As of 31st August, Microsoft will introduce its new requirements for their Tier-1 Cloud Service Partners. For those who are not able to meet the new requirements, Tier-2 seems like the logical alternative. To make a solid decision, we will discuss the differences between the two models in this blog, so you can decide which one will be best for you.
 

Differences between the two models

First, let’s take a look at the basics of the two models:

Tier-1 Tier-2
Purchase: direct from Microsoft. Purchase: indirect from Microsoft.
Margins: higher as you buy directly. Margins: lower, as distributors take their share.
Bonusses and incentives: equal as in Tier-2 Bonusses and incentives: equal as in Tier-1

 

New requirements for Tier-1 CSP

To stay a Tier-1 partner Microsoft has set several new conditions. Below the three most important requirements. Cloud Service Providers need to:

  • Provide managed solutions to their customers in which CSP licences are incorporated.
  • Purchase an Advanced or a Premium support contract, € 12.000 and € 30.000 a year respectively.
  • Feature automated provisioning and billing.

 

What to choose?

Considering the differences and stated conditions it may seem obvious to you which model to choose but perhaps it is not. Let us tell you on what basis you should decide which model suits you best.

When Tier-1 is best…
When you prefer to have direct access to Microsoft support channels via your support contract.
When your business case is positive, the break-even point is around 2500 to 3000 CSP licenses.
When you have built a strong own IP by using Microsoft products as a core technology.

 

When Tier-2 is best…
When you prefer to have a direct relationship with a distributor and don’t value a Tier-1 status.
When you can predict you will not earn back the expenses of the support contract.
When you want to use the additional support services that distributors offer.

 

Do the calculations: set up a business case

Investing in a support contract will probably be the major consideration to decide whether or not to stay a tier-1 CSP. To make a sound decision setting up a business case will help. To make it really simple: calculating € 1000 a month in a single client’s contract will be harder to sell than adding € 1 to invoices of a 1000 clients. Consider the amount of cloud service clients you have. Not just now but also in the future.

Next to the amount of licences you sell, you also need to consider the type of support contracts you have agreed upon with your customers. A support contract with a higher level of support, will return the investment more quickly than a 8×5 contract. In our former blog we also go into this.

To be able to decide what status is best for your company, setting up a business case is essential. In our whitepaper you can read more on how to do this. Of course we are happy to help you. Based on your current and estimated future install base, we can calculate your ROI on the Microsoft support contract.
 

Choose what suits you best

Whether you choose to be a Tier-1 or a Tier-2 partner, both have their advantages and we can support you in both.

As a Tier-2 you buy your services through us and you can benefit from our proposition of full automation, self-service portals for your clients, business intelligence and integration with your business processes. This automation and integration also goes when you are buying from several distributors. The advantage of our platform is you will have only one provision and billing system. Plus, your customer will have only one invoice every month with all purchased services, even if it comes from several sources.

As for Tier-1 partners we offer the same proposition, while you buy directly from Microsoft. With our platform you fulfil Microsoft’s requirement of featuring automated provisioning and billing.

It is up to you to decide which status suits you best. If you are not sure yet which one that is, give us a call and we gladly think along with you, after which you can take a well-founded decision.

Coen Korver, Managing Director Keenondots