Microsoft's Modern Commerce – Important things you should know

The past two to three years have seen many CIOs aggressively working on their company’s digital transformation (DT) strategy. Cloud, internet of things (IoT), augmented reality (AR), artificial intelligence (AI), automation, and similar technological advancements and now COVID-19 have given a primary push to the digital transformation efforts of organizations.

But, contrary to many beliefs, digital transformation and the cloud do not come in a box. Digital transformation encompasses a journey wherein organizations need to digitally transform their people, processes, and technology to fundamentally change business performance and customer experience.

Now, to help accelerate the digital transformation of customers, Microsoft introduced a new commerce experience for Azure in the Cloud Solution Provider (CSP) program last year in November.

Microsoft has always emphasized the importance of its Partner Ecosystem. There are currently 75K+ active partners in the CSP program. And, they are the trusted advisors with more than 3.4 million customers being serviced by the CSPs. The new development can help (CSP) partners to sell Azure services in a more streamlined manner and realize greater profits.

This blog extensively covers Microsoft Modern Commerce Experience in Azure for CSP partners. By the end of this blog, you will know:

What is Microsoft New Commerce Experience for Azure in the CSP program?

Microsoft has always helped its customers achieve digital maturity and transformation through its products, services, and its huge partner ecosystem. To accelerate the digital transformation journey of its customers, Microsoft introduced a new commerce experience for Azure on November 1, 2019.

The new experience in CSP for Azure primarily focuses on streamlining and improving the way customers buy and use Azure services. On the other hand, this new development helps CSP partners achieve greater growth and profitability.

Source: Microsoft

Under this new development, following changes and features were introduced:

Standardized Azure Pricing: With this, partners can get a consistent view of Microsoft Azure pricing across various sales motions. The partners also get USD pricing for all Azure plans, enabling global consistency, billing date, and even access to Azure cost management.

Microsoft Customer Agreement: A non-expiring agreement that replaced Microsoft Cloud Agreement for all new and existing CSP partners. The single agreement helps customers with simplified terms and conditions through digital contracting.

Source: Microsoft

Microsoft Partner Agreement: The new partner agreement made the contracting experience smoother while meeting regulatory obligations and promoting trust among Microsoft Partners. It does not have any expiry date or any annual revision cycle. Thus, reducing complexities by providing a modular way to execute and store contracts digitally.

Source: Microsoft

Azure Lighthouse and Cost Management capabilities: The new tool helps you efficiently manage all your customers and reduce onboarding time by 71%. This can lead to quick revenue recognition and increased contract value. Similarly, Azure cost management provides you with a fresh set of tools to monitor, allocate, and optimize cloud costs, backed with rich analytics.

Microsoft's modern commerce experience for Azure customers and partners is deeply rooted in the belief that digital transformation can lead to better operational efficiencies, seamless buying/selling processes, and eventually a favorable customer experience.

Why Microsoft introduced new ways to re-sell and buy Azure?

Customers are looking to transform digitally. And now, the global crisis brought-forward by the pandemic has put everything on a remote model. In these trying times, Microsoft partners have been at the forefront of servicing customers and helping them keep operations alive.

The current situation has kind of created an urgency for businesses to transform digitally. Here, Microsoft via its partners is helping them do just that by simplifying their purchase experience.

The new experience will create a consistent and simplified purchase experience for customers and enable them to digitally transform with greater flexibility in how and where they buy. With this, Microsoft is working on delivering on its four customer promises:

• Faster time to value with solutions from Microsoft and Partners
• Increased flexibility without compromising control
• Optimized costs with new savings
• Foundation of trust and security

Let’s breakdown the important components of Microsoft’s Modern Commerce and understand why Microsoft has introduced a new way of reselling Azure.

Source: Microsoft

• Standardized Azure Pricing and billing

Under the new model, Azure pricing has been standardized. It provides access to one single universal catalog that includes the latest Azure services at consistent pricing. This allows CSPs to expand its portfolio of services with the latest Azure innovations.

These changes give customers a transparent view of Azure pricing and encourage the CSP partners to shift their focus away from just reselling Azure to adding value to the top of Azure offerings.

Why: Traditional pricing strategy for Azure was varied and complex. There were multiple licenses, countries, and programs. Each licensing program had its own price lists. For CSPs, this meant having to manage multiple licenses with so many different price lists.

With standardized Azure pricing, all pricing is now included in a single global price list in USD. The global consistent pricing simplifies the buying process from a customer viewpoint.

• Simplified agreements

Just like the standardization of Azure pricing, Microsoft has also implemented standardization across its agreements – Microsoft Customer Agreement (MCA) and Microsoft Partner Agreement (MPA). We discussed it in the overview of Microsoft Modern Commerce experience. Now, let’s understand why this change was necessary.

