Direct vs. Indirect CSP - which is right for your organization?

When conducting preliminary research on becoming a Cloud Solution Provider (CSP), you will find there are two models for CSP partnerships: Direct (Tier 1) and Indirect (Tier 2). Before forging ahead, you must ensure that you understand your options with both Direct and Indirect CSP so that your organization receives the best fit possible.

After you walk through your business’s wants and needs, you will be able to understand which model best aligns with your organization’s goals and why. Keep reading to learn about the differences between Direct and Indirect CSP.

What is Microsoft CSP?

Microsoft’s Cloud Solution Provider (CSP) program allows partners to completely own their end-to-end customer lifecycle.  A CSP program helps value-added resellers (VARs) and managed service providers (MSPs) sell Microsoft software and Cloud Service licenses with additional support so that you can become more involved with your customer base. This means that every cloud solution from Azure to Office 365 could be resold to your customers at a price that you set.

The CSP program helps to manage and back customer subscriptions – either directly or indirectly. This enhances your connections and allows for increased engagement with your customers, boosts profits, and enables greater control of your investments.

What are the differences between direct and indirect CSP?

There are two models for the CSP program: Direct and Indirect. If you’d like to use CSP, you have to choose between the two. In order to understand which model is best for your organization’s needs, you have to understand each of their own unique benefits. Let’s take a look:

Direct CSP

Becoming a Direct CSP partner means that you will be contracted directly with Microsoft. Essentially, you would be purchasing from Microsoft and reselling to your customers. The Direct CSP program has certain requirements, however, that could alter your decisions to take this route as not everyone who applies to go direct is qualified.

For starters, becoming a Direct CSP takes approximately 4 months to complete, which is something to consider if you’re eager to get into the market. In most markets, Microsoft are proactively reducing the number of existing Direct Partners, rather than approving more. Another additional factor is that Microsoft requires direct partners to purchase and maintain an Advanced Support Agreement, so you should be prepared for the level of support you would have to provide to your customers. Direct partners must also have their own IP built around the Microsoft cloud. Direct CSP partners also have to put a concrete customer billing structure in place to manage the complexity of CSP. There are also annual minimum revenue expectations to be achieved to maintain Direct CSP partner status.

Indirect CSP

Selling through an Indirect CSP program is overall a much quicker process than direct CSP. Since you are not working directly with Microsoft, your organization is able to get to market sooner. Indirect Providers are required to service you as a reseller by giving you the tools and platform needed to place orders, billing and license management. Whereas Direct CSP requires you to purchase your SKUs from Microsoft, working with an indirect CSP would have you purchase them right from a CSP Provider. Then, you would be able to sell to customers at the profit margin of your choosing.

While you can get to market quicker with an Indirect CSP, this type of program lets you scale at your preferred pace. You will be able to learn the ins and outs of the Microsoft cloud suite without having to meet specific guidelines or margins. Plus, if you are selling through Indirect CSP, you will have an experienced support infrastructure along the way.

Through Indirect CSP, you will still earn incentives directly from Microsoft, as well as the Partner of Record status (POR) and the revenue recognition goes towards your Microsoft Partner status.

Indirect Providers also have complementary services and IP that allow you to build a stronger and long-term customer experience.

Questions to determine which is right for your organization

Now that you know the differences between Direct and Indirect CSP, you should learn which questions will guide you towards the best fit for your organization. Some questions to ask yourself include:

How quickly would I like to go to market?

Direct CSP takes longer to get off the ground due to the fact that there are other requirements that need to be in place first. Indirect CSP will let you cut to the chase and get you out on the market right out of the gate.There are also resources and infrastructure, mentioned above, which you’ll need to have in place to manage a direct partnership.

How much technical support do I want to provide?

Going Direct will require to you offer 24/7 technical support.. Indirect CSP will allow you to partner up with a CSP Provider who can help offer that support to customers.

Do I want to bill directly through an automated platform?

Direct CSP programs allow you to bill customers directly through a payment system of your choosing.

How would I like to manage my licenses?

Direct CSP programs can manage their licenses manually through the Microsoft Partner Network. If you’re looking to go indirect, you would have to manage licenses through the portal of your CSP distributor.

Does Microsoft prefer one model over the other?

No. Microsoft recognizes both partner models equally and revenue recognition is weighted the same.