Ramifications of Microsoft Azure’s Strategic Shift towards Cloud Solutions Provider (CSP) Partners

Microsoft Azure is giving a tough fight to AWS in the public cloud market. Its no secret that AWS, with its 6 years of headstart in IaaS segment has more market share and more services. The latest announcement by Microsoft about Azure pay-as-you-go model not available in the MPSA licensing model gives us a hint on the strategic initiative by Microsoft Azure to capture more market share.

Before we begin, let me share few licensing models with which microsoft sells Azure.

Microsoft Online Subscription Program (MOSP)

This licensing model is the subscription based model which is the default option when you go to the Azure portal and create an account using your credit card. You can also use this model to procure products like office 365, Dynamic CRM, etc. Most small and medium business, and individual developers procure Azure in this fashion. This is the classic Pay-as-you-go model with no prepaid commitments.

Enterprise Agreement (EA)

EA is a volume licensing package offered by Microsoft which primarily targets large organizations that have 500 or more personal computers. Although this is primarly used to buy software like Windows and SharePoint, Azure can be bought with this licensing model. There is usually some prepaid Azure bought, and there are some discounts, but it is not required to be that way.

Microsoft Products and Services Agreement (MPSA)

MPSA is a partner driven licensing model, where a Microsoft Partner helps client to procure and manage the various licensing elements. Azure could be procured under this model, in both pre-pay as well as Pay-as-you-go model.

Cloud Solution Provider Program (CSP)

In CSP, Microsoft partners provide value added services and help clients with their implementation and management of advanced products and services for accelerated innovation on Azure.

From all the different models of licensing above, Microsoft has removed the ability for new MPSA customers to be able to have Azure pay-as-you-go subscription. Thus you can view this more as Azure pay-as-you-go being removed from MPSA for new customers. Below are the strategic implications of these move, especially if we extrapolate a bit.

By Having customers choose a CSP instead of MPSA if they want to go pay-as-you-go, will help Azure customers leverage cloud better

Most customers that bought MPSA, didn’t get much value added services on Azure. Microsoft possibly realized that the MPSA partner is just invoicing the client by adding a few percentage points on top. Many MPSA partners themselves might not have the skills to support a client’s migration to Azure.

Moreover, most new customers that start using a cloud provider like Azure only use a handful of services. When we get new consulting clients at CloudThat, we usually see that they use only the basic services like VNet, Storage and Virtual Machines (EC2 instances in AWS); Thus, Azure is nudging new customers that use  tagging a consulting company with each new customer, Microsoft is making sure all new customers can get full benefit of all new services in Azure from the consulting company.

Microsoft will make it easier for Azure customers to find a matching CSP

Microsoft wrote to me that “Microsoft is also actively evolving the referral engine process so there will be an even more seamless way to connect [customers and CSP Partners].” Currently after signing up as MOSP pay-as-you-go, Azure customers must manually find the CSP Partners at  partnercenter.microsoft.com/en-us/pcv/search. In future, its very likely that as soon as they sign up, they might he asked a few questions and recommended a few partners to work with. This way, the partners get more business, and customers, if needed, can leverage the partners recommended by Microsoft.

Thus the long term strategy of Microsoft revolves around making it easier for Azure customers to leverage the growing CSP partner ecosystem, rather then struggle on their own. Its also clear that Microsoft is not going to force customers to have to use a particular model, although CSP is at the center of their strategy. This I believe will help Azure customers, as well as help the CSP partner ecosystem to also get more clients, and grow their business.

What are your thoughts on this strategy by Microsoft? Feel free to leave your thoughts below.