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Microsoft sells its cloud services directly to customers

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and it also sells them through a huge network of partners.

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Both of those statements are true and here's why that matters.

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Today we're talking about the CloudSolution Provider Program,

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CSP for short.

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It's the engine behind how hundreds of thousands of businesses

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buy their Microsoft services.

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By the end of this episode,

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you'll know exactly what CSP is,

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how the money actually flows,

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and whether it matters for your company.

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Let's start with the simplest version.

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What is CSP?

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The core model, partners as wholesalers.

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CSP is Microsoft's program that lets partners resale cloud services.

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That means Microsoft 365 Azure Dynamics 365

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and enterprise mobility and security.

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Think of it like a wholesale club.

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Microsoft is the manufacturer.

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They sell their cloud services at bulk prices to partners.

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Those partners buy at wholesale,

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add their own services on top

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and sell the whole package to customers.

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You have three players in the system.

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Microsoft builds the cloud services.

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The CSP partner buys them and manages the relationship

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and the end customer just wants their email, files,

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and meetings to work.

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Here's the thing most people miss.

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When you buy through a CSP partner,

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Microsoft is not your billing contact.

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The partner handles billing, support, and provisioning.

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20 years ago, if your email server went down,

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you called Microsoft or fixed it yourself.

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Today, you call your partner.

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They own the relationship.

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Let me give you an example.

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Say you run a 50 person company.

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You buy Microsoft 365 through a local IT partner.

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That partner manages your licenses,

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sends you one invoice every month

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and provides support when someone can't log in.

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You never talk to Microsoft directly.

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You talk to your partner.

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What does this mean for you?

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If you're buying Microsoft cloud services

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through someone right now, you're likely already using CSP.

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You just didn't know it had a name.

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Now, not all CSP partners are the same.

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There are two different flavors

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and the one you pick matters.

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Direct versus indirect reseller.

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So there are two paths for partners in the CSP program.

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Direct Bill and indirect reseller.

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They sound similar, but they're actually very different.

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Direct Bill partners buy directly from Microsoft

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and handle everything themselves,

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billing, support, infrastructure.

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It's the hard path.

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The requirements are steep.

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You need at least $1 million in trailing 12 month revenue,

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12 months of prior experience as an indirect reseller,

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a solutions partner designation,

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and a paid Microsoft support plan.

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In the entire United States, only about 30 partners are direct bill.

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The other path is indirect reseller

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and that's the most common way to become a CSP partner.

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Instead of buying directly from Microsoft,

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you work through a distributor.

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Companies like Ingram Micro, Pax 8 or Rype.

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The distributor handles the Microsoft relationship,

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the billing platform and tier two support,

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while the reseller focuses on the customer.

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Picture it like a car dealership.

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Microsoft is the manufacturer.

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The distributor is the regional warehouse that stalks the parts

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and the reseller is the dealership you walk into

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when you want to buy a car.

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You don't talk to the factory.

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You talk to the dealer and the dealer gets their inventory

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from the warehouse.

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More than 90% of CSP partners are indirect resellers.

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That's the vast majority.

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And there's a reason for that.

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The indirect model has low barriers to entry,

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no revenue minimum, no support plan required.

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The distributor provides the backstop.

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This makes it easy for small IT shops

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to start reselling Microsoft services

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without a huge upfront investment.

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So what does this mean for you?

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If you're a small partner wanting to resell Microsoft,

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indirect is the path.

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That's how almost everyone starts.

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You focus on your customers and the distributor handles the rest.

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How partners add value.

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Now you know the two parts the partner can take,

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but here's the real question,

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how do these partners actually make money?

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And what do they bring to the table

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that you can't get by buying direct from Microsoft?

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The short answer is that partners don't just resell licenses.

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They bundle services on top.

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Think of it like buying a phone.

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You can buy the phone itself for a certain price.

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Or you can buy the phone with a case,

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a screen protector and a warranty.

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The phone is the license.

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Everything else is the value add.

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Typical partner offerings include onboarding help,

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migration from your old system,

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training for your team around the clock support

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and security monitoring.

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Some partners will even manage your entire IT environment.

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They become your IT department.

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Now here's the thing about the money.

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The margin on the license itself is small.

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We're talking about eight to 15%

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depending on incentives and volume.

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That's not nothing, but it's not where the real profit lives.

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The real profit is in the managed services

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wrapped around that license.

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Let me give you a concrete example.

