Updated Microsoft's Toby Richards, General Manager of programmes within the Commercial Partner organisation, has explained the company's removal of free licences from the benefits assigned to resellers.

Richards presented an "Ask me anything" (AMA) session yesterday on the subject of "Partner investments and incentives" – and there was only one thing on the mind of the participants. This was the removal of "Internal use rights" (IUR) from the licences granted to resellers who sign up for Microsoft's "Action Pack" or earn a gold or silver "competency" in a specific area. A fee is payable, starting at £350 for an Action Pack, but it is small compared to the cost of the licences awarded. The rules are now changing, and after 1 July 2020 no more IUR licences will be provided.

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A typical comment on the AMA thread went: "We've been a Microsoft Partner since nearly the inception of the company. To be told 25 years later that the IUR benefits we've literally built our business around are being 'retired' in July 2020 comes as quite the shock... Having grown from 1 employee to nearly 90 over the years, licensing out the full stack that we're using now is going to be incredibly cost prohibitive. 1 year isn't long enough to plan for this level of change. This news was received very poorly and the directive I was given was to start researching all alternatives to Microsoft software."

Richards gave a frank response to these concerns.

We will continue to provide product licenses to our partners for business development purposes. But the concept of IUR specifically as it relates to running your business, that will go away. That is because we have 9,800 new partners joining our programme every single month... the weight of the licenses of our programme were constraining us and our ability to provide the type of value our cloud partners are wanting from Microsoft. I do not want to minimise the impact that change has on our partners today.

Why would Microsoft mind having nearly 10,000 enthusiastic resellers sign up every month? Is it possible that many are not there to win new customers, but rather to take advantage of the licence offer? Those joining are not individuals but organisations, potentially representing a significant chunk of business – though you cannot assume that each one would otherwise pay the full price.

The problem is Microsoft's own doing. If you make it easy to join a scheme that has generous benefits, a lot of companies take the bait. It is also unfortunate, from the resellers' perspective, that the solution adopted is to remove the benefit from everyone, rather than tuning it in order to ascertain whether members are making a genuine effort to grow Microsoft's business.

Alongside the licensing changes, the company is also making it more difficult to achieve competency status. "We are creating more stringent requirements around our competencies," said Richards. "The requirements for Gold partners in Cloud Platform, as an example, will move from $100,000 in trailing 12 month ACR, Azure Consumed Revenue, to $300,000."

Microsoft's strategy is influenced by the supposition that customers now have a preference for more specialist resellers/ integrators, according to a slide presented that was credited to Gartner and Forrester researchers.

The problem with this narrative is that it ignores the millions of small businesses who look for more generalist help, provided by the small resellers most affected by Microsoft's changes.

You can view the presentation by Richards and his colleague Erez Wohl here. ®

Updated to add

Following publication of this story, the presentation was pulled. Also, see our followup of Microsoft backing down.