Microsoft Exec: NCE Change Won’t ‘Allow Partners To Steal’ Customers With Lower Prices

‘This isn’t a feature that will allow partners to steal other customers,’ Microsoft Program Manager Brent Serbus said on a call Wednesday.

A Microsoft partner program manager said the tech giant’s upcoming partner-to-partner New Commerce Experience license transfer policy for the Cloud Solution Provider program is not designed to encourage solution providers to poach customers by offering lower prices.

“This isn’t a feature that will allow partners to steal other customers,” Microsoft Program Manager Brent Serbus said in a conference call with partners Wednesday. “At the end of the day, the owner of the subscriptions is the person that has to acknowledge and accept and agree to—if they don’t, they don’t have to. If they don’t want to transfer a customer’s subscriptions, they simply ignore the transfer and it goes away to ‘expired’ after 30 days. So partners are under no obligation to participate or to move a customer’s subscriptions if they do not want to.”

The inability for CSP partners to transfer subscriptions under NCE was widely considered one of the more controversial measures of the program after enforcement began in 2022. Microsoft employees discussed more specifics around the policy change—set to start sometime during this quarter—on a Wednesday call with partners, a recording of which was seen by CRN.

Serbus said on the call that transfers—due to start this quarter—are not designed for high-volume scenarios, just when needed. And for now, transfers are only allowed for the billing owners of subscriptions, which means direct-bill partners and indirect providers in the CSP program. Transfers “may come later” for other partner types, such as indirect resellers, and other channels including direct and Enterprise Agreement.

NCE License Transfers

When asked by CRN for more details about the transfer policy, Microsoft said in a statement that the transfer policy “change was made based on feedback from partners and will provide improved flexibility and a better partner and customer experience.”

Lane Shelton, vice president of business development at Somerset, N.J.-based SHI—No. 14 on CRN’s 2023 Solution Provider 500—told CRN via email that he isn’t worried about customer poaching through lower pricing as a result of the policy change.

“We believe it offers an efficient and cost-effective way for customers to choose the CSP provider that best meets their needs,” Shelton said. “This increased flexibility in the market can lead to healthy competition among partners, ultimately enhancing the range and quality of offerings available to customers.”

He said he is not worried about price competition and looks forward to more details from Microsoft on the limits around license transfers.

“We view this as an opportunity to distinguish ourselves through value-added services rather than just price points,” Shelton said.

Jean Prejean, president of Metairie, La.-based Microsoft partner Guardian Computer—a member of CRN’s 2024 MSP 500—told CRN that while she appreciates greater flexibility around license transfers, she hopes Microsoft eventually allows indirect resellers such as her company to make transfers.

“This adjustment would enable us to manage our license allocations more effectively, ensuring we can fully support our clients without the risk of having to pay for unused licenses should the client go out of business or switch service providers,” she said.

The ability for indirect resellers to transfer licenses “would encourage us to invest more confidently in purchasing additional licenses, bolstering our commitment to the Microsoft platform,” she said.

Partners Question Microsoft Change

Serbus said on Wednesday’s call that under the legacy, pre-NCE system, partners could cancel subscriptions for any number of reasons. The feature was not put into NCE and now Microsoft is addressing the gap.

“Partners haven’t been able to solve the problem of getting a customer from themselves over to a new partner,” Serbus said on the call. “It has created some friction and disallowed partners to do things they have needed to do and things, historically, they have been able to do in the old system that did not really enforce the terms.”

Serbus told call participants that if the two partners can’t come to an agreement, Microsoft support escalation can potentially help.

“There are going to be cases where partners don’t agree,” he said. “And the whole point of needing both partners to agree is that the ownership and the sovereignty of that current partner needs to be respected.”

When asked by a call participant about what happens when a customer’s new partner receives subscriptions with expiration dates different from the contract the new partner and new customer signed, Serbus said a scheduling option could be added in a future iteration to decrease the burden.

Another Microsoft partner on the call voiced concern about customers bringing in products sold under terms the partner doesn’t normally accept, such as long commitments paid monthly. The partner asked for a way to see what terms the new partner is inheriting from the original partner, saying not being able to see them isn’t “really acceptable in this scenario.”

Serbus said he will take feedback from the call back to Microsoft. “They are opportunities for us to improve on as we fall forward and iterate on improvements to the feature,” he said.

During the call, Serbus said that Microsoft is looking into other issues involving billing and pricing, including partner difficulty in getting pricing beyond six months and difficulties with reserved instances.

In response to another partner’s question, Serbus said that the system doesn’t monitor or track what partners charge customers, only what Microsoft bills partners.

The Microsoft partner voiced disappointment in the launch of partner-to-partner transfers, saying that despite Microsoft’s intentions, solution providers will try to win over customers with lower prices. “Customers are price-shopping,” she said. “When a customer wants to transfer something midterm, it usually is because they saw that another partner is selling something … for less.”

She questioned why partner-to-partner transfers are becoming available before another oft-requested change—tenant-to-tenant transfers.

“There are a lot more important transfers that could have occurred,” she said.

When previously asked by CRN about tenant-to-tenant transfers, a Microsoft spokesperson suggested that partners seeking flexibility for user changes purchase monthly commitment subscriptions instead of annual ones.

More Transfer Policy Details

The NCE transfer actually leverages the years-old existing Azure transfer model, Serbus said. “Think about this as adding license-based to the existing flows.”

A transferred subscription keeps the original price point and the promotions applied to it, Serbus said.

The customer’s original partner—also called the source partner or current partner—is not double-billed. That partner pays for the term it has up until the transfer.

Then the future partner—also called the receiving partner or target partner—takes over the remaining financial term obligations after the transfer. If the original partner prepaid, that partner will receive a credit or refund for the remaining term after the transfer, according to Microsoft.

The subscription owner and current source partner for the customer can say no to transfers. If the original partner and future partner can’t come to an agreement, the source partner keeps the subscription and ignores the transfer request, which expires after 30 days, according to Microsoft.

In the actual in-portal transfer process, the customer accepts a future partner relationship request. The future partner sends the transfer request to the current partner. And the current partner defines which subscriptions to transfer before hitting submit.

The new partner will not get incentives for a “customer add” because they are not considered new, according to Microsoft.

Customers must establish a new relationship with the new target partner, which could mean customers starting a relationship with a solution provider’s distributor. Transfers will support different billing partner currencies and respect regional authorization, according to Microsoft.

Transfers will have self-serve user experience and API support, Serbus said on the call. They will support direct bill partners transitioning to indirect providers, and they will only support active subscriptions and end-of-sale product SKUs.