Partners Cheer ‘Substantial’ Microsoft Marketplace Fee Cuts

Solution providers say Microsoft’s reduction in commercial marketplace fees from 20 percent to 3 percent should result in more interest from partners in offering services and applications via the marketplace.

Solution providers say that Microsoft’s move to slash commercial marketplace fees will provide a major boost to profitability while enhancing interest among partners in offering their services and applications through the online marketplaces.

This week, the Redmond, Wash.-based company said it has reduced commercial marketplace fees on transactable offers to 3 percent, down from 20 percent previously. Microsoft, which made the announcement in connection with its virtual Inspire 2021 partner conference, said that 20 percent has been the “industry standard” for commercial marketplace fees.

[Related: 5 Big Partner Announcements At Microsoft Inspire 2021]

Reed Wiedower, global alliances leader and CTO for the Cognizant Microsoft Business Group, said in an email that the marketplace fee reduction to 3 percent was probably “biggest” of the Inspire announcements this week “because the impacted audience is much broader than the enterprise space.”

For some time now, major online store providers have charged relatively high fees “because they were able to get away with it,” he said. But as those platforms have matured, developers have begun to question the system of “platform holders making money without providing additional value,” Wiedower said.

Microsoft competes with a number of companies in the cloud marketplace arena including AWS and Google.

“By lowering the fee to 3 percent, Microsoft has planted a flag in the ground to indicate that they are broadly supportive of developers, which includes a whole host of ISV partners,” Wiedower said.

Microsoft has shown that it’s more interested in allowing organizations to acquire applications and manage them via their preferred mechanism than it is in dictating to the market what should and should not be done, Wiedower said.

The 3 percent fee is “so much lower than competitors that I feel like a lot of shops are going to develop for Microsoft’s platform first and only later think about the other ones—at least until they too become as developer-friendly [as Microsoft], which would be great for all parties,” he said.

Microsoft’s marketplace storefronts include the Azure Marketplace, which features consulting services and applications, and AppSource, which focuses on business applications.

Even for business purchasing, “people are going to the web first,” said Glenn Gruber, senior digital strategist at Blue Bell, Pa.-based solution provider Anexinet. “This [Microsoft marketplace] is another step in that direction.”

With the reduced marketplace fee, “any opportunity to retain more margin is great,” said Gruber, whose company offers services through the Microsoft marketplace such as a workshop on architecture modernization.

Dropping the commercial marketplace fee from 20 percent to 3 percent is a “substantial” decrease that will bolster profitability for partners, said Rajeev Agarwal, CEO of Redmond, Wash.-based solution provider MAQ Software, which offers services in Microsoft’s marketplace including a three-week assessment for Azure cost optimization.

“I think it’s a beneficial move for partners and shows good faith by Microsoft in its partners,” Agarwal said. “The more they invest in their partners, the more their partners are going to sell [in the marketplaces]—more Power BI, more Azure services, more consumption.”

Matt Scherocman, CEO of Mason, Ohio-based solution provider Interlink Cloud Advisors, echoed the sentiment, saying that he’s “excited” about Microsoft dropping the fees in the commercial marketplace.

“I think it highlights their commitment to building out the marketplace and welcoming a diverse set of solutions,” Scherocman said. “This will definitely cause us to invest more of our efforts in marketplace.“

At Inspire, Microsoft reported that momentum has already been growing in its commercial marketplace, with the number of transactable applications now up 70 percent from a year ago. More than 30,000 apps and services are now available in the commercial marketplace, and 4 million shoppers engage with the marketplace per month, Microsoft said.

With the fee reduction, “any movement to increase the number of partner solutions into the marketplace and expand the ability to sell in marketplaces is a good move,” said Ric Opal, principal and national GTM and strategic partnerships leader at Oak Brook, Ill.-based BDO Digital. “The more solutions that exist will further drive the expanding footprint of Microsoft’s cloud. Reducing the marketplace fees should entice more developers who maybe have not previously published in the Microsoft marketplace to do so.”

The move may also encourage partners to provide solutions in the marketplaces that are aligned with Microsoft’s new industry clouds, Opal said.

“Clients require solutions that are tightly aligned to their industry’s processes, regulations and business outcomes,” he said. “I think that the industry clouds, coupled with low marketplace fees, will fuel growth for partners and for Microsoft.”

Charlotte Yarkoni, chief operating officer for cloud and AI at Microsoft, said during Inspire that the company’s commercial marketplace presents a massive growth opportunity for partners.

“Our commercial marketplace is the channel to scale your solutions to millions of customers,” Yarkoni said. “And this marketplace exists only for one purpose—to help you scale and connect with customers.”

Opal said that he’s seen other strong moves by Microsoft related to the commercial marketplace as well, particularly around making the marketplace easier for partners to use. The process is “a bit more seamless now,” he said.

“They’ve been refining the places that their partner channel needs to interact in order to be able to effectively sell in those marketplaces,” Opal said.

Ultimately, Microsoft’s commercial marketplace offers partners another avenue for finding new business, said Tony Fischer, Microsoft alliance leader at New York-based LogicalisUS.

“It’s a great platform for us to publicize and showcase the solutions and offerings to the public market and Microsoft sellers for what Logicalis is bringing to market and capable of delivering across our consulting and managed services platforms,” Fischer said. “While we haven’t seen a tremendous amount of business opportunity to date, I also think the market is still learning how to leverage this equally in their pursuits for relevant solutions to achieve their outcomes.”

In another announcement related to its commercial marketplace at Inspire this week, Microsoft said it plans to allow marketplace app publishers to set one price for customers and another price for preferred cloud service provider (CSP) partners. The change is planned to debut in the fall.

The move will provide partners with margin up front and allow partners to mark up prices when reselling to customers outside the commercial marketplace, according to Microsoft. Publishers can develop their partner channel in the CSP program and compensate partners for new sales, Microsoft said.

Addressing ISVs at Inspire, Yarkoni said that “this capability helps you access resellers across the globe.”

“It works by allowing you to share margin with resellers and offer your solutions through their storefronts,” she said. “Everyone wins. You get greater reach, cloud service providers get a broader solution offering and customers get greater flexibility and choice.”