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Say a partner sells Microsoft 365 Business Premium

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for $22 per user per month.

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You can buy that same license directly from Microsoft

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for $22, same price.

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But the partner adds identity setup, device management

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and a help desk for an extra $8 per user per month.

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Now the customer is paying $30 total

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and they get one bill, one support number

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and someone who actually knows their business.

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The partner earns the margin on the service layer,

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not the software.

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That's the model.

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The license gets you in the door.

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The services keep you there.

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Now here's where CSP gets a little tricky.

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The newcomers experience changed the rules.

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The newcomers experience, term commitments.

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In 2022, Microsoft launched something

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they call the newcomers experience or NCE for short.

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And it completely changed how CSP subscriptions work.

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Before NCE, the process was straightforward.

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You bought monthly subscriptions, canceled whenever you wanted

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and adjusted seats freely.

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Higher five people, add five licenses, let two go,

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remove two without penalties or commitments.

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It was flexible, almost two flexible.

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After NCE, everything shifted.

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Now you have term commitments.

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You pick between a one month, one year or three year term

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and each choice carries a different price tag.

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The monthly term gives you the most flexibility

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since you can cancel at the end of any month,

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but you pay a 20% premium over the annual list price.

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So if the annual price is $100 per user per month,

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the monthly price hits $120.

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That's the cost of flexibility.

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The annual term is the standard choice.

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You can pay monthly with a 5% premium

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or pay upfront at list price.

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Most businesses go with the annual term paid monthly

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because it sits right between cost and flexibility.

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Then there's the triennial term

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which locks in your price for three years

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and saves you about 12 to 18% compared to renewing annually.

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But you are locked in.

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No changes for three years.

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Here's the part that catches people off guard.

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After you place an order,

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you have a seven day cancellation window,

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just seven days to change your mind or adjust quantities.

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After that, the commitment is binding

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and seed reductions are not allowed midterm.

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You can only add seeds, never remove them.

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Microsoft did this for predictable revenue.

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They wanted to see their recurring revenue

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laid out months and years ahead.

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Partners hated because customers changed their minds.

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A company might plan for 100 seats in January

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and then need 80 by March, but under NCE,

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they are still paying for those 20 unused seeds

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until the term ends.

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The practical impact is simple.

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Plan your headcount carefully before buying.

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If you are unsure, it is safer to over buy slightly

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than to under buy.

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You can always add seeds, but you cannot remove them.

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One more thing.

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The old grace period which ended in May, 2026

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has been replaced by something called the extended term.

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If your subscription expires and you do not act,

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it automatically moves to the extended term,

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build at the monthly rate,

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plus an additional 3% uplift.

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It is designed as a short term bridge,

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not a long term solution.

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Let it sit too long and your costs climb fast.

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Why customers choose a CSP partner?

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So what does all this mean for a business

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buying Microsoft services?

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Let's look at it from the customer side.

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The biggest reason customers choose a CSP partner

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is consolidated billing.

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One invoice covers all your Microsoft services

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plus anything the partner adds on top.

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You don't have to log into Microsoft's portal,

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figure out which subscription is which

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or reconcile multiple invoices

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because it all comes from one place.

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Your partner.

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Next support is included.

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When you buy through a CSP partner,

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that partner becomes your first line of support.

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So you don't need a separate unified support contract

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from Microsoft.

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Your partner handles day to day issues,

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meaning if something breaks,

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you call them instead of Microsoft.

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For a small business without a dedicated IT team,

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that is a huge deal.

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Then there's flexibility.

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Yes, the monthly term costs a 20% premium

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but for some businesses that premium is worth it.

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Think about a landscaping company

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with 80 employees in the summer and 30 in the winter.

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Under the old rules, they could scale down easily.

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Under NCE, they cannot reduce seeds midterm

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but they can choose the monthly term

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and pay the premium for the right to adjust.

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For seasonal workforces, that trade off makes sense.

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Beyond licenses, many partners offer value at services.

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They set up security baselines to lock down your tenant,

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backup your data, provide training

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when your team moves to new tools

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and help with adoption,

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so you actually use what you are paying for.

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Here is a rule of thumb.

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If you are under 500 employees,

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CSP is probably the right path.

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If you are larger,

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an enterprise agreement might be cheaper.

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EA pricing typically comes in 20% to 35% lower

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per seat for organizations with 500 or more users

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because Microsoft negotiates volume discounts

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directly with large customers.

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But those discounts come with a catch.

