Microsoft to Cut Online Services Advisory Partner Commission

All that good karma Microsoft (MSFT) earned in 2012 when it ceded to partners’ wishes and granted them the ability to directly bill their end customers may well slip away later this month when partners find their cloud commissions cut.

The cuts will happen under the Microsoft Advisor Enterprise Agreement Deploy volume licensing program and will have an effect on the fees partner collect from selling Office 365 and Exchange Online, as well as other Microsoft cloud services.

Microsoft’s foray into the cloud over the last few years has had some great successes with Office 365, Windows Azure and others, but the Redmond-based company’s track record with channel partners has been stained by several ill-advised decisions. Cutting partners’ commissions for selling Microsoft cloud services is simply the latest poor decision made by the company.

The price cuts will vary on the service. Some partners may see up to a 50 percent decrease in commissions, whereas Office 365 volume licensing commissions will face a 15 percent cut. Hardly insignificant, particularly for larger volume deals that could see huge commission reductions.

Partners aren’t sitting idle in the face of this decision. Some have been quite vocal about their displeasure. And that’s not surprising. Not only will partners potentially make far less on cloud deals while doing the same amount of work, Microsoft has made four changes to its partner commissions in the last two years.

As Microsoft continues to make gains and increase its business in cloud, it has worked to sell through its channel partners while also competing directly with those partners by selling directly. It’s a go-to-market model that has been criticized, particularly by those being directly affected by it.

This latest change to the way Microsoft rewards partners for sales calls into question the company’s commitment to the channel, and with such a quick erosion of margins, this could lead to some Microsoft resellers jumping ship and going to Microsoft’s competitors. If enough leave to sell the likes of Google Apps and others, it could be a huge blow to Microsoft’s business.