Microsoft partners seek answers amid O365 billing shake up

Under new commerce experience, partners fear that they will have to absorb costs of licensing agreements if customers cannot pay

Microsoft partners are seeking clarity from the vendor over proposed billing changes which would see them take on financial responsibility if their customer becomes unable to pay for their O365 licence.

The vendor is currently introducing a New Commerce Experience (NCE) which includes a number of key changes for its partners.

Under the new agreement, partners claim that they would have to take on the financial risk of paying the rest of a subscription if a customer was no longer able to due to insolvency or another reason.

"With Office 365 CSP licensing at the moment, the risk and the ownership of the license is with the end user," one source told CRN.

"Microsoft is changing it next year so that the responsibility of that licensing is on the reseller. What that means is, if a company takes out a three-year Office 365 on CSP and they go bust in year two, then the reseller still has to pay the remaining two years.

"If it's a big licensing agreement and they go bust, we've still got to pay Microsoft the remainder of that contract.

"I think more work needs to be done... but in our world it's massive because, for the margin involved, why would we take the risk?"

Another partner also told CRN that they had heard about these pricing changes, adding: "This is of course concerning. The annual commit requirement also allows less flexibility in terms of pricing accommodation for starters and leavers.

"We're talking to our CSP providers at the moment to seek how they can help us de-risk, if this does come into force."

Microsoft last week published a blog post announcing that it would give partners until January to implement the changes required for NCE.

In its CSP operating guide, it states that partners can cancel "within the first 72 hours after the initial order or term renewal" but goes on to say that there will be "no cancellation available and no prorated refund" after that time and that the partner will be "billed for the remainder of the annual term if monthly billing was chosen".

Michael Frisby, managing director of Microsoft CSP Vuzion (pictured), explained the changes in more detail and said: "The difference is, on legacy CSP you could cancel the subscription without any early termination penalty.

"What's been taken away is that ability to cancel early without an early termination penalty. If someone cancels on month two of a 12-month term, Microsoft is still going to send you the next ten months' worth of bills.

"There has been a lot of pushback globally in the channel and we've been having conversations about that. This insolvency issue is one of the hottest topics there is. If the company goes insolvent then yes, the way NCE is written today, the reseller is responsible for any remaining months' worth of credit.

"It is a very significant change and, from a business perspective, a lot of IT resellers in this country are relatively small businesses, they don't have big finance teams that can go and credit check every customer and make sure that that customer is credit worthy. It's putting that credit risk onto the channel more so than it ever has."

CRN contacted Microsoft but did not recieve a response by the time of publication.