Microsoft: Dynamics CRM Going To Pay-For-Performance Model

Dynamics CRM

Microsoft launched the pay-for-performance initiative last year to cover its Dynamics ERP applications. Under pay-for-performance, solution providers are rewarded for growth rather than just maintaining a customer base.

"The pay-for-performance model provides partners with the opportunity to earn more by differentiating themselves in the market," said Doug Kennedy, vice president of Microsoft Dynamics partners, in an interview. "The ones that drive growth will be more highly rewarded than those that don't."

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Starting next month, the Customer Support Agreement (CSA) fee that partners earn for selling the on-premise Dynamics CRM application will shift to a flat 17 percent for sales of initial licenses and Software Assurance services, and 5 percent for renewals.

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Effective July 1, 2013, the incentive model will shift to pay-for-performance under which partners will be rewarded for growth in their net gross revenue, based on the trailing 24 months (beginning with July 2011 sales).

For Dynamics CRM Online, the current 40 percent CSA fee promotion will be replaced with a flat 26 percent CSA starting next month. On July 1, 2013, the CRM service will shift to a pay-for-performance model that's based on the net-new number of seat subscriptions sold by a partner.

Microsoft is also making Dynamics AX, the company's ERP application set targeted toward large businesses, available under enterprise agreements for Microsoft volume licensing customers starting Sept. 1.

Microsoft already offers volume licensing for Dynamics CRM and today that accounts for about 50 percent of Dynamics CRM sales, Kennedy said.

Some customers, including large enterprises and federal government agencies, prefer to acquire software under such enterprise agreements, Kennedy said. Large-account resellers (LARs) typically handle the transaction under volume licensing deals and pay solution providers a margin for deals. Kennedy said the change would make Dynamics AX more competitive with other ERP products and increase sales opportunities for partners.

Dynamics AX will continue to be available to partners that want to resell the applications off the Dynamics price list, Kennedy said. He predicted that, at least initially, the percentage of Dynamics sales under enterprise agreements would be in the single digits.

Microsoft also is increasing, from six to 15, the number of ERP competency technical certifications Dynamics AX resellers need to qualify for Microsoft Partner Network Gold status. Kennedy said Microsoft wants only "enterprise-class AX partners to sell in the enterprise space" and he said the stricter requirements are intended to keep out companies that lack the necessary expertise.

Microsoft also is developing simpler pricing plans for Dynamics NAV 2013 and Dynamics GP 2013 when those ERP application suites ship late this year. Also under way is a test program involving some 30 to 35 partners that uses subscription pricing for Dynamics applications running either on-premise or in the cloud on Windows Azure.