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Microsoft Raises Eyebrows with Plans to Sell Azure Cloud Services Directly to SMBs

The plan to let smaller customers buy cloud products and services directly could impact partners.

Jeffrey Burt

January 24, 2019

5 Min Read
Microsoft Raises Eyebrows with Plans to Sell Azure Cloud Services Directly to SMBs
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Microsoft is making it easier for many small and midsize businesses to buy Azure and third-party cloud services directly from the company — a move that’s sure to rankle some channel partners.

In a note on the Microsoft licensing website, the company introduced its new Microsoft Customer Agreement (MCA), which the company says is designed to streamline the purchasing process for customers who want to buy Azure services. Once it goes into effect in March, the MCA will replace current Azure customer purchasing agreements and allow SMBs to buy services either through an Azure representative or an online portal.

The digital agreement also comes with an array of billing, cost, subscription and account-management features. The goal is to address the demands of customers that want more control over what services they buy. The MCA will replace the current ways – including the Enterprise Agreement and Azure-only Server and Cloud Enrollment plans – that many customers now use to buy Azure services.

However, the MCA doesn’t mean that SMBs will no longer be able to lean on channel partners. In an online FAQ sheet, Microsoft says that if customers “want a partner-managed service instead of managing them yourself, or if you want additional partner services or tools, consider purchasing through a Cloud Solution Provider partner. If you want to buy directly online, you can do that through Azure.com.”

In addition, in the notice about the MCA, Microsoft says partners will “play a critical role in this new commerce model. They’ll continue to provide customers with upfront assistance, offer value-added services, and deliver differentiated solutions combined with Microsoft products and services. Our partners will be foundational in helping our customers to innovate and thrive.”

But the focus of the new purchasing agreement is to make it easier for SMBs to buy Azure services directly from Microsoft.

“Eligible customers can move Azure purchases to the Microsoft Customer Agreement and Azure portal at their enrollment’s renewal,” according to the FAQ sheet. “New customers that want to purchase only Azure services will also do so with the help of a Microsoft sales representative through the Microsoft Customer Agreement. Your Microsoft representative will be your primary contact for purchasing Azure services through this new way to buy. Your partner will continue to support you with value-added presales services and post-sale solutions for your Azure services.”

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Liftr Cloud Insights’ Paul Teich

Paul Teich, principal analyst with Liftr Cloud Insights, says the new MCA will probably help Microsoft improve its relationship with SMB customers that are comfortable enough managing their own Azure footprints. Those that are can use the online portal with its simplified cost management, billing and invoicing, or work with Microsoft directly, Teich told Channel Futures.

“This should reduce friction for Azure-savvy SMB customers who can consume Azure directly, and will have little impact on those who don’t,” he said. “Microsoft will get a closer relationship to those savvy customers, which will hopefully make Microsoft more responsive to its customers. It will certainly give Microsoft more direct feedback on what IT savvy SMBs want from Azure.”

It appears to be a play for the midmarket, “with little impact to small businesses who are likely to continue to purchase through the channel and more impact for larger customers that have or can train Azure certified IT staff,” Teich said.

The MCA is part of a larger effort by Microsoft to improve how customers and partners buy products and services, according to the Microsoft notice. In 2017, the company began the push to modernize the buying experience, and in October, it introduced a number of changes to its …

… volume licensing programs. Now Microsoft is putting a focus on Azure services.

The MCA includes a single catalog for SMBs that features first- and third-party Microsoft products and services in a new marketplace environment; a new 11-page MCA that is accessible and stored digitally; and greater consistency in the purchasing experience whether the customer buys a product or service directly from Microsoft, through the web portal or via partners.

“The Microsoft Customer Agreement is a perpetual contract that doesn’t expire for transactional purchases,” the company said in the FAQ. “The agreement is already used for purchases made via the Microsoft Store for Business. It’ll now also be used for Azure transactions completed directly with Microsoft.”

Customers eligible to adopt the MCA will receive an email from Microsoft when their licensing agreement comes up for renewal. They also will be contacted by a Microsoft sales representative.

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Enderle Group’s Rob Enderle

Microsoft finds itself in fierce competition in the crowded and fast-growing public cloud space. Gartner analysts predict the global market for public cloud services will jump more than 17 percent in 2019, surpassing $206 billion, compared to less than $176 billion last year. At the same time, the company is a distant second in the space behind Amazon Web Services, which Synergy Research Group analysts said owns about one-third (34 percent) of the market. Microsoft’s market share is about 15 percent.

It’s this competition with AWS that is driving the new MCA, says Rob Enderle, principal analyst with The Enderle Group. Amazon has always chosen direct selling with its similar offerings, Enderle told Channel Futures.

“Azure is very focused on creating a strong counter to AWS,” he said. “I doubt [the impact on the channel] is huge. The issue is a counter to Amazon, which regularly bypasses the channel. This move isn’t anti-channel; it is anti-Amazon.”

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