Tech

Microsoft postpones shift to cloudy subscriptions

Microsoft has indefinitely postponed the date on which its Cloud Solution Providers (CSPs) will be required to sell software and services licences on new terms.

Those new terms are delivered under the banner of the New Commerce Experience (NCE). NCE is intended to make perpetual licences a thing of the past and prioritizes fixed-term subscriptions to cloudy products. Paying month-to-month is more expensive than signing up for longer-term deals under NCE, which also packs substantial price rises for many Microsoft products.

Channel-centric analyst firm Canalys unsurprisingly rates NCE as better for Microsoft than for customers or partners.

It’s just taking us a little longer to onboard all of this community to make sure that they can transact

Partners fears NCE because it can leave them on the hook if end user organisations don’t pay their bills. CSPs would prefer Microsoft – which rakes in $192 billion annual revenue – wear the risk of that happening, rather than the smaller businesses in the channel.

Microsoft didn’t make NCE deals immediately compulsory, instead setting a July 11 deadline after which existing deals could not automatically be renewed, and CSPs would instead be required to bring customers onto the NCE.

On Wednesday, Microsoft cancelled that deadline. An announcement posted to Microsoft’s Partner Center “extended indefinitely the previously announced July 11 end of auto-renewals of legacy CSP subscriptions.”

“Though our goal is still for partners to migrate legacy subscriptions to new commerce before end of term, we have made a business decision to continue supporting the legacy auto-renewal functionality beyond July 11,” the announcement states.

The extension of the deadline is not the end of the matter, because in 2023 Microsoft will stop paying monthly incentive rebates to partners that maintain active legacy subscriptions.

That means CSPs won’t be paid, giving them more incentive to shift customers to NCE.

Hence the post’s exhortation: “All CSP partners are encouraged to complete migrations from legacy to new commerce as soon as possible.”

Microsoft’s announcement doesn’t indicate why it made the change to the deadline, nor when it might be replaced.

But Microsoft may have revealed that reason two months ago. On its Q3 earnings call, CFO Amy Hood said “licensing revenue across both the Office and Server businesses was more negatively impacted than expected due to the transition from our open licensing program to our cloud solution provider program.”

“It’s just taking us a little longer to onboard all of this community to make sure that they can transact the way they want to in the program,” she added.

Hood predicted Microsoft’s Q4 results would record more pain from the transition.

The announcement of the indefinite extension to legacy license renewals came a month before the end of Microsoft’s Q4. The deadline itself would have come 20 days before the end of that quarter.

Microsoft may therefore have just bought itself 20 extra days of free and easy renewals, without customers or CSPs worrying about the NCE – and by doing so plumped the books for Q4.

But CSPs are still on notice that future paydays will slip away if they don’t move customers to NCE. That surely means that, like it or not, customers will be asked to sign up for the scheme soon. ®


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