Channel Watch

Microsoft's Partner Competency Changes Signal End of an Era

Microsoft has long favored its licensing partners -- until now. The upcoming retirement of a dozen MPN competencies, including Volume Licensing, marks a turning point in how Microsoft does business through the channel.

There were prophets and portents enough that Microsoft was driving its partners to cloud. You'd have to be willfully ignoring them not to notice the message over the past few years. Yet a new set of changes to the Microsoft Partner Network (MPN) speaks louder than all of them that Microsoft is really, truly changing its business model.

In about 18 months, Microsoft will fully retire a dozen competencies, including Volume Licensing. Let that sink in for a second.

For decades, licensing partners have been Microsoft's favorites. The licensing partners were the ones who handled the transactions, whose results were clearly measurable, whose ups and downs visibly affected Microsoft's balance sheet. The LARs and LSPs got Microsoft's undivided attention.

While Microsoft has been talking about shifting gears to bring revenues through cloud products, its back-office systems are catching up to the rhetoric. Thus, the cloud-oriented streamlining of the MPN competencies, announced in April. The MPN will go from having 29 distinct competencies to having 17.

"We're realigning our competencies so they meet the needs of our customers. More than 80 percent of our customers are actually employing or embracing cloud technology today," Gavriella Schuster, the general manager of Worldwide Partner Programs at Microsoft, told me in an interview. "When we did our customer research [on competencies, there were] too many. The [17] are grouped into six key areas that are very consistent: productivity, intelligent cloud, data platform and analytics, mobility, Dynamics applications, and application development."

The moves aren't isolated -- they're part of a trend that includes things like the gradual ratcheting down of LSP margins over the last few years. And the competency changes, which take effect in several stages through Jan. 31, 2018, follow Microsoft's introduction of and emphasis on a handful of cloud competencies over the last two years. All of those cloud competencies will survive the competency reductions.

Competencies that are going away in addition to Volume Licensing read like a who's who of key partner categories from the mid-'90s through the 2000s: Distributor, Hosting, Learning, OEM, Software Asset Management. Also being shown the door are competencies including CRM (the on-premises-only version), Devices and Deployment, Digital Advertising, Identity and Access, Intelligent Systems and Midmarket Solutions Provider.

Market roles like distribution, LSP and OEM will surely continue without any competency designation. In the interim, licensing-focused partners will continue to have temporary advantages over pure-play cloud partners in the types of deals they can close on behalf of customers and the margins they can secure.

But make no mistake -- the fact that Microsoft will no longer have competencies directly related to licensing is a big deal. The MPN competency list is like a map of how Microsoft does business through its channel. The waypoints on that map are now cloud-oriented rather than licensing/distribution/OEM-oriented.

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About the Author

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