Microsoft To Let Partners Handle Office 365 Subscription Billing

Office 365 Worldwide Partner Conference

The move will eliminate a point of friction that has existed between Microsoft and some solution providers since Office 365 launched a little more than a year ago. Until now partners have only been able to play an "adviser role" in Office 365 sales while Microsoft billed customers directly for Office 365 subscriptions and paid back to "adviser" partners a margin on subscription fees.

Some partners said not allowing them to bill clients for the Office 365 service, which Microsoft hosts, interfered in the solution provider-customer relationship. Partners that provided services around Office 365 had to bill their customers separately from the subscriptions, creating unnecessary paperwork and confusion.

[Related: Q&A: Microsoft Channel Execs Outline Windows, Cloud Opportunities For Partners ]

The initial Microsoft decision to have a direct billing relationship with customers was based on the need to be sure Office 365 worked as advertised, said Kirk Gregersen, general manager of Microsoft Office marketing, in an interview.

While Gregersen didn't disclose Office 365 sales, he said it's on track to be Microsoft's fastest-growing business product. And about 75 percent of the subscriptions have been sold or deployed with a partner involved.

About 50 percent of the 50,000 solution providers in the adviser program that have been working with Office 365 are what Gregersen described as "born-in-the-cloud" solution providers who have built new business models around cloud computing.

But the other 50 percent are more traditional resellers, many of which wanted to sell the Office 365 subscriptions and bill customers directly. Gregersen said that fits better with their business models, including paying their sales staff based on top-line revenue.

Microsoft, Redmond, Wash., is launching the Office 365 Open program under which partners can buy Office 365 subscription keys from a price list, sell subscriptions to customers and bill them for the service. That's the approach Microsoft offers channel partners for most of its software products.

"They can package up their own services with the subscriptions on their invoices," Gregersen said. "And they can recognize more top-line revenue. We know that for our 'Open' partners, this is their lifeblood. This will have a huge impact."

"This will really transform how [managed service providers] can sell Office 365 to their clients," said David Geevaratne, president and co-founder of New Signature, a Washington, D.C.-based solution provider and Microsoft Gold certified partner.

New Signature's midsize and large customers get Office 365 through enterprise agreements with Microsoft, but small customers had to pay using credit cards, Geevaratne said. His company had to spend time helping those customers manage their accounts rather than providing services with more value. "Now I can take that burden off the customer," he said.

"Microsoft has listened," he said, noting that some partners weren't happy with the adviser option. "This demonstrates Microsoft's continued commitment to the channel."

Microsoft is developing an Office 365 SKU and price list, Gregersen said, but he would only say that the "Office 365 Open" option would be available in the current fiscal year ending June 30, 2013.

PUBLISHED JULY 9, 2012