• On July 1, 2020, Microsoft partners will no longer be able to use the tech giant's software internally for free, instead pushing them towards cloud services for which they'll have to pay.
  • The end of the free-software perk has been met with a huge backlash, with over 3,300 people signing a petition to Microsoft to reverse the changes.
  • Microsoft will instead focus its resources on programs that support business growth for partners, and says that customers will feel more comfortable with the change after these new programs help them land more customers and revenue.
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Starting on July 1, 2020, Microsoft is making some big changes to its partnership program — changes that have already caused an uproar among its reseller partners.

Partners will no longer be able to use Microsoft software internally in their own businesses for free as part of their annual subscription to the partner program.

"We have essentially let them run their environment on Microsoft for free. Now, just like every other customer, they'll have to pay for the services that they use," Gavriella Schuster, corporate vice president and One Commercial Partner channel chief at Microsoft, told Business Insider.

These partners build their businesses by reselling Microsoft products to large customers, providing customer support and developing their own add-ons and extensions to provide bespoke solutions for business ses. This partner program is a significant part of Microsoft's business, with 95% of the company's total commercial revenue flowing through those resellers, developers, and systems integrators.

Beyond the software issue, Microsoft in August will end its dedicated customer support for partners using its traditional, boxed-software products. Toby Richards, general manager at Microsoft, said that only 1% of partners use this support, and it will continue to offer the same perk for partners who use cloud services like Microsoft Office 365.

The change comes as Microsoft itself continues to shift its focus away from traditional software, and towards subscription-based cloud services like Office 365, Microsoft Azure, and Microsoft Dynamics 365.

"We are a cloud company," Richards said at a Microsoft press event. "We felt that investment for that 1% could be better served for adding more enablement and better go-to-market services."

'An opportunity cost'

Schuster says that it doesn't cost Microsoft much of anything to provide software to its partners, given that it can be sent via the internet or mailed on a CD and that's the end of it.

"When we gave a partner a license, the only thing it cost us was kind of an opportunity cost. Would they have bought something?" Schuster said.

However, Schuster points out that it does cost Microsoft money to provide cloud services, since they require the use of the company's servers to function.

"If the partner really uses a lot, then it costs even more and if they add more employees because they're successful, then it's an even higher cost," Schuster said. "It's not a bad problem to have that you have partners who want to use your stuff and have partners grow. But you don't want to feel, 'that's an X number of dollars I have to pay out.'"

These changes don't stop partners from using Microsoft products for purposes of making a sale, doing trainings, or setting up demonstrations. They just can't use them internally at their own businesses for free. Instead, Microsoft partners will pay for the cloud services they are using per month.

"It's a different kind of bill for them as well," Schuster said. "When we go through that, every partner that I've talked to in this last week has really understood...We can't afford to run every single partner's organization for free anymore, because it's not free."

Richards says that Microsoft would rather invest in programs and resources that support business growth for partners, including those that will help them find more customers or work more closely with the company.

"The role of my team is to take customer and partner feedback as well as work with our product teams to determine not only what are the core requirements we need but also how we think about the various businesses and services we offer to help our partners grow," Richards said.

Schuster also said that Microsoft will look into creating special offers for partners.

'Wait a minute, I have to pay for this'

Schuster notes that not everyone has reacted favorably to these changes. At the time of writing, over 3,300 people have signed an online petition urging Microsoft to reverse course and provide the software again — up from 1,800 people on Tuesday.


"As I would have expected, it's, 'wait a minute, I have to pay for this. I'm not sure if I have the budget,'" Schuster said on the backlash. "Where we are turning our attention is how to help them land more customers. All it takes is three wins, five wins for a partner, and they've made enough profitability to pay."

Schuster said that Microsoft is giving partners as much notice as it can, so they have about a year to figure this out.

"You have to start paying for something we've been giving for free for a long time," Schuster said. "It's like when your kids turn 20, and you tell them they have to pay rent. We have all our teams on standby working with partners to come up with the best licensing solution for the organization."

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