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Channel goes nuts as Microsoft issues cloud commission cuts

23 Jan 2014

Microsoft’s channel partners are furious this morning following revelations Redmond will cut the fees partners currently receive from its Online Services Advisor Incentives program.

The cuts, which could see partners make less money when selling cloud services such as Office 365 and Exchange Online, have left some partners threatening to jump ship to industry rival Google instead.

Partners who sell Microsoft cloud services receive a one-time payment based on the annual value of each seat when the customer uses the service, but the industry has been stung with cuts now ranging from 15% to 50%, which will go into effect on January 25.

“All that good karma Microsoft earned in 2012 when it ceded to partners' wishes and granted them the ability to directly bill their end customers may well slip away later this month when partners find their cloud commissions cut,” writes Talkin’ Cloud.

The move, widely criticised by the channel industry, could have a damaging effect on the software giant, with many partners now questioning the incentive of selling Microsoft services.

"Microsoft is [screwing] its partners," one North American Microsoft cloud services partner CEO told CRN. “It's total [crap]. I am not happy about this."

The uproar didn’t stop there however, with another annoyed partner claiming: "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.

“The channel needs consistency, but Microsoft has changed the payout and commission structure four times in two years.

“How can a partner build a go-to-market model around a payout plan that keeps changing?”

Microsoft's reaction…

In reaction to the widespread annoyance among channel partners, a Microsoft spokesperson told CRN Australia that the company’s cloud-focused incentives have doubled year-over-year in terms of dollars and a percentage of the overall mix.

“We are confident that our incentive programs provide the greatest partner opportunity for building a profitable business in the cloud,” a spokesperson said.

"It is inaccurate to state that our cloud incentives have decreased or been removed.

“Rather, our incentive changes are a result of updates to product pricing and mix, and many incentives increased in value as changes were implemented.

"Microsoft is committed to continuing partner investment on Cloud with a significant growth in Cloud Incentives this fiscal year.

“The partner fee cuts reflect the underlying changes in the product pricing and product mix and do not reduce partner opportunity to build a profitable business on Microsoft Cloud Services.”

The Channel has contacted Microsoft New Zealand for comment on how this will impact the Kiwi market. Check back to The Channel for more updates...

How will Microsoft’s partner cuts impact the channel? Tell us your thoughts in the comments below