Microsoft Partners Offer Mixed Reactions On The End Of Internal Use Rights

Microsoft’s plan to end the program is sparking a range of responses from partners, with some seeing the move as necessary and others airing concerns.

Microsoft announced it will stop offering free product licenses for internal business use by partners as of one year from now, prompting mixed reactions in the partner community.

The plan to end Microsoft's internal use rights (IUR) benefit was disclosed just ahead of the company's Inspire 2019 partner conference next week. Some partners told CRN they understand why the move is necessary, while others expressed concerns, pointing to potential issues such as diminished testing of Microsoft products going forward.

[Related: Microsoft Azure: 5 Key Takeaways On The Partner Opportunity]

In a July 3 update to its Microsoft Partner Network Programs Guide, the company disclosed that changes are on the way for product licenses that have been offered in the Microsoft Partner Network--including in conjunction with partner competencies and Microsoft Action Pack subscriptions. Microsoft Action Pack subscriptions (MAPS) combine software with support and other benefits for businesses.

"Currently, the licenses allow partners to access and use the products for internal business purposes,” the updated document from Microsoft said. “We will retire product licenses for internal use purposes on July 1, 2020."

After that date, "product licenses offered through the Microsoft Partner Network may only be used for business development scenarios, including demonstration purposes, solution/services development purposes, and internal training purposes," Microsoft said in the document.

The announcement has caused a "major uproar" among some partners posting in online communities, said Travis Adair, principal partner and vice president at Columbia, Mo.-based InfiniTech Consulting, in an email to CRN.

"Many of the other Microsoft partners I network with, especially the smaller partners, plan on abandoning their MAPS subscriptions moving forward," Adair said. Without the internal use rights benefit, "they just do not see the value proposition of the offering," he said.

"Initially, I was taken aback by the announcement as well. I have been utilizing the MAPS for 15 years or more,” Adair said. “However, upon further analysis, I realized that the change would actually have very little business impact for us. We actually use very little of the on-premise [software] internally.”

A Change.org petition expressing disapproval of Microsoft's move to end the IUR program had received more than 1,500 signatures as of this writing.

While the announcement "does feel like Microsoft is devaluing their partner relationships, I feel like it is getting more backlash than is warranted," Adair said. "To me, the announcement is not a surprise considering the direction Microsoft has been heading with abandoning their on-prem solutions in favor of the cloud and subscription-based models."

Kelly Yeh, president of Chantilly, Va.-based Phalanx Technology Group, said he’s concerned that a diminished ability to test Microsoft products may be the result of this move by Microsoft.

“Partners are the biggest advocates of their products,” Yeh said in an email to CRN. "Small partners like Phalanx use the internal use licenses to deploy and test in real life scenarios systems we are proposing to our clients. Microsoft more than recoups the lost revenue from partners’ internal use licensing by keeping thousands of us on their platforms and partners evangelizing the technology."

In addition, "there are always challenges to upgrading and migrating platforms that can only be replicated in production environments," Yeh said. "Without having those first-hand 'war wounds,' it affects a partner's ability to properly scope a project and set customer expectations. In the end, it won’t affect our status to remain a partner with Microsoft, but it will affect our first-hand experience with some technologies."

In a statement provided to CRN on Monday, a Microsoft spokesperson said that “we are continually looking at where and how to make investments in our partner business to create the most value for our partners.”

“We outlined our approach to these investments in a recent blog post, ‘Investing in partner success and growth.’ Like any business, we need to prioritize where we are going to commit funds,” the Microsoft spokesperson said in the statement.

“In this case, we made the decision to invest more heavily in programs and resources that support business growth, helping partners connect with more customers, other partners, and Microsoft sales teams. One of the trade-offs is changing our approach to providing product licenses for internal use,” the Microsoft spokesperson said. “While we understand this may be an adjustment for our partners, we believe the evolution of our partner business investments will allow partners to better capitalize on the cloud opportunity.”

Microsoft has "always invested heavily with their partners. I view this as a re-balancing of their investments as our mutual priorities change," said Ric Opal, principal at Oak Brook, Ill.-based SWC Technology Partners, a BDO USA LLP company.

"The cloud was not a consideration as it relates to partner investments at the inception of the IUR benefit. Our worlds are different. The investments need to match the needs going forward,” Opal said.

Many partner organizations have historically used the value of the Microsoft Partner Network "primarily as a low-cost way to acquire software, rather than as a brand differentiator. So it’s a reaction to that, to be sure," said Reed Wiedower, CTO of Washington, D.C.-based New Signature, in an email to CRN.

"The one thing that I’m unclear on is whether this change will encourage the type of behavior I’d love to see more of: namely, partners who can support the entire Microsoft stack, especially on the SaaS side," Wiedower said. "Partners find the bar to entering a new space (whether Dynamics 365 or Azure) to be lower if IUR is part of the mix – and I’d hope that Microsoft takes that into account when they think about the long-term value of providing IUR in any capacity."

For larger partners such as New Signature, which are already spending hundreds of thousands of dollars on Microsoft software, the internal use rights change "won’t be as large of an impact," Wiedower said. "Ultimately, as a Gold partner, and an Azure Expert MSP, we would be better served in the market if there were fewer shops that were able to claim Gold status – and the IUR change is part of a broader set of steps designed to help ensure when a customer needs a 'great' Microsoft partner, that it’s clear who can stand out."

The move follows changes in the Microsoft Partner Network that were revealed by the Redmond, Wash.-based company in May. The changes include the introduction of new ways for partners to differentiate so that customers understand their expertise; increasing partner access to marketing resources and services; and providing more ways for partners to reach customers to sell their services and applications.

The market opportunities are significant as businesses and organizations continue to move to the cloud, said Toby Richards, general manager of Microsoft’s partner co-selling and go-to-market programs for its One Commercial Partner organization.

“Partners that provide value-added services will see strong margins when they focus on specialized business applications deployment and projects that require planning, implementation, integration, security and compliance,” Richards said in the recent blog post.

Meanwhile, Microsoft has also disclosed it will soon be ending the availability of on-premises product support incidents that come as part of silver and gold competencies, as well as in the Microsoft Action Pack.

"Starting August 1, 2019, product support incidents will no longer be available. Partners already enrolled in Microsoft Action Pack, silver or gold competency prior to August 1, will retain the product support incidents they received through their current enrollments," Microsoft said in its updated document.

"Not having the safety net of the on-premise support incidents is a little disturbing, but we rarely used these anyway," Adair said.