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You are committing to a multi-year term

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so you cannot walk away.

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One more thing to keep in mind.

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CSP does not include software assurance

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which is Microsoft's program for on-premises upgrade rights.

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If you have a hybrid setup where some stuff is in the cloud

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and some is on your own servers,

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software assurance matters.

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In that case, an enterprise agreement might serve you better.

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The tradeoff is simple.

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CSP for flexibility and support, EA for the lowest price at scale.

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CSP versus enterprise agreement went to use which.

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So that leads to the big question,

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when should you go with CSP instead of an enterprise agreement?

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Enterprise agreements are meant for organizations

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with 500 or more users,

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especially when your head count is predictable

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and you're willing to commit to a multi-year deal.

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You get volume discounts, software assurance

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and a direct relationship with Microsoft.

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But you also get complexity, true up cycles,

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enrollment periods and plenty of fine print.

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CSP is built for a different kind of customer.

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00:09:08,000 --> 00:09:10,360
Small and medium businesses spending under a million dollars

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00:09:10,360 --> 00:09:12,000
a year on Microsoft services,

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00:09:12,000 --> 00:09:13,760
companies with fluctuating head count

275
00:09:13,760 --> 00:09:15,840
or organizations that want to partner to lead the way

276
00:09:15,840 --> 00:09:17,920
instead of figuring it out themselves.

277
00:09:17,920 --> 00:09:20,080
Here's something that makes this decision easier.

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00:09:20,080 --> 00:09:23,040
Microsoft has been shutting down older licensing programs.

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00:09:23,040 --> 00:09:25,080
The Microsoft products and services agreement,

280
00:09:25,080 --> 00:09:28,760
or MPSA, close to new business in mid 2025

281
00:09:28,760 --> 00:09:32,520
and new enterprise agreement enrollment stopped in October 2024.

282
00:09:32,520 --> 00:09:33,880
You can still renew an existing EA,

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00:09:33,880 --> 00:09:35,080
but you can't start a new one.

284
00:09:35,080 --> 00:09:37,400
For most businesses, the choice is already made.

285
00:09:37,400 --> 00:09:39,880
CSP under the newcomers experience is the default.

286
00:09:39,880 --> 00:09:41,360
Now, I want to be clear about something.

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00:09:41,360 --> 00:09:42,800
CSP is not a discount program.

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00:09:42,800 --> 00:09:44,200
It's a service delivery program.

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00:09:44,200 --> 00:09:45,880
The discount doesn't come from Microsoft.

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It comes from the partner's service.

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00:09:47,680 --> 00:09:48,920
A good partner saves you money

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00:09:48,920 --> 00:09:50,440
by reducing your IT headache,

293
00:09:50,440 --> 00:09:52,320
not by selling you a cheaper license.

294
00:09:52,320 --> 00:09:53,880
Think of it like buying a car.

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00:09:53,880 --> 00:09:55,480
You can buy direct from the factory

296
00:09:55,480 --> 00:09:56,800
and save a few thousand dollars,

297
00:09:56,800 --> 00:09:58,480
but the dealership offers test drives,

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00:09:58,480 --> 00:10:01,840
helps with financing and fixes it when something breaks.

299
00:10:01,840 --> 00:10:03,280
You're paying for convenience and support,

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00:10:03,280 --> 00:10:04,480
not just the metal and rubber.

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00:10:04,480 --> 00:10:06,920
What this means for you is pretty straightforward.

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Under 300 seats, CSP is almost certainly your best bet.

303
00:10:10,040 --> 00:10:12,440
Over 500 run the numbers on an enterprise agreement

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00:10:12,440 --> 00:10:13,440
before you decide.

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00:10:13,440 --> 00:10:14,280
If you're in between,

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00:10:14,280 --> 00:10:16,400
it depends on how stable your head count is

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00:10:16,400 --> 00:10:19,320
and how much you value having a partner in your corner.

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00:10:19,320 --> 00:10:21,920
The partner reality, requirements and support.

309
00:10:21,920 --> 00:10:23,920
So being a CSP partner sounds great so far,

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but it's not free.

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00:10:24,760 --> 00:10:26,320
Microsoft has been raising the bar,

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especially for direct bill partners

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00:10:28,080 --> 00:10:29,560
and the requirements are real.

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Let's start with direct bill.

