Microsoft Channel Chief on Internal Use Rights: ‘We Can’t Afford This’

Microsoft channel chief Gavriella Schuster on Thursday addressed the company’s decision to eliminate free internal use rights (IUR) for its software, saying the shift to cloud has magnified the costs to an unsustainable level.

“We can’t afford this,” Schuster said during a prerecorded virtual briefing in advance of next week’s Microsoft Inspire, the company’s annual global partner conference.

Schuster recalled that she was on the team responsible for coming up with IUR in the mid-1990s to ensure partners were using the company’s products, hence making them more familiar with the software.

“At that time nobody even knew what our stuff did,” she recalled, adding IUR was put into place as an “opportunity cost.”

As Office, Dynamics and Microsoft’s various infrastructure and applications have pivoted to a cloud-based subscription model, it has increased the company’s cost of offering the software to its partners, Schuster said. Moreover, 7,000 new partners join the Microsoft channel community every month, having an exponential impact on the program’s cost.

“We didn’t really think that through very much, until recently, when the bills were getting very big,” she said. “We can’t actually afford to run every single partner’s organization all around the world anymore, because it’s not free.”

While the usage rights will remain intact for one more year, thousands of partners are protesting the change, many of which say it will have a devastating impact, as reported earlier this week. More than 5,300 people have signed an online petition as of midday Thursday, up from 3,000 late Tuesday. Schuster, along with David Willis, corporate VP for Microsoft’s U.S. One Commercial Partner Group, and Brad Smith, company president and chief legal officer, will get an earful from partners at next week’s Inspire conference in Las Vegas.

The International Association of Microsoft Channel Partners (IAMCP) is soliciting partner feedback and will address the issue with during its annual executive meetings at Inspire, said Jeffrey Goldstein, president of the IAMCP and managing director of Queue Associates, a Microsoft gold partner that specializes in Dynamics.

IAMCP’s Jeff Goldstein

“We will collect feedback, quantify it and go back to Microsoft with it,” Goldstein said.

A committee of the partner association, called the Microsoft IAMCP Strategic Team (MIST), intends to investigate the issue, according to an email sent to members yesterday.

“We feel it’s important that IAMCP leadership not rush to any conclusions until we have a chance to meet with Microsoft leaders at Inspire, in order to both seek to understand what’s driving these changes and what we can expect as partners,” the email stated. “We also know an important part of our job is to advocate on behalf of you and be a unified global voice to Microsoft about how these changes will impact our businesses.”

The co-author of the message, Randy Steinle, VP of Microsoft partner Onsupport, told Channel Futures he didn’t want to guess whether Microsoft will offer some form of concession to partners who will be adversely affected by the loss of IUR.

Onsupport’s Randy Steinle

“There is no way to predict what Microsoft will decide,” Steinle said. “Our job is to listen, seek to understand, help provide clear communication to our members and advocate on their behalf.”

Microsoft has come up with compromises to changes that were poorly received in the past, Goldstein recalled. For example, when then-channel chief Allison Watson revamped the Microsoft Partner Network a decade ago, the company ultimately relaxed certain requirements, he said.

Goldstein said he hasn’t heard from Microsoft about the IUR changes, but he urged partners not to presume that there isn’t any middle ground.

“It could be how they are negotiating this,” he said. “The way you negotiate is you take everything away, and then you give back a little until people are happy.”