Microsoft Irritates MSPs with Office 365 Commission Changes

Scott Calonico

microsoft smallAgainst a backdrop of widespread apathy regarding Windows 8, Microsoft have made a couple of other decisions that could reasonably be described as “misguided.”

In case you've forgotten, here's what's happened in just the past few months:

  • They have reduced channel commissions on sales of Office 365 by anything from 15 to 50 percent. These commission cuts apply to Exchange Online as well.
  • They have announced a deal with GoDaddy to allow the Web hosting firm to sell Office 365 to SME customers at a reduced rate.

Microsoft certainly don’t seem too concerned about alienating their MSP partners. When they first launched Office 365, they didn’t offer channel sales at all. They only gave in and allowed MSPs to directly bill clients in 2012. Now, just over a year later, they are making this deal half as lucrative (in some cases) for MSPs.

Meanwhile, Google are going in the opposite direction. After a couple of price cuts, they are now offering far more flexible billing, allowing customers the choice of a true pay-as-you-go option for those who want flexible or experimental cloud deployment.

Microsoft or Google?

So will this move push more MSPs in Google’s direction? Ultimately it will come down to end user preference. Microsoft always have the benefit of offering the applications that users are already familiar with. While Google Apps can integrate with these, there is always something of a “square pegs into round holes” feel about such a setup. Additionally, Google Apps doesn’t offer up-to-date licences for Microsoft’s Office suite as part of the deal.

Microsoft are winning the race at the moment, if two recent surveys are truly reflective of the situation on the ground. 66% of top MSPs sell Office 365 (according to MSP Mentor), while only 30% sell Google Apps (according to Talkin’ Cloud). Google Apps does, therefore, have some ground to gain.

It’s fair to say that MSPs who move in Google’s direction will be doing so on principle as much as anything else. For small MSPs, the commission stream earned from reselling these cloud services pales into insignificance compared to the income from the actual implementation and support work, so the platform is largely immaterial. However, a commission cut of up to 50% is probably enough of a slap in the face for many people to at least consider the alternatives.

Adding Insult to Injury

The GoDaddy deal is an additional insult. This is effectively Microsoft and GoDaddy trying to take MSPs “out of the loop” entirely. It’s not the first time this strategy has been tried. In fact, it’s essentially the pre-2012 Office 365 strategy all over again, albeit with a third-party now involved.

Microsoft enjoy a large enough market share to display this kind of arrogant complacency, but it’s not without its dangers. With Windows XP support coming to an end very soon, and Windows 8 widely viewed as Vista Mark Two, small sites may decide to do something completely different: Macs supported by a Google Apps back-end, for example.

At times it seems that Microsoft don’t appreciate they’re actually on rather shaky ground.