Microsoft Partners Protest Decision to End Internal Use Rights

Thousands of irate partners signed an online petition disapproving of the plan.

Jeffrey Schwartz

July 9, 2019

6 Min Read
Fist Raised in Protest
Shutterstock

Microsoft partners are fuming over the company’s plan to stop offering Internal Use Rights (IUR) that have effectively let them use the company’s software with Action Packs at no charge to run their businesses. Thousands of partners from around the world have signed an online petition protesting the company’s decision to “retire” the highly coveted benefit offered with its Microsoft Action Packs.

Partners will have to pay to use Microsoft products to run their businesses, but the company will continue to offer free licenses for demonstrations and software development. The new requirement that partners pay for software licenses goes into effect July 1, 2020.

Starting on Oct. 1, however, Microsoft said it will only offer product licenses that are specific to the partners’ competencies; moreover, starting next month, the company also is doing away with product support offered to partners with silver or gold competencies for incidents with Microsoft Action Packs.

Microsoft quietly acknowledged the benefit cutbacks late last week in advance of the long July 4 weekend and on the eve of its annual Inspire partner conference, which kicks off this weekend. The announcement, posted on the Microsoft partner portal, gave notice of the change.

“Product license use rights will be updated to be used for business development scenarios such as demonstration purposes, solution/services development purposes, and internal training,” according to the announcement.

Asked why Microsoft is taking away such a popular benefit, a spokesperson responded with a statement that the company is shifting its investments to partners.

“Like any business, we need to prioritize where we are going to commit funds,” according to the statement. “In this case, we made the decision to invest more heavily in programs and resources that support business growth, helping partners connect with more customers, other partners and Microsoft sales teams. One of the tradeoffs is changing our approach to providing product licenses for internal use.”

The spokesperson noted that a May 29 blog by Toby Richards, GM of go-to-market programs at Microsoft, pointed to how the company planned to shift its partner investments.

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Microsoft’s Toby Richards

“Partners that provide value-added services will see strong margins when they focus on specialized business applications deployment and projects that require planning, implementation, integration, security and compliance,” Richards noted.

Ben Johnson, CEO and founder of Liberty Technology, a Microsoft silver partner, said in an interview that communications have come out piecemeal and said the IUR announcement before the holiday weekend was vague.

“To just kind of leak it without a whole lot of information is creating a lot of mistrust,” said Johnson, who recently renewed his silver designation, which cost approximately $2,000. “Will that cost go down once these changes go into effect to offset it? They haven’t mentioned that. These benefits are part of the value we pay to Microsoft.”

More than 3,000 signatures appeared on the petition as of Tuesday, primarily disapproving of the move. Microsoft’s decision to rescind the benefits is a sign that the company is looking to squeeze out partners, especially smaller ones, according to comments on the petition and those who spoke to Channel Futures about the move.

Many expressed anger or questioned Microsoft’s commitment to partners. “There is essentially no value in maintaining silver/gold status as we pay for that,” according to a comment on the petition by Pamela Santangelo, CEO of Interpreting Technology. “I always saw the licenses as …

… part of our ROI for the partner program status.”

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Inpora’s Ryan Finnesey

Ryan Finnesey, managing director with Inpora Technologies, which provides Microsoft services to small and midsize businesses, said in an interview that he has spoken with several partners since word of the change started to surface late last week. Rescinding IUL will hurt many of the partners, especially the smaller providers with fewer than 10 employees, Finnesey said.

“A lot of them really relied on these benefits to run their businesses,” he said. “I think that they’re trying to limit the number of partners they have.”

In addition to the cost, partners say the ability to use the software internally at no added cost plays a role in their competency and expertise in the various products. Partners who can’t afford to pick up the tab said they will lose out on the ability to refine their expertise in Microsoft’s products.

“By running it internally, we can dog-food it,” Johnson said. “It’s a lot different when you’re actually using software in your business than it is when you’re setting up a proof of concept or a lab. When you are actually using it in your line of business, you’re not going to see the warts and you’re not going to see the daily pain points.”

Many partners see this as the latest strike from Microsoft to bypass them in favor of distributors or selling direct. Steve Mordue, a Microsoft Dynamics 365 MVP and CEO of gold partner Forceworks, said that might be true, but it also might not be such a bad thing.

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Forceworks’ Steve Mordue

“The whole Microsoft partner network is a legacy construct from a prior time when software was sold and supported a completely different way than it is now,” Mordue said. “Many of the partners are legacy partners that have been around forever. So we get this knee-jerk reaction from many of them whenever Microsoft makes any kind of a move like this. But I don’t think it’s just meanspiritedness. I think it’s Microsoft; [it’s] just one of the levers they’re pushing and pulling on to try and remold their channel into the future.”

Mordue said he will just pay for the software his company uses internally. But he said he’s happy to do so if the benefits are more valuable than IUR.

“I’d rather have the new direction, provided that I’m part of it,” he said.

According to Microsoft’s statement, partners will benefit over the long term.

“While we understand this may be an adjustment for our partners, we believe the evolution of our partner business investments will allow partners to better capitalize on the cloud opportunity,” the company said.

Partners attending next week’s Inspire conference plan to meet with channel chief Gavriella Schuster and David Willis, corporate VP for the U.S. One Commercial Partner Group at Microsoft.

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About the Author

Jeffrey Schwartz

Jeffrey Schwartz has covered the IT industry for nearly three decades, most recently as editor-in-chief of Redmond magazine and executive editor of Redmond Channel Partner. Prior to that, he held various editing and writing roles at CommunicationsWeek, InternetWeek and VARBusiness (now CRN) magazines, among other publications.

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