Microsoft Partners In Uproar Over Cloud Sales Commission Cuts

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Microsoft is preparing to slash the fees partners get from its Online Services Advisor Incentives program, and many partners are furious about the likelihood of making less money selling Office 365, Exchange Online and other cloud services.

"Microsoft is [screwing] its partners," said the CEO for one Microsoft cloud services partner, who did not want to be identified. "It's total [crap]. I am not happy about this."

The fee cuts, which go into effect Jan. 25, are happening in Microsoft's Advisor Enterprise Agreement Deploy program, in which partners steer customers to purchase Office 365 and other cloud service subscriptions as part of EA volume licensing contracts. In return, partners get a one-time payment based on the full-year value of each seat when the customer deploys the services.



Some partners are so angry about having their fees cut that they're prepared to sell competing products, like Google Apps. One partner told CRN he's planning to change his business to be less dependent on Microsoft partner fees.

"Based on this information, I'll push into other services sooner instead of being a cloud-only play," the source told CRN. "That means VMware and managed services, for which Microsoft gets zero revenue."

The fee cuts mean partners will have less incentive to tout Microsoft cloud services over Google's, the source said. "In the small and medium business space, since the payment from Microsoft isn't much, and the payment from Google isn't much, I'll let the customer choose, instead of advocating for Microsoft," he told CRN.

None of the half-dozen or so partners CRN interviewed for this story would speak on the record for fear of damaging their relationships with Microsoft. A spokesperson for Microsoft addressed some, but not all, of the questions CRN asked about the Office 365 fee cuts, and declined to make an executive available to discuss the matter.

All of the partners CRN interviewed are questioning the wisdom of Microsoft cutting back on Office 365 partner fees at a time when competition in the cloud services market is intensifying.

One Microsoft partner told CRN his incentive fees for Office 365 will drop more than 50 percent after the changes go into effect. To put this into context, a 300-seat deal for Microsoft's top-of-the-line Office 365 E3 plan, which used to earn the partner more than $12,000, will now only bring in around half that much.

For an Office 365 E1 deal of similar size, partner incentive fees are set to drop 40 percent, according to the source. "Unfortunately, it looks like the changes are pretty drastic," he said in an interview.

Even partners that don't have a direct financial stake in the Advisor EA Deploy program told CRN the fee cuts are a troubling sign.

"Microsoft has been preaching that the cloud was going to level the playing field [for partners], but nothing is going to stop them from cutting margins," said one disillusioned partner who has been selling Microsoft cloud services since the Business Online Productivity Suite was launched in 2008.

"The channel needs consistency, but Microsoft has changed the payout and commission structure four times in two years," said another disgruntled partner. "How can a partner build a go-to-market model around a payout plan that keeps changing?"

NEXT: Why The Office 365 Fee Cuts Are Happening Now?

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