Microsoft's CSP Ecosystem: A Guide to the Players

The emerging Microsoft Cloud Solution Provider (CSP) program ecosystem is a complex beast.

Over the last few months, several groups of major vendors have been jostling to position themselves to offer the infrastructure that Microsoft partners will need to sell Microsoft cloud services to customers. Think of it as a gold rush triggered by the release of the Microsoft CSP APIs, the embrace of the model by the channel and Microsoft fully aligning its resources with the CSP effort.

This new ecosystem takes its shape from the existing Microsoft Partner Network (MPN), but it's different in crucial ways. The combination of unfamiliar and slightly overlapping terms for different roles in a dynamic marketplace that's only now defining itself can make the landscape confusing for partners and vendors alike.

So what are the different categories of partners and vendors in the CSP ecosystem, and what is each group doing?

The Main Groups
In addition to Microsoft, there are five main categories of partners in the CSP ecosystem.

1-Tier Partners: The 1-Tier partner is what most people think about when they think about a CSP. It's the partner that orders cloud licenses directly from Microsoft and turns around and sells them to a customer in a bundle of other services, their own and third-party. There will actually be relatively few of these partners, due to requirements such as ability to bill, to provide 24x7 support, to do technical integration, to handle customer lifecycle management and to have broad market reach. Microsoft hasn't set a strict target, but it's expecting to have somewhere more than 1,000 during the course of this year.

These partners come from all over the old MPN with a concentration in a few places. Many of the few dozen Syndication Partners are transitioning to 1-Tier. Other obvious ones are hosters/ISPs, telecoms, ISVs and Licensing Solutions Providers (LSPs). Expect to see large systems integrators, such as Microsoft National Solutions Providers, and top-tier Dynamics CRM partners join this club, too.

2-Tier Resellers: The vast majority of Microsoft partners in the CSP will be 2-Tier resellers, also known as indirect partners. Microsoft is expecting tens of thousands of 2-Tier resellers to emerge from the hundreds of thousands of Microsoft partners worldwide. These partners won't get their licenses directly from Microsoft. Instead they'll work with 2-Tier distributors (see the next group).

These 2-Tier resellers can come from almost any area of the MPN. They may be partners who sold cloud services previously through the Advisor or Open programs, they may be Dynamics CRM partners and many more will be VARs, solutions providers and managed services providers (MSPs) who previously only dabbled in Microsoft cloud, but sold mostly on-premises products.

2-Tier Distributors: These are the heavy-lifting partners of the CSP system -- dealing with Microsoft on one side of the transaction and interacting with hundreds or thousands of 2-Tier resellers on the other side. Some of these partners, also referred to by Microsoft as cloud distributors, are bundling up other products for the 2-Tier resellers to offer. In many cases, the 2-Tier distributors provide the billing and provisioning back-end on the 2-Tier resellers' behalf and, in some cases, these distributors are offering white-label support, as well.

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According to a Microsoft list and map (see above) of authorized 2-Tier distributors, there are 34 of them worldwide, with anywhere from five to 10 of them in a given geographic region. Mostly these partners are the traditional distributors, who have branched out to build their own cloud marketplaces in the last few years. For example, Ingram Micro and Tech Data Corp. are represented in almost every geography worldwide. Some of the Syndication Partners, such as AppRiver and Inc., and LSPs are also serving as 2-Tier distributors. The 2-Tier distributors for the United States and Canada (two different regions) include AppRiver, Ceryx, Ingram Micro, Intermedia, SherWeb, Synnex Corp. and Tech Data.

Cloud Marketplace Technology Providers: Working closely with both the 2-Tier distributors and the 1-Tier partners are the cloud marketplace technology providers, which is not an official Microsoft term. These companies use their own systems plus the new Microsoft CSP API (known more formally as the CREST API) to handle turning on the Microsoft cloud service, provision the licensing and manage recurring billing. What the companies also bring to the table is that they provide similarly automated services for hundreds of other cloud services, enabling 2-Tier distributors and 1-Tier partners to easily curate unique packages of services to offer to their end customers. The main vendors in this category are Odin (formerly known as Parallels), AppDirect and Ensim Corp.

Cloud Management Tools: The final category in the CSP ecosystem is what we'll call cloud management tools vendors, and they vary in their capabilities specific to the Microsoft cloud stack. While the cloud marketplace technology providers enable the license provisioning, it's left to the 1-Tier partner or 2-Tier reseller to set up a new customer by migrating mailboxes, folders and data. A set of vendors emerged to handle those tasks in a more robust way than Microsoft's free migration tools could for Office 365, including SkyKick, BitTitan and Binary Tree. Now some of the tools vendors, including SkyKick and BitTitan, are striking up partnerships where the 2-Tier distributors offer their tools to their resellers as part of their programs. Meanwhile, SkyKick recently launched ongoing management capabilities and message-level backup offerings that are designed to help CSP partners continue to serve their end customers long after the migration phase ends.

Differentiating Distributors
The critical decision for most partners, at least initially, will be with which 2-Tier distributor to work. Consequently, those distributors are working diligently to enumerate what differentiates them from the other distributors in their regions.

One approach that longtime distributors with big networks of partners are using is brand familiarity. "Partners are in good hands with Ingram Micro, a company with over 34 years' experience as a technology partner for resellers worldwide," says Dan Shapero, director of global cloud marketing at Ingram.