Why: Microsoft licensing can be complex to manage with multiple use rights and portals. Currently, there are several programs available to purchase Microsoft products. Customers have multiple portals to manage; with each portal having its own set of terms and conditions. This also makes moving from one program to another time-consuming and complex.

• Differentiated value-added services

Now, the partners can get recognized by offering differentiated value-added services through the new partner earned credit (PEC) model.

The PEC is Microsoft’s new method to reward those CSP partners who actively manage their end customer’s Azure environment, and not simply resell Azure.

If any CSP is only reselling Azure without any managed services, this means they will get low margins.

Focus on only transactional services = Low-profit margins

On the other hand, the CSPs who help customers deploy and manage their Azure environments by offering a value-added service, qualify for PEC. They will receive it as a rebate on their CSP invoice from Microsoft.

Focus on value-added services including managed services, packaged IP = Greater profits

So, if you are not already offering any managed services on top of your Azure offerings, it is time you do!

However, please note that the partner may need to fulfill other conditions too, to qualify for PEC. You can get more information on this from your partner center resources.

Why: Currently, CSP partners receive discounts when buying Azure even if they are not providing any managed services. The new model encourages the CSPs to be more agile and digitally mature by offering value-added services.

What does it mean for CSPs?

To understand this, you first need to know if these changes are for you or not.

These changes are primarily for Direct and Indirect CSPs. The ones who are using Microsoft Partner Center to transact Azure. Thus, if you are any one of them, it is time you get ready to adopt this new model.

While the new changes have been implemented from November 1, 2019, Microsoft has not mandated it. The traditional commerce practices are still on. But Microsoft is continuously encouraging its CSP partners to start selling Azure through the new commerce experience.

Microsoft Customer Agreement and Microsoft Partner Agreement are already available to accept for all the partners and customers. Any partner failing to accept the MPA will not be able to place orders for new or existing customers. A while back, Microsoft extended the deadline for signing up the MPA to November 1, 2020.

It’s important to note that the new changes have been introduced only for Azure services and not for other Microsoft services like Office 365, Dynamics 365, Microsoft 365, and other ‘license-based’ services.

Another important factor to note, as explained above, is that under the new commerce experience, you as a direct or indirect CSP partner, are not entitled to any discounts. Instead of that, you will get ‘rebates’ or ‘incentives’ via the new Partner Earned Credit Model for Azure services.

Microsoft’s Modern Commerce experience will fundamentally change how you as a CSP – Direct or Indirect partner buy and resell Azure.

Summing it up: Under the new system of selling Azure, you will now pay for Azure consumption from a global price list (that will be regularly updated) without any discounts for usage-based services like Azure. Your focus must be on selling value-added services along with Azure or providing managed services. As then, you will qualify for PEC.

Again, you must remember that the new changes do not change how Azure is used by your customers. It just defines a new way to transact Azure – how you get billed for it and how you will be incentivized via rebates. The Azure subscription and resources under it remain the same.

How RackNap supports your transition to Microsoft modern commerce experience for Azure?

RackNap, as a cloud automation platform, has always helped Microsoft CSP partners through its automated billing and order provisioning capabilities. We will continue extending our support on this new model as well.

Automated billing and service provisioning: RackNap gives you complete cloud billing flexibility. This includes but does not limit to

a) allowing you to customize margins and set prices,

b) ability to set free, recurring, one-time, pay-per-use, plans,

c) ability to increase cross-selling by offering bundled packaging

d) ability to create discounts, redeemable coupon codes, and auto-applying of codes, and

e) access to detailed billing history of a client as well as Azure cost breakdown.

f) supporting new Azure plans, monthly calendar billing cycles, new Master Customer Agreement (MCA) as per new modern commerce experience

Automatic provisioning of Azure subscription, generation of invoices, ledger, receipts, and debit/credit notes can help you onboard your customers within seconds.

Help your customers easily manage their Azure environment: You can enable your customers to upgrade, downgrade, stop, start, or pause cloud resources in one-click.

Your customers can get complete Azure real-time resource consumption details in their customer panel. They also get alerts against any budget thresholds set-up in their account.

The Azure billing API integration with RackNap further empowers you as a CSP to bill Azure Cloud on the pay-per-use model and suspend or terminate subscriptions in case of any payment failures.

Having firm control over Microsoft’s new billing rules can help you easily migrate your customers to the new modern commerce experience. And, a cloud automation tool like RackNap, can help you do just that. Providing value-added services can help you earn money under the new PEC model.

If you want to know more about how we support the new model, you can contact our experts at [email protected].

Next Steps The purpose of this blog was to give you detailed information on Microsoft's modern commerce experience for Azure in the CSP program. You can visit your partner center account to get more information on the same.

This is your golden chance to be at the center of your customer transformation by offering them value-added services. This will benefit not only your customer but can help your CSP business grow and achieve newer heights.

Let me know if you have any query regarding Microsoft's Modern Commerce. I'll be happy to help.

This blog was first published on RackNap blog.