Microsoft tightens CSP rules, impacting partners, distributors and resellers

Software giant Microsoft has made changes to cloud service provider (CSP) licensing rules, updating the maximum resale price calculation for channel partner agreements.

Changes will come into effect in July, impacting all products and volume licensing frameworks.

Microsoft chief partner officer and corporate vice president, global partner solutions, Nicole Dezen said these changes would streamline customers when it comes to monthly billing support and its focus on cloud and AI.

“At the same time, we will deepen our investment in the partners who are delivering transformational impact with customers, aligned to our strategic imperatives,” she said. 

In FY26, Microsoft will have a tighter grip on partners by monitoring and measuring any CSP change of channel partner (“COCP”) activity regularly.

Revenue, tenants, and subscriptions from CSP (cloud service provider) entities acquired, merged, or otherwise transitioned are explicitly monitored.

Microsoft doesn’t pay incentives for revenue, tenant, subscription movements between CSP partners, as incentives are not intended for CSP partner-to-CSP partner transfers. This doesn’t apply when Microsoft deauthorises a CSP partner or when a CSP partner goes out of business.

Change of channel partner activity, as determined solely by Microsoft, might result in adjustment of incentive payments, claw back of previously paid incentives, and/or termination of the applicable incentive.

Solution area for incentives eligibility is defined as:

• Modern Work incentives: Solutions Partner designation for Modern Work or Security
• Business Applications incentives: Solutions Partner designation for Business Applications
• Azure incentives: Solutions Partner designation for Data & AI (Azure), Digital & App Innovation (Azure), or Infrastructure (Azure)

Starting 1 October 2025 partners will be expected to meet authorisation requirements. This will apply to direct bill partners, distributors (formerly indirect providers), and indirect resellers. 

Microsoft said it wants to provide partners with offers, capabilities, and enablement to make the total addressable market (TAM) opportunity a reality.

As well as ensure its CSP partner ecosystem is “well-positioned to create the seamless solutions and experiences its customers have come to expect while accelerating growth opportunities”. 

Authorisation requirements

Microsoft will also look to roll out updated eligibility requirements for CSP incentives in FY26. These updates will “align” with the CSP authorisation changes, requiring CSP direct bill partners, distributors, and indirect resellers to have streamlined and relevant expertise by solution area.  

In FY26 Microsoft wants direct bill partners to transact as an indirect reseller for at least 12 months before applying to become a direct bill partner. The must also complete business vetting.

All direct partners must have a minimum of US$1 million in CSP billed revenue at the partner global account (PGA) level. The sales that make up their trailing 12 months (TTM) CSP revenue are subject to review and verification by Microsoft, and you may be asked to provide additional information.

They must also pass an automated assessment that measures operational capabilities, including billing, provisioning, compliance, customer support, and security.

These changes include:

• An actived Advanced Support for Partners (ASfP) or Premier Support for Partners (PSfP) plan. Completed the mandatory requirements of the Partner Center security score.
• At least one Solutions Partner designation.
• Accept the Direct Bill Microsoft Partner Agreement (MPA)

In FY26, indirect resellers they must:

• Complete business vetting.
• Have a minimum of US$1,000 TTM billed revenue at the reseller tenant level.
• Complete the mandatory requirements of the Partner Center security score.
• Accept the Indirect Reseller Microsoft Partner Agreement (MPA).

Distributors can only be nominated and approved by Microsoft. They must:

• Complete business vetting.
• Have a minimum of US$30 million USD TTM billed CSP revenue per authorised region.
• Pass an automated assessment that measures operational capabilities, including channel management, billing, provisioning, customer support, and security.
• Have an active Advanced Support for Partners (ASfP) or Premier Support for Partners (PSfP) plan.
• Complete the mandatory requirements of the Partner Center security score.
• Accept the Distributor Microsoft Partner Agreement (MPA).

Changed SKUs for MSFT 365 EA

According to Microsoft it will expand purchasing channels, including those transitioning from expiring Enterprise Agreements (EAs).

The software giant plans to launch three-year subscription terms for Microsoft 365 E3 and E5, with or without Teams, as well as Teams Enterprise licenses in CSP on 1 June 2025.

These will only be available for purchase with three-year upfront or triennial/annual billing options only.

The newly three-year stock keeping units (SKUs)for E3 and E5 without Teams and Teams Enterprise standalone SKUs will be generally available on the CSP price list on 1 June 2025.

These SKUs will appear on the May 1, 2025, CSP price list preview in the Partner Centre pricing workspace.

At either midterm or renewal, partners will be able to change E3 and E5 subscription terms for customers who have EOS SKUs of Microsoft 365 and Office 365 Enterprise suites with Teams to these new three-year EOS terms.

In addition, effective 1 July 2025, a three-year subscription for Microsoft 365 E5 Security and E5 Compliance mini suites will also be available.

According to Microsoft, to help partners transition customers from on-premises solutions or upgrade them from Office 365, its launching 10 per cent discount promotions for new-to-E3 or new-to-E5 customers on the CSP three-year subscription terms.

The E3 and E5 promotion will be available on 9 June 2025, while the E5 mini suite promotion will be available on 1 July 2025.

The software giant will also be extending the Microsoft 365 Copilot Getting Started discount promotion through 30 June 2025. 
 
Based on partner feedback, Microsoft has made what it terms as “two important process improvements” on 1 April 2025. This was done to make it “it easier to transition customers from EA to CSP and reducing the processing time for midterm upgrades”.

This includes a channel transfers interface in Partner Centre that “helps partners renew expiring EA offers for Microsoft 365 E3 and E5 with Teams and Office 365 E1, E3, and E5 with Teams, which are EOS, into CSP and maintain the customers’ Teams entitlements.

Microsoft has also introduced AI-powered automation that streamlines midterm upgrades by handling subscription cancellations and credits automatically.

The software giant believes this will lead to “fewer duplicate SKUs and a reduction of support resolution times down to one day or less”. 

According to Microsoft one of the frequent requests we get from partners is to help you understand the state of your Microsoft 365 install base and act when needed.

“We’re making Net Paid Seat Adds (NPSA) reporting available in Partner Centre in June 2025,” it said.  “This reporting will provide visibility into the same performance metrics that Microsoft employees can access internally, creating more clarity during business reviews and stronger joint execution”.