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5 ways to maximise your CSP profits

Hands shaking over profits

In the fast-paced world of IT services, Managed Service Providers (MSPs) are constantly looking for ways to maximise their profit margin while still delivering quality solutions and services to their customer. One avenue that holds immense potential for bolstering profitability is the Microsoft Cloud Solution Provider (CSP) programs. But how exactly do these programs drive CSP profit maximisation? This post delves into five essential strategies for leveraging the Microsoft CSP program to boost profitability.

Moving to direct-bill CSP, or maximising your margin through your CSP indirect provider

As an MSP, navigating the Microsoft CSP program involves choosing between two primary purchasing avenues: Direct-Bill (procuring licenses directly from Microsoft) and Indirect Reseller (obtaining licenses through an Indirect Provider or distributor). Each option presents distinct advantages and considerations. Refer to the table below for a comprehensive comparison.

Direct-Bill CSP enables MSPs to purchase licenses directly from Microsoft, establishing a direct relationship with the provider. By cutting out the middleman, you can increase your profit margins and have more flexibility in pricing and packaging your offerings. However, managing direct billing requires additional administrative overhead and compliance with Microsoft’s requirements. This option often suits larger MSP’s who have the admin ability required to be direct.

On the other hand, opting for an Indirect Reseller model and working with an Indirect Provider provides MSPs with enhanced support and guidance through the complexities of the CSP program. While your margins may be slightly lower compared to Direct-bill, the time and resources saved by leveraging the expertise of your distributor can outweigh the margin difference. This is a great option if you are a smaller business who may be looking for more handholding or are new to the Microsoft CSP program.

Increased margins (~20% margin for M365, up to 35% margin for D365, and 15% margin for Azure)Requirement of USD$300K annual Microsoft CSP spend minimum, plus an outlay of USD$17,500 for a Microsoft Premier Support Plan
Direct relationship with Microsoft (gives you greater visibility within Microsoft)Reduced handholding with the intricacies of the Microsoft CSP program
Access to the most feature enhanced APIs in any Microsoft CSP platform 
Improved reporting 

Ensure Microsoft CSP billing accuracy

Billing accuracy is essential for maximising your CSP profit. Inaccurate billing can lead to revenue leakage, customer dissatisfaction, and even compliance issues. To ensure billing accuracy, you need robust systems and processes in place.

With Microsoft’s New Commerce Experience (NCE) billing model, billing CSP subscriptions introduces numerous complexities. For instance, a single product may have at least three different prices, contingent on the commitment term and billing frequency. Failing to monitor which price applies to each subscription and neglecting to track expiry dates for potential price increases could result in a loss of up to 16.67% margin on each subscription.

Many MSPs choose not to prorate their billing for customers, aiming to simplify invoicing and minimize administrative burden. However, this practice often compromises billing accuracy and renders reconciliation challenging. Through a synthesis of industry data analysis and our own findings, we observe that MSPs may experience up to a 2% reduction in profit margin solely due to the absence of prorated billing practices.

Automating billing processes with a solution like Xeneth’s MSPlus can streamline invoice generation, reconcile usage data, and identify discrepancies. By leveraging automation and real-time data insights, you can minimise errors and discrepancies, ultimately leading to increased profitability.

Manage Microsoft CSP Price Fluctuations

Navigating Microsoft CSP price variations is a key aspect of maintaining profitability. Prices within the CSP program can be adjusted by Microsoft due to various factors, often due to shifts in currency exchange rates which are assessed every six months. A notable instance occurred in September 2023 when countries outside the US faced increases up to 9%, specifically affecting monthly and upcoming renewals of annual subscriptions. To manage these changes effectively, it’s crucial for MSPs to stay informed and adapt their pricing strategies accordingly, ensuring consistent margins despite the dynamic pricing landscape.

Focus on achieving the relevant Microsoft competencies

Microsoft offers various competencies within the CSP program, each designed to showcase expertise in specific areas such as cloud productivity, data analytics, and security. Achieving relevant competencies not only demonstrates your proficiency to clients but also unlocks additional benefits and incentives from Microsoft.

By focusing on competencies aligned with your business objectives and target market, you can differentiate your offerings, attract new customers, and command higher margins. Investing in training and certifications for your team is essential to staying competitive and maximising your CSP profit potential.

Register Your Deals

Using Co-Sell/Referrals in Partner Center or CRM connectors to share information about your deals gives the Microsoft greater insight into your pipeline (and helps the Microsoft Sales Team build their own at the same time). Doing so also elevates your presence within the Microsoft ecosystem, opens you up to greater opportunities from the Microsoft team and allows you to get help to accelerate the closure rate of your deals at the same time.

Co-Sell also allows you to show any deals that you may be working on with another Partner or Distributor (Partner 2 Partner).

Consider the road ahead

Whether through direct billing, managing billing accuracy, or adapting to price fluctuations, each strategy offers a unique avenue to boost your margins. Regardless, maximising your CSP profit requires careful consideration of billing strategies, a focus on accuracy, and a commitment to achieving relevant Microsoft competencies. With the right tools, automation and support you can streamline your processes and increase your profitability.

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