Expert Tips: 7 Secrets for Selling Microsoft CSP

As the CEO of Interlink Cloud Advisors in the Cincinnati area, Matt Scherocman has been selling cloud for a long time. Having launched the born-in-the-cloud startup after observing the opportunity from inside Microsoft, Scherocman has navigated a lot of change in how Microsoft offers cloud services. In this guest post, Matt shares his secrets for selling to customers under Microsoft's Cloud Solution Provider model and for competing with Enterprise Agreement inertia.

Interlink has seen it all when it comes to selling Microsoft's Cloud Solution Provider (CSP) licensing program. We have had tremendous success over the last eight years of our business, but we also know the tremendous frustration it can bring. Licensing itself is constantly changing, and it can be confusing and complicated.

Microsoft and other partners often ask us what has made us successful and how we overcome challenges. Here are some pointers:

1. Figure Out the Solutions Before the Licensing Program
I know that it sounds simple, but it is amazing how tough this can be. Even I catch myself sometimes talking about a Microsoft bundle of products and what comes in them.

Instead, our success has come from spending more time talking about customers' needs. What initiatives do they have to accomplish this year? Then, take the customer's needs and guide them to the right bundles of products and licensing plan that could be the best fit.

2. Sell the Bundle
Microsoft's bundles are the key to selling larger licensing packages. Knowing what is included in the bundle is immensely important. How many of your salespeople can name the key components of Microsoft's Enterprise Mobility + Security (EMS) suite? Do they even know that the Identity and Threat Protection Bundle exists? 

3. Invest in Education
A lot of success in CSP selling comes from real-life experience. Each program has its own challenges, strengths and quirks.

For example, say a customer purchases the Microsoft 365 (M365) bundle, which includes Windows Desktop licensing. The software licenses don't actually show up in the customer's portal until the CSP adds a zero-dollar SKU for Windows to the purchase.

4. Play Up Support
The CSP program's strength comes from the requirement that the partner provide the support. Local partners get to know their clients. They take great notes on what is in their environment and what things coexist with Office 365. We know customers' names when they call in and which support person they like to work with.

We frequently troubleshoot more than Office 365. One small example is an Enterprise Agreement (EA) customer who was on the phone with Microsoft support for more than 24 hours straight for a mail flow issue. When they called to get our help, we referenced their configuration and noted that they had a third-party spam filter. We then helped them troubleshoot the connection between the third-party and Microsoft -- and fixed the issue in less than 15 minutes.

5. Know How To Sell Against EAs on Price
Here are some key points:

• Since October 2018, the automatic discount for purchasing under the EA agreement is gone. This was an automatic discount of 3 percent that EA customers no longer receive. This means that the price of the EA out the door is the same as list price!
• Microsoft reps can offer negotiated discounts for a newly signed agreement. However, these discounts are frequently in the single digits and tied to the products that Microsoft is currently focused on. Those products are going to be the same ones that Microsoft is incenting partners to sell via back-end rebates. So, typically, partners can be competitive with EA pricing.
• The EA requires an annual payment for the entire year of usage of the subscription. Most customers hate the impact that has on their cash flow and would prefer a monthly subscription, charged as they use it.
• "From SA" is a discount that Microsoft used to offer to clients who moved from Software Assurance to subscription licensing. It is a programmatic discount of 15 percent, but it typically means that the CSP provider cannot touch the pricing offered with this discount. However, only a small percentage of clients have this discount.
• In July 2016, Microsoft increased the minimum user count of an EA agreement to 500 users, but it allowed companies a one-time renewal. Thus, partners should start to see a good set of clients with 250 to 499 users no longer being eligible for renewal in the coming years.

6. Know How To Sell Against EAs on Other Factors
Products on an EA are either locked in for the three-year term of the agreement or they can be modified annually. This gives CSP partners a tremendous advantage in that CSP solutions can be changed on a monthly basis. And practically, they can be changed during any month, versus the EA, where quantities of cloud SKUs can only be changed with notice at the anniversary date of the agreement.

Customers hate paying for licensing that they aren't using. So even things like summer interns can increase the cost of an EA agreement even though the licenses are only used a small fraction of the time. Additionally, Business bundles like the Premium offering and M365 for Business aren't available under an EA. These SKUs are limited to 300 users and don't include on-premises use rights.

For many clients, those limitations aren't a problem, or they find that a subset of their users are a great fit for these plans. The Business Premium plan and the E3 plan are more similar than they are different, and the Premium plan is considerably cheaper -- $12.50 per month versus $20. Not every user needs the features of E3, and it gives CSP sellers a $90-per-year cost advantage without sacrificing their margins.

7. Know Where CSP Is Lacking Versus EA
Four things to keep in mind here:

• EAs have step-up offers, in which a client can add single components of things. For example, a customer might have the M365 E3 bundle, but need the EMS E5 functionality added. On an EA, it is easily added for the incremental price. On CSP, it isn't so simple. A client would need to purchase the EMS E5 package, essentially paying twice for the EMS E3 components.
• The EA pricing for each particular product is locked in for the three-year life of the agreement. If prices are rising, the EA is the best platform. If they are falling, CSP is the best platform. So far, Microsoft has basically kept pricing steady and increased revenue by offering new features and bundles.
• CSP agreements don't include many of the traditional licenses and SA. Customers will likely need another agreement to hold onto these licenses with SA. However, licenses like SQL Server and Windows can now be purchased as subscription licenses, but customers who already have active SA won't want to lose the value of what they have already paid. Frequently, this means that a customer transitioning to CSP will need to keep a second agreement like a Microsoft Products and Services Agreement (MPSA) or Open Agreement for these particular licenses.
• Downgrade rights are also limited in CSP. Office ProPlus, for example, needs to be the current version from Office 365.

The CSP platform has a lot of advantages for customers when it's positioned properly. To do that, start with the basics by figuring out what solution the customer needs and then sell the bundles. Keep investing in education for your people, and make sure your customer appreciates the quality of your support. Finally, stay up to speed on the ins and outs of EA versus CSP pricing, and you'll be able to identify opportunities that are wins for you and for your customers.

Licensing can be challenging to navigate, but a large part of Interlink's success has come from following these seven secrets.

Posted by Matt Scherocman on October 17, 2019