WPC 2012: Microsoft Upends Dynamics Partner Incentive Model

Dynamics AX, NAV, GP, CRM all getting big changes.

TORONTO -- Microsoft is making major changes to the way partners can earn money on the Dynamics suite of enterprise resource planning (ERP) and customer relationship management (CRM) products.

At the Microsoft Worldwide Partner Conference on Monday, Microsoft announced new partner incentive models on Dynamics CRM, Dynamics CRM Online, Dynamics AX, Dynamics GP and Dynamics NAV.

Dynamics AX
The Dynamics AX move coincides with a significant push into the enterprise with what is considered to be the most scalable of Microsoft's several ERP products.

The biggest change will be Microsoft Dynamics AX's availability on Sept. 1 on Enterprise Agreement (EA) in Volume Licensing.

"The reason we're doing this is that in the enterprise space, a lot of customers want to purchase AX in their Enterprise Agreements," said Doug Kennedy, Microsoft's vice president of Dynamics Partners, in an interview.

Partners who sell Dynamics AX to enterprise customers will see a change in the way they're compensated. "With ERP, it's an indirect model, partners take a discount of the licensing. As AX moves into EA, the [Large Account Reseller] handles the transaction. The ERP partner then needs to claim a CSA [Custom Support Agreement ] fee instead of taking a discount on the licensing."

Partners selling AX will see other changes, as well. Pricing and licensing for Dynamics EA will shift to a pay-for-performance partner incentive model, Kennedy said. Microsoft is also raising the technical certification requirements for partners selling Dynamics AX to EA customers.

While the gold competency in Dynamics ERP requires six engineers, those partners interested in selling Dynamics AX in the enterprise will need 15 certified technologists, Kennedy said.

"Not all midmarket ERP VARs are going to go running to the enterprise space," Kennedy said. "We'll rely on partners that are far more focused on a systems integration model than a VAR reseller model. The profile are the national, regional and international systems integrators."

Kennedy acknowledged that the CSA fees will bring less money to partners than they would have gotten from discounts, but argued that the changes are necessary to build the product's momentum in the enterprise.

"In that space, more of the revenue the partner should be getting is from professional services. If you want to play in that space, your P&L needs to be driven by professional services. We're being dead clear with our partners. We're not changing the midmarket model [for Dynamics AX]," Kennedy said.

Microsoft does not plan to bring other ERP products to Volume Licensing, Kennedy said. "Technically it makes sense for AX. We don't anticipate moving [Dynamics GP, SL or NAV] onto that model," he said.

Dynamics CRM
Dynamics CRM partners will see their incentives shift to a performance basis over time, but for now a promotion is coming to a close.

The 40 percent CSA fee promotion for Dynamics CRM Online will end next month and be replaced with a 26 percent CSA fee. Then, a year from now, Dynamics CRM Online will shift to the pay-for-performance partner incentive model.

"The online model is really going to focus heavily on recapturing of net seats, and the addition of net customer adds. The reason we've got net in there is to motivate not only new customers, but also to make sure they're effectively managing their installed base. We take a look at the churn, and we look at their new adds," Kennedy said. All partners who participate in CRM Online now will be grandfathered into the highest level.

For on-premises Dynamics CRM, the CSA fee will shift to a flat 17 percent for initial License & Software Assurance sales and 5 percent for renewals starting next month. Then next year, on-premises will also shift to a pay-for-performance model.

"We'll actually be looking back two years at consistent growth in licensing and licensing Software Assurance. Once they get to July 2013, the highest level will take into account two years of consistent growth," he said.

Dynamics NAV and GP
On the SMB side of Dynamics ERP, Microsoft will roll out simplified pricing for SMB ERP products as part of the release of Dynamics NAV 2013 and Microsoft Dynamics GP 2013 later this year.

The company is also planning a pilot for new subscription pricing that will provide a pay-as-you-go model for on-premises, as well as cloud-based deployments.

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About the Author

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