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Pax8 Suggests Microsoft Could Offer Relief In Expected October Partner Program Changes

C.J. Fairfield, Steven Burke

“I know it has been a tough 12 months [for MSPs] with NCE,” Pax8 Chief Commerce Officer Nick Heddy said. “In our office we call [NCE] it ‘Bruno’ … We don’t talk about Bruno anymore. We are trying to get past it. But we realize it has been a tough go, and I expect some big announcements in October to offer some relief.”

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Pax8 Chief Commerce Officer Nick Heddy

Microsoft is poised to offer partners grappling with stringent New Commerce Experience (NCE) software licensing requirements “relief” with changes that are expected to be announced in October, Pax8 Chief Commerce Officer Nick Heddy told XChange August 2022 conference attendees at a packed keynote panel session on Tuesday.

“I know it has been a tough 12 months [for MSPs] with NCE,” Heddy said referring to the frustration partners have felt with a myriad of licensing changes associated with NCE. “In our office we call [NCE] it Bruno…We don’t talk about Bruno anymore. We are trying to get past it. But we realize it has been a tough go and I expect some big announcements in October to offer some relief.” “Bruno” references a song from the popular Disney movie “Encanto.”

The NCE rollout has sparked an outcry from partners frustrated with new annual software licensing commitments that they claim have put an unfair burden on them and their customers. With NCE, customers are required to make an annual commitment to Microsoft software offerings like Microsoft 365 or pay a 20 percent premium on month to month commitments.

[RELATED: Microsoft NCE Changes Will ‘Reduce Risk At The Partner Level:’ Pax8’s Nick Heddy]

Furthermore, MSPs are on the hook for the full contractual licensing commitment if a customer reduces their license count in the wake of a layoff or a change in business.

“Microsoft is absolutely listening,” Heddy told CRN in an interview after the keynote. “In October I expect there will be a lot of great announcements that will ease the fear, ease the tension, and reduce risk at the partner level as they bring on new customers.”

CRN reached out to Microsoft but had not heard back at press time.

Heddy said he expects the changes coming from Microsoft to put the focus squarely back on helping partners grow their business.

“Pax8 has been working behind the scenes with Microsoft to advocate on our partner‘s behalf,” he said. “Our three core messages are: How do we help you grow? How do we help you optimize? How do we help you reduce risk? I believe the announcements in October will do all three of those things: help partners grow, help partners become more efficient and reduce risk.”

Pax8 – one of the top Microsoft distributors - has been an advocate for its 23,000 Microsoft partners during the difficult NCE transition. In fact, Heddy has had a monthly recurring meeting with Microsoft Corporate Vice President Sales Enablement, Partner Ecosystem and Supply Chain Mazhar Mohammed, who runs the team of 3000 engineers working on the NCE platform.

Partners Cheer NCE Relief

Gary Herbstman, CEO of Byte Solutions, a Boca Raton, Florida MSP and Microsoft partner, said he welcomed any NCE changes that will provide relief for partners and their customers.“There is definitely a need for NCE to be fixed,” he said. “The annual requirement in order to get a (software licensing) discount really hurt. “

The other problem is when a client shifts from one MSP to another MSP the license for Microsoft 365 stays with the original provider because the annual commitment can not be transferred, said Herbstman. That means the original MSP is involved even if there was a “disagreement” with the customer. “If you have a customer that moves from one MSP to another it is a nightmare,: he said.

“I’m optimistic that there will be some relief,” said Herbstman. “This gives me some hope that there is light at the end of the tunnel…It would be very good if there are some changes.Microsoft is like the big gorilla. You have to use Microsoft 365. Nothing competes with it. We have to deal with it the best we can.”

Herbstman praised Pax8 for acting as an advocate for partners and building a strong Microsoft partner community. “We as a community really need to use our leverage together and Pax8 has helped with that,” he said. “We have been very happy working with Pax8. They started working with us on this a year ago.”

Herbstman said his message to Microsoft is: “Give some consideration to what we have to go through with customers. Work with us. We are a team!”

Pax8 Lauded For Advocacy

Michael Goldstein, president and CEO of Fort Lauderdale, Fla.-based MSP LAN Infotech, also singled out Pax8 for actively seeking changes with Microsoft to help partners. “We all need an advocate,” he said. “We have petitioned Microsoft on this and spoken with them.”

Goldstein said he is not looking forward to doing renewals with customers on Microsoft licenses as a result of the issues with NCE.

“We have to go out and deal with the customers as a service provider and make sure this is not set up as an automatic renewal,” he said. “I am dreading the renewal process. On the backend it creates a lot of administrative overhead. We have to give the client the opportunity to review the license and determine just how many licenses they need. The worst is yet to come because we have to do these ‘True Up’ (Enterprise Agreement) renewals with customers. It’s an administrative nightmare.”

Goldstein said he is hoping Microsoft will make changes that provide contract relief for customers that have purchased software licenses that are no longer being used.

“We’re waiting for more details but our hope is there will be flexibility in terms of allowing customers that have made an annual commitment to adjust that licensing commitment,” he said. “What do you tell a customer that has over bought (software licenses) and is looking for relief? We are hoping customers can make changes without a penalty. Our message to Microsoft is please listen to the partner community. Give us some relief so there is no penalty on licensing changes.”

Looking Forward To ‘Business As Usual

Heddy, for his part, said the NCE changes were necessary but placed an enormous burden on partners and Pax8 as MSPs scrambled to meet the new NCE commitments.

“I think at the heart of NCE the spirit was to help partners with predictability of revenue,” Heddy said. “But when you make these big sweeping changes it is hard to model out what the impact is going to be. There is no doubt there was a distraction as we all worked through this. It was also necessary as the current systems had been in place for around a decade and it needed that refresh.”

When the NCE changes required for February 28 hit the channel, Pax8’s system processed 168,000 transactions over an eight hour period. “Our platform did not go down which is something we are really proud of,” said Heddy. “But the way it was received by the market there is no doubt that it was a distraction from growing your business.”

Heddy said the superstar Microsoft distributor, which this year received three awards from Microsoft (Modern Workplace for SMB, Indirect Provider, and Customer Experience), is looking forward along with its partners to getting back to “business as usual.”

Pax8 is looking forward to doing what it has always done whenever there are changes that impact partners, said Heddy. “We aggregate, we amplify, we advocate for our partners,” he said. “We are the voice that communicates to many of the Microsoft partners. Microsoft has 600,000 partners. We’re serving 23,000 of those. We are helping partners to navigate program changes and incentive changes that we expect to land in October.”

Additional Reporting By Wade Tyler Millward

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