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00:10:30,680 --> 00:10:32,400
If you want to buy directly from Microsoft

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00:10:32,400 --> 00:10:33,840
and manage everything yourself,

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00:10:33,840 --> 00:10:35,720
you need to meet some serious thresholds.

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00:10:35,720 --> 00:10:38,560
One million dollars in trailing 12 months revenue,

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00:10:38,560 --> 00:10:41,720
at least 12 months of experience as an indirect reseller first,

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00:10:41,720 --> 00:10:44,000
at least one solutions partner designation,

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00:10:44,000 --> 00:10:47,360
and you have to purchase a paid Microsoft support plan.

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00:10:47,360 --> 00:10:50,480
Advanced support for partners runs about $15,000 a year,

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00:10:50,480 --> 00:10:51,680
and that's the minimum.

324
00:10:51,680 --> 00:10:53,640
Now compare that to the indirect reseller path.

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00:10:53,640 --> 00:10:55,880
No revenue minimum, no support plan required,

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the distributor provides the backstop.

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00:10:57,680 --> 00:10:59,600
You sign up, partner with the distributor,

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00:10:59,600 --> 00:11:00,880
and you're in business.

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00:11:00,880 --> 00:11:03,640
That's why the vast majority of partners choose this route.

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00:11:03,640 --> 00:11:05,760
Here's something that surprises a lot of people.

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00:11:05,760 --> 00:11:07,640
All CSP partners are required to provide

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00:11:07,640 --> 00:11:09,160
first line support to their customers.

333
00:11:09,160 --> 00:11:11,600
You cannot escalate most issues to Microsoft.

334
00:11:11,600 --> 00:11:14,080
If a customer calls with a problem, you own it,

335
00:11:14,080 --> 00:11:17,120
you diagnose it, you fix it, or find someone who can.

336
00:11:17,120 --> 00:11:19,680
The customers first call is always to you, not to Microsoft.

337
00:11:19,680 --> 00:11:21,000
The support landscape is shifting too.

338
00:11:21,000 --> 00:11:24,440
Microsoft's legacy support plans for partners are being retired.

339
00:11:24,440 --> 00:11:26,840
Advanced support for partners, or ASFP,

340
00:11:26,840 --> 00:11:28,760
ends in January 2027,

341
00:11:28,760 --> 00:11:31,160
and premier support for partners follows shortly after.

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00:11:31,160 --> 00:11:33,320
The replacement is called unified for partners,

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00:11:33,320 --> 00:11:34,560
or UFP for short,

344
00:11:34,560 --> 00:11:37,720
and it's expected to launch in Microsoft's fiscal year 2027.

345
00:11:37,720 --> 00:11:39,280
Here's the opportunity in that change.

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00:11:39,280 --> 00:11:41,280
Partners who earn the support services designation

347
00:11:41,280 --> 00:11:44,000
can get up to 50% off on unified for partners.

348
00:11:44,000 --> 00:11:45,600
That's a significant discount.

349
00:11:45,600 --> 00:11:47,240
Microsoft is essentially saying,

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00:11:47,240 --> 00:11:49,000
show us your serious about support

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00:11:49,000 --> 00:11:50,560
and will make it affordable for you.

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00:11:50,560 --> 00:11:52,240
There are also security requirements.

353
00:11:52,240 --> 00:11:55,640
All CSP partners must meet the partner center security score,

354
00:11:55,640 --> 00:11:57,520
which means multi-factor authentication,

355
00:11:57,520 --> 00:11:59,160
secure application model,

356
00:11:59,160 --> 00:12:00,720
and basic security hygiene.

357
00:12:00,720 --> 00:12:01,920
Microsoft checks this,

358
00:12:01,920 --> 00:12:03,040
and if you fall short,

359
00:12:03,040 --> 00:12:04,720
you can lose your ability to transact.

360
00:12:04,720 --> 00:12:06,480
The message from Microsoft is clear.

361
00:12:06,480 --> 00:12:09,080
Being a CSP partner is about delivering value,

362
00:12:09,080 --> 00:12:10,680
not just passing through licenses,

363
00:12:10,680 --> 00:12:13,000
the days of buying a block of seats and marking them up,

364
00:12:13,000 --> 00:12:14,120
are fading.

365
00:12:14,120 --> 00:12:15,840
If you're not providing real service,

366
00:12:15,840 --> 00:12:17,800
you're not really a CSP partner.

367
00:12:17,800 --> 00:12:19,920
The big picture, why CSP matters?

