting customers. In 2-Tier, partners will own the customer relationship, but work with a distribution partner to manage the Microsoft licensing plus end-customer billing and support.

In customer terms, at its most basic level, CSP simply provides a different billing mechanism. Service and support are included in monthly payments, so the customer's entire Dynamics CRM Online experience is managed in one transaction.

"The big benefit, albeit intangible, for customers is a channel that's much more engaged in driving success for our collective Microsoft customers," Sheehan says. "That will lead to more people using the software within the organization. I believe that partners who manage this right will drive churn down to nearly nothing."

For partners, CSP provides the opportunity to build a recurring revenue model with predictable revenue streams.

For Dynamics partners used to having much of their customer's product licensing handled directly with Microsoft or distributors, there will be a learning curve if they go the 1-Tier route. "Partners will have to learn more about the licensing because we are in charge of selling and collecting," Sheehan says. "We'll have to be knowledgeable about the different forms of licensing that serve the customer's requirements."

Other considerations that Sheehan recommends to other partners include:

  • Don't underestimate the effort involved in the billing and support. Bake those expenses into your business model.

  • If you're just trying to sell the licensing, it will be a race to the bottom. Dynamics CRM is a business solution, so you have to drive real business value with a services-centric and/or IP-based solution.

  • Carefully think through how much of this you want to bite off. If you don't want to take on the billing and support, look for a 1-Tier partner or distributor to work with. It will be interesting over the next 12 months to see how 2-Tier fleshes out. There is a potential model there to enable a broader channel.

There's no question it will be an interesting year for CSP partners as they navigate a business model that is likely to become the standard in a few years. Let me know how you're going to plot your course.

More Columns by Barb Levisay:

About the Author

Barb Levisay owns Marketing for Partners, a marketing and service delivery leadership firm for Microsoft Dynamics, SharePoint and ISV partners. She serves as the event chair on the Board of Directors for the Washington, D.C., chapter of the International Association of Microsoft Channel Partners.