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Making the right choice: Direct vs. Indirect CSP—what’s best for your business?

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When it comes to procuring Microsoft CSP subscriptions, IT service providers often face a critical decision: should they go direct to Microsoft, or partner with an Indirect Provider? Choosing between a direct and indirect approach can significantly impact your operational flexibility, margin potential, and the quality of service you provide to your customers. For organisations with a considerable investment in cloud services, particularly those with annual expenditures exceeding $300,000 AUD, a strategic evaluation is essential.

Elevating your indirect provider’s value

Opting for an indirect model offers more than financial incentives—it’s a strategic engagement that extends your operational bandwidth. Direct procurement is indeed lucrative, offering margins that reach up to 20% for Microsoft 365, 35% for Dynamics 365, and 15% for Microsoft Azure — which can be compelling for businesses with the infrastructure to support direct dealings with Microsoft.

However, indirect partnerships are not solely about the margins. They’re about enriching your business with expertise and support that catalyse your growth. Indirect Providers can offer margins around 10-19% for Microsoft 365, but they should be delivering a holistic package: from technical support and licensing management to training programs which are designed to offset the slightly lower margins. How does your provider stack up in these areas? Are they truly adding value the beyond basic margin considerations?

Considerations for adopting a direct model

Embracing a Direct-Bill CSP model signifies a step forward for your business. It signals readiness for a direct relationship with Microsoft, maturity in your business and the capability to manage and thrive amid complex vendor ecosystems. There are some considerations for this shift, including:

Service desk integration: Does your service desk seamlessly integrate with your CSP operations and will you be able to effectively provide level 1 customer support CSP customers?

Internal processes: Are your billing and service delivery processes robust and automated?

Automated provisioning: Are you providing a self-service portal for your customers to provision subscriptions and is you finance department equipped to be able to efficiently manage customer billing and provisioning tasks?

Skill set: Is your business making the necessary investments in your vendor relationship with Microsoft?

These elements become the foundation around your organisations capacity to manage a direct CSP model, enabling a shift that becomes a strategic move rather than a simple transactional exchange. While such a shift involves considerations, the journey need not be daunting. Investing in the right relationships and partners is key and the path becomes less about overcoming challenges and more about unlocking opportunities to empower your business’s potential.

Strategic engagement with your indirect provider

If you have made the decision to stay with your Indirect Provider, communication is key to help you unlock preferential terms and amplify your value proposition. How can you ensure you’re not just getting a competitive margin but also receiving substantial support and service benefits? Effective providers go beyond transactional relationships, some things to consider when working with an Indirect Provider:

Technical and sales support: Does your provider help with customer onboarding, troubleshooting, and proactive sales strategies?

Billing support: Does your provider make it easy to reconcile their bill and is there only one bill for all your customers, reducing the time it takes to bill your customers?

Training and development: Are there opportunities for your staff to learn and grow, keeping up with new Microsoft products and features?

Marketing and business development: Some providers offer co-marketing funds or platforms, which can go far in helping you to expand your customer base and increase sales.

Engage in dialogue with your Indirect Provider about these critical services. They are not just add-ons but components that differentiate your business from an average service provider.

The power of choice

The critical decision to partner directly with Microsoft or to collaborate with an Indirect Provider must be informed by evaluation of your business needs, aspirations, and capabilities. Targeting a minimum 18% margin from your indirect partnerships – significantly above the standard 10-14% – is not only about financial optimisation but also about ensuring that the value provided comprehensively aligns with your business needs and strategy.

By understanding and negotiating the specifics of these partnerships, you can significantly enhance your business’s efficiency and profitability.

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