368
00:12:19,920 --> 00:12:21,240
So let's zoom out for a second.

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00:12:21,240 --> 00:12:23,680
CSP delivers most Microsoft cloud transactions

370
00:12:23,680 --> 00:12:25,240
for small and medium businesses.

371
00:12:25,240 --> 00:12:26,480
It's not a discount program.

372
00:12:26,480 --> 00:12:27,720
It's a partnership model.

373
00:12:27,720 --> 00:12:30,360
Microsoft hands the customer relationship to partners,

374
00:12:30,360 --> 00:12:32,880
and that trust is what makes the whole thing work.

375
00:12:32,880 --> 00:12:34,160
Three layers to think about.

376
00:12:34,160 --> 00:12:35,840
Microsoft builds the services.

377
00:12:35,840 --> 00:12:38,800
Partners wrap those services with support and expertise.

378
00:12:38,800 --> 00:12:40,960
Customers get one bill and one point of contact,

379
00:12:40,960 --> 00:12:43,440
one person to hold accountable when something breaks.

380
00:12:43,440 --> 00:12:45,320
But here's where the real power lives.

381
00:12:45,320 --> 00:12:46,440
Connection.

382
00:12:46,440 --> 00:12:48,920
The partner who sets up your Microsoft 365 tenant

383
00:12:48,920 --> 00:12:51,280
can also deploy in-tune to manage devices.

384
00:12:51,280 --> 00:12:53,560
They can configure defender to block threats.

385
00:12:53,560 --> 00:12:56,160
They can help your team actually use teams

386
00:12:56,160 --> 00:12:58,640
instead of just installing it and forgetting about it.

387
00:12:58,640 --> 00:13:00,080
You end up with a cohesive setup

388
00:13:00,080 --> 00:13:02,520
instead of random tools that don't talk to each other.

389
00:13:02,520 --> 00:13:04,080
Think of it like an office building.

390
00:13:04,080 --> 00:13:07,680
Microsoft built the building, the walls, the wiring, the plumbing.

391
00:13:07,680 --> 00:13:09,760
The CSP partner runs the front desk.

392
00:13:09,760 --> 00:13:10,760
They handle the maintenance.

393
00:13:10,760 --> 00:13:12,120
They manage their IT closet.

394
00:13:12,120 --> 00:13:15,800
Everything works together so you can just show up and do your job.

395
00:13:15,800 --> 00:13:17,400
For customers, here's the good news.

396
00:13:17,400 --> 00:13:18,880
You don't need to be a licensing expert.

397
00:13:18,880 --> 00:13:21,840
You don't have to know the difference between E3 and E5

398
00:13:21,840 --> 00:13:23,600
or what software assurance covers

399
00:13:23,600 --> 00:13:25,320
or how true upcycles work.

400
00:13:25,320 --> 00:13:26,960
Your partner handles that complexity.

401
00:13:26,960 --> 00:13:28,320
You just tell them what you need.

402
00:13:28,320 --> 00:13:30,000
For partners, the benefits are real.

403
00:13:30,000 --> 00:13:32,840
Recurring revenue that smooths out the business cycle,

404
00:13:32,840 --> 00:13:35,280
deeper relationships that make you essential.

405
00:13:35,280 --> 00:13:36,640
Growing demand from businesses

406
00:13:36,640 --> 00:13:39,520
who'd rather not manage IT themselves, the bottom line is this.

407
00:13:39,520 --> 00:13:42,960
CSP is how most businesses will consume Microsoft Cloud

408
00:13:42,960 --> 00:13:43,760
going forward.

409
00:13:43,760 --> 00:13:45,120
The old programs are closing.

410
00:13:45,120 --> 00:13:46,400
New ones have arrived.

411
00:13:46,400 --> 00:13:48,920
And the partner sits right at the center.

412
00:13:48,920 --> 00:13:50,360
Here's what I want you to remember.

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00:13:50,360 --> 00:13:54,000
CSP is Microsoft's way of letting partners handle the messy parts,

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00:13:54,000 --> 00:13:55,760
billing, support, and service.

415
00:13:55,760 --> 00:13:58,760
So customers can focus on running their business.

416
00:13:58,760 --> 00:14:00,800
If you're buying Microsoft services today,

417
00:14:00,800 --> 00:14:02,400
check who your partner of record is.

418
00:14:02,400 --> 00:14:04,800
If you don't have one, now you know why that matters.

419
00:14:04,800 --> 00:14:06,960
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