Introduction to CSP model


I'm starting a new post series to uncover a new hot topic for Microsoft called "Cloud Service Provider" program (CSP). CSP is a new way to sell Microsoft public cloud services for Microsoft partners. This is a hot topic for all our partners, rolling out at scale this year. More details are below.

What is CSP?

Here is the CSP definition from the official website:

The Microsoft Cloud Solution Provider program enables partners to directly manage their entire Microsoft cloud customer lifecycle. Partners in this program utilize dedicated in-product tools to directly provision, manage, and support their customer subscriptions. Partners can easily package their own tools, products and services, and combine them into one monthly or annual customer bill.

Before the launch of CSP, there were 3 ways to buy Office 365 or Azure for business purposes:

  1. Direct model – purchase on Microsoft web sites, payment via credit card, monthly, pay-as-you go. Optimal for SMB customers.
  2. Open – purchase via Microsoft Partner, local closing documents, yearly payment. Optimal for Midmarket customers.
  3. EA – purchase via Enterprise Agreement through Large Account Reseller. 3-year commitment with a fixed price. Optimal for Enterprise customers.

CSP combines advantages of Direct and Open models, and adds a layer of added value, provided by CSP partner:

  • Customer pays for the Microsoft Cloud services to CSP partner. CSP partner pays to Microsoft for the consumed services by all its customers.
  • Usually monthly payments are used, based on the amount of consumed resources (pay-as-you-go)
  • CSP partner provides local closing documents for the accounting
  • No commitments or huge upfront costs, great flexibility.
  • CSP partner provides a deployment of services, technical support and billing capabilities. Also CSP partner can add extra added value on top of Microsoft cloud services to differentiate.

Any Microsoft partner can become a CSP partner. It can be a system integrator, ISV or a service provider. The main focus here is on service providers, and there are several reasons for that:

  1. Service Providers are already familiar with monthly licensing payments, because in most cases they have SPLA agreement. CSP is very similar to SPLA.
  2. They usually have great technical support capabilities, and adding a new product to support (Office 365, Azure or CRM Online) is not a tough task for them.
  3. They are able to provide hybrid cloud offers based on their own cloud services (e.g. IaaS based on Azure Pack, licensed via SPLA) and Microsoft public cloud services (e.g. Microsoft Azure, provided via CSP)
  4. Business model of a typical service provider is suited for a large amount of short-term deals, with a revenue outcomes in long-term. This is very different for traditional system integrators, who are focused on long-term large deals.

Good explanation why service providers should join CSP is available here.

CSP is fully aligned with Microsoft cloud strategy. It unblocks a lot of deals in SMB (not all small companies like to pay with credit card), in Midmarket (because a year upfront payment is not that everybody is happy with) and among large enterprises (not all of them have EAs signed, and not all of them are ready to pay upfront).

CSP is a great opportunity for Microsoft partners, because it allows them to differentiate and become true cloud service providers, without heavy investments. Partners make money on rebates and a discounted price lists, so CSP is much more profitable that Open license model. If partners don't currently have a 24/7 technical support unit, they can just purchase a service like BitTitan Concierge.

Partners can sell services like Azure or Office 365 with an added value from their side (great examples – Office 365 from GoDaddy or Azure from Rackspace), or they can create new offers using a "white label" model. White labeled service can have a unique name and technical capabilities, but it can use Microsoft cloud services inside (like custom business solutions, based on Dynamics CRM Online).

Here is a great article about CSP – "Should You Be a Microsoft CSP? 20 Points To Consider".

Direct and Indirect CSP

There are 2 ways to become a CSP partner:

  1. Find a local CSP Distributor and sign an agreement for CSP. This is called CSP Indirect (previously called "2-tier CSP").
  2. Reach your Partner Sales Executive in Microsoft, prepare a business plan with specified sales commitments and become CSP Direct partner (previously called "1-tier CSP").

In CSP Indirect model partner pays to CSP Distributor, and CSP Distributor pays to Microsoft. This is similar to SPLA model. Probably, your SPLA Reseller (company that service providers pay for SPLA licenses to) is also a CSP Distributor. In Russia 2 of 3 SPLA Resellers are CSP Distributors. Here is a good explanation how CSP Indirect works.

In CSP Direct model partner pays directly to Microsoft. This is similar to Large Account Reseller (LAR) model. To become a CSP Direct partner, company must pass all the required credit checks and commit to sell at least 2500 Office 365 seats during the following year. Also if CSP Direct partner wants to sell Microsoft cloud services to a large amount of customers, he needs to deploy billing and automation solutions, such as Odin Service Automation. Cloud purchase process for CSP customers must be smooth and automated.