For Ingram, part of the company's experience pitch also involves cloud. "We have seen tremendous response from our existing reseller base, and have welcomed a number of new partners that haven't transacted with Ingram Micro in the past [to] the program, as well. These new partners include traditional resellers, MSPs, ISVs, telcos and born-in-the-cloud resellers. Our ability to provide an automated Cloud Marketplace, which enables the ordering, provisioning, managing and invoicing of all cloud solutions and services from a single portal, is a key differentiator in attracting these new partners," Shapero says.

Tech Data also boasts an existing Tech Data Cloud Solutions Store with many complementary cloud products for CSPs, notes Stacy Nethercoat, vice president of product marketing for TDCloud.

"We have seen tremendous response from our existing reseller base, and have welcomed a number of new partners that haven't transacted with Ingram Micro in the past [to] the program, as well."

Dan Shapero, Director, Global Cloud Marketing, Ingram Micro

"The Tech Data Cloud Solutions Store offers many opportunities to bundle additional cloud products or services with CSP. In addition, we have incentives and promotions we offer reseller partners that they can, in turn, offer to their end-user clients. Tech Data simplifies the billing process for the reseller by consolidating the billing across multiple cloud vendors, reducing the complexity associated with varying billing cycles, and provides a single monthly invoice," Nethercoat says. Among other things, Tech Data also offers cloud assessments that partners can use to show ROI and TCO of the cloud, she notes.

Another established distributor, Synnex, is emphasizing flexibility on credit that's developed around the cloud.

"The needs of the cloud space have also inspired an entirely new set of financing options," says Rob Moyer, vice president, Software and Cloud Services at Synnex. "[Those include] utility finance with consumption-based billing in public, private, and subscription-based cloud environments; partnerships with vendors in various risk management strategies (typically under NDA with the vendor) that result in more credit available to the channel; pre-funded leases (that is, funding prior to acceptance by end customer); cash flow financing for the reseller in the form of factoring of AR and pre-funding of annuity streams for the reseller allowing them to realize cash now; [and] other forms of lending."

"Tech Data simplifies the billing process for the reseller by consolidating the billing across multiple cloud vendors, reducing the complexity associated with varying billing cycles, and provides a single monthly invoice."

Stacy Nethercoat, Vice President, Product Marketing, TDCloud, Tech Data Corp.

Nearly all of the 2-Tier distributors either offer white-label support or have it on their roadmaps for those partners who might not be ready to provide 24x7 support right away.

AppRiver, originally a Syndication Partner but now a 2-Tier distributor, puts an emphasis on quality support as one of its selling points.

"The experience factor is one differentiator that partners can literally take to the bank, and our try/buy experience may be another. Phenomenal Care for Partners means direct access to a dedicated Office 365 escalations team, Office 365 Internal Use Rights licensing, expert pre-sales and onboarding support, and other partner benefits," says Scott Paul, Microsoft strategic account manager for AppRiver.

"The needs of the cloud space have also inspired an entirely new set of financing options."

Rob Moyer, Vice President, Software and Cloud Services, Synnex Corp.

AppRiver also emphasizes messaging and security. "As a born-in-cloud service provider with a focus on messaging and security, AppRiver offers resellers a single source for an array of cloud services that snap on to Office 365 and help make clients more secure, more compliant and more resilient. Advanced e-mail encryption and delivery control, eDiscovery and compliance archiving, and cloud-based Web protection are some examples," Paul says.

SherWeb, one of the 2-Tier distribution partners Microsoft lists for Canada, draws attention to its support for helping its 2-Tier resellers take advantage of the multi-channel capabilities of the Microsoft CSP program. The company announced in late July that its systems leveraged the multi-channel feature to allow resellers to transfer existing client subscriptions for Office 365 from other Microsoft reseller programs, such as Open, Enterprise Agreement and Advisor.

"What we've seen with CSP is it's the new cloud model for the new cloud world, and it's really breaking down the barriers."

Todd Schwartz, Co-CEO, SkyKick

"The operation is 100 percent seamless for every user," Jason Brown, director of product management for SherWeb, said in a statement. "There is no technical migration required and the client won't experience any downtime. What he will get is SherWeb's total support and expertise immediately after the transfer."

'We're Seeing Rapid Adoption'
Across the ecosystem categories, vendors report extremely strong interest in the CSP from Microsoft partners, which helps to explain all the noise around the sector.

Todd Schwartz, co-CEO of SkyKick, which partners with Odin, AppDirect and several 2-Tier distributors in addition to individual 1-Tier partners, saw a lot of energy around the model at the Microsoft Worldwide Partner Conference in July, and says it has carried over.

"What we've seen with CSP is it's the new cloud model for the new cloud world, and it's really breaking down the barriers. We're seeing rapid adoption from telco to hoster to LSP to large-scale providers to SIs to MSPs to the smallest solution providers. All segments are really starting to adopt CSP in quite an accelerated way," Schwartz says.

Alex Danyluk, vice president of alliances and the partner ecosystem at Odin, is seeing bottom-up pressure from the company's clients, which includes many of the original Syndication Partners, as well as distributors. "We see CSP as hugely interesting to the market. I haven't heard anyone who is currently one of our partners that isn't planning to go to CSP," Danyluk says.

At AppDirect, the CSP model is leading the company to staff up, according to Richard Dufty, vice president for worldwide sales and strategic partnership. "We're definitely seeing a huge ramp up as Microsoft continues to be successful in signing up new partners," Dufty says. "We have a dozen people who are dedicated to nothing but CSP."

About the Author

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