Channel Watch

A Brave New World of Partner Billing in the Cloud

There are now almost as many ways to bill for the cloud services that partners deliver to customers as there are cloud services.

In the early part of this year, vendors have been innovating furiously on the question of how to bill partners or customers. The flagship case is Microsoft, which by dint of its market position, its early embrace of cloud and the size of its partner community, is a de facto pacesetter.

Microsoft now has so many cloud billing models that partners need a cheat sheet (we're working on it).

Redmond started with the familiar advisor model, with Microsoft billing the customer directly and the Partner of Record getting a percentage payment back from Microsoft over the next three years. That was expanded later with a variation for volume licensing customers.

The advisor model remains popular, probably the most popular Microsoft billing model, but many partners were concerned that Microsoft controlled the billing. Enter the open licensing model, where a partner goes through a distributor to buy a year's worth of subscription licenses on behalf of the customer and then resells it as part of an overall services bundle. The key limitation here being "a year's worth."

Most recently, Microsoft has introduced a cloud solution provider (CSP) model, a complicated beast with many tiers, but the upshot is monthly billing -- so partners are paying for the subscriptions from a pool that they resell in the same time frame that customers want to buy them.

Distributor Ingram Micro has been selling Office 365 via CSP for several months, but with the help of Office 365 partner automation specialist SkyKick, just rolled out a portal that will allow partners to order licenses in a digital, self-service manner -- and provision, deploy and manage them, as well.

Judging by the experience of vendors in the managed services provider (MSP) space, creating self-service portals where partners can centralize license purchases for many customers can be a real growth multiplier for both the partners and the vendors.

All of which is fairly tame compared with what Axcient announced in mid-February. The Recovery-as-a-Service (RaaS) vendor unveiled Software as a Service: Front-Loaded Option (SaaS:FLO). Axcient will cut a check to partners equal to the first five months of full revenue from its RaaS, about the same amount of money Axcient partners previously received over two years.

Axcient CEO Justin Moore says the company couldn't offer SaaS:FLO if one, they didn't have years' worth of customer retention data telling them they'll keep the customers long enough to be profitable; and two, if they hadn't just landed a ton of investment capital and a new debt facility.

Axcient's circumstances may make it work, but there's no way to categorize the lump-sum-up-front approach as anything but high-risk and difficult for other vendors to copy.

Who has the right idea on cloud billing? Share your thoughts at sbekker@rcpmag.com or leave a comment below.

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About the Author

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

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