CSP Direct partners can access Microsoft Partner Center portal and manage their customers there. They can create new customers, assign subscriptions to cloud services, administer these services and create support tickets. Also there is CSP Commerce REST API (CREST API) available. It can be used to automate customer and subscription management, and it allows CSP Direct partners to integrate CSP services to their existing management portals.

CSP Indirect partners don't have access to Partner Center portal or CREST API. Instead of them, they must use custom portal and APIs, provided by CSP Distributor to create and manage cloud service subscriptions.

Common recommendation for traditional Microsoft partners (SIs, ISVs) and small service providers – start with CSP Indirect model as a try. No commitments, minimal investments needed. After a period of time If you'll see, that you are able to make business on it and you are ready to take a commitment for several thousand new Office 365 new seats every year – prepare a business plan and nominate yourself to CSP Direct model.

If you are a large service provider, successfully selling its own cloud services, and you want to build unique hybrid cloud services, not limited by management tools, provided by CSP Distributor, then you can try to start with CSP Direct right away. Anyway – you should discuss both options with your Partner Sales Executive at Microsoft.

Available Cloud Services in CSP

Almost all main Microsoft public cloud services for business are already available in CSP program. Here is the list:

  1. Office 365 business plans and add-ons like Delve Analytics and Customer Lockbox
  2. Microsoft Azure
  3. Enterprise Mobility Suite – includes Azure AD Premium, Intune, Azure Rights Management and Advanced Threat Protection Analytics. Can be purchased as a full suite or separately.
  4. Dynamics CRM Online
  5. PowerBI Pro
  6. Project Online

Bright picture from the nearest future – service provider offers a hybrid cloud service, that includes:

  1. IaaS from local datacenter + VMs and storage in Microsoft Azure, integrated to a single virtual network with a stretched AD
  2. Hybrid Exchange environment. Part of mailboxes is hosted in Exchange 2016 in service provider's environment, another part is moved to Exchange Online, but the whole Exchange environment is fully integrated.
  3. Portal solutions based on SharePoint 2016 in service provider's environment and SharePoint Online, that leverage Project Online, PowerBI and Dynamics CRM Online.
  4. Hybrid unified communications with Skype for Business 2015 Servers, integrated to a local cloud PBX from service provider, and Skype for Business from Office 365
  5. Short-term backup is stored on a SAN in service provider's datacenter. Azure Backup is used for long-term backup.
  6. Office 365 Pro Plus provides a desktop and a mobile version of Office client as a service to 5 devices of every end-user
  7. All end users access these hybrid cloud services securely by using multi-factor authentication (provided by Azure AD Premium). Their devices are configured automatically using Intune. Data loss risks are managed by Azure RMS.

And all these great hybrid cloud services are available from the same service provider – same agreement, same entry point for technical support, great cloud expertise and high quality service standards.

Functionality of all cloud services, except Microsoft Azure, is the same in CSP and other purchasing models. Customer can buy Office 365 via CSP partner, or directly on office.com website – service features will be exactly the same.

But this is different for Azure. Azure was added to CSP much later than other services because of the technical challenged with role-based management model implementation. There are some feature differences between Azure, purchased directly on the azure.com website or through EA (I'll call it "traditional subscription"), and with Azure, purchased via CSP partner. I've described the difference in a dedicated post about Azure in CSP.

Comments (5)

  1. Anonymous says:

    In my previous post I’ve mentioned, that currently there are significant feature differences between Microsoft Azure, purchased via traditional channels (Direct, Open, EA), and Azure CSP. In this port I’ll continue my CSP story and describe Azure

  2. AK says:

    Hello Kirill,
    Thanks for great articles, they are very helpful. I can’t find the one describing allocating test subscriptions (not sure I’m using the right term here) on a per client basis with a monthly credit (I believe it was $250 a month or so). Could you share a link?

    1. There are no test subscriptions in CSP. Partner can use “Integration Sandbox” subscriptions for testing, they are limited to $400/month.

  3. Baker Kong says:

    i am still confused at the indirect csp. it seems that the officially site told us both indirect and direct csp against to Miscrosoft,not for customers. 1st tier–> Ms+direct csp+customer. and 2nd tier–> Ms+indirect csp+reseller+customer. i am doubting what’s the CSP Distributor? i will appreciate if you can explain it to me. thanks in advance!

    1. In CSP Indirect model there are 2 types of CSP Partners – CSP Indirect Distributor and CSP Indirect Reseller.
      CSP Indirect Distributors have direct relationship with Microsoft, they provide support and self-service billing capabilities to their Resellers.
      List of authorized CSP Indirect Distis is available here: http://assets.microsoft.com/en-us/Indirect-CSP-Partner-Approval-Map.pptx

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