The Noteworthy team has spent the last few days really getting to grips with the FY27 CSP changes from Microsoft, and I actually think most people are focusing on the wrong thing. There’s been a lot of noise across the last week about whether the overall incentive pot has gone up or down, and yes, I think it’s fair to say the overall funding available to partners is becoming more targeted. But for me, that’s not the real story. The real story is that Microsoft has fundamentally changed the type of action it wants to reward.
Historically, partners could earn healthy incentives by taking business from another CSP. From Microsoft’s perspective, that doesn’t create a single new customer or increase Microsoft consumption. It simply moves revenue from one partner to another while Microsoft funds the transition, and I think that’s exactly what Microsoft is trying to move away from. When you compare the FY26 incentive guide with the new FY27 announcements it’s clear that this hasn’t just been a refresh of percentages; it’s much more of a behavioural shift. Microsoft is deliberately redirecting investment away from channel churn and towards genuine customer growth.
The introduction of Growth Margin is the clearest example of that. Rather than rewarding partners for simply transacting licences, Microsoft is rewarding partners that create measurable growth through new customer acquisition, seat expansion and increasing adoption of strategic workloads. It’s also no coincidence that the strategic accelerators are centred around Microsoft’s biggest priorities; AI, Copilot, Data, Security and the broader Frontier vision. Microsoft has spent the last couple of years telling partners to transform their businesses around AI, and this is the first CSP incentive model that genuinely pays partners to behave that way. Personally, I think that’s the right direction for them to take and is in the best interest of the end-customer.
I don’t think Microsoft should be paying partners to move existing revenue around the ecosystem. If funding is becoming more selective, I’d much rather see it invested in partners who are helping customers adopt new technologies, increase consumption and realise value from Microsoft’s strategic investments. The biggest winners under FY27 won’t necessarily be the biggest CSPs and the legacy licensing partners. They’ll be the partners that can generate demand, create new opportunities, land AI workloads and continue growing customer estates over time. They’ll be AI-led, agile partners who can build solutions that truly address customer challenges and increase their productivity in innovative ways.
I also think this raises the bar for the channel. Sales teams will need to understand incentive qualification before deals are transacted, because Growth Margin is earned at the point of sale and can’t simply be corrected afterwards. Success becomes much more about strategy and customer outcomes than processing renewals. For me, the biggest misconception over the past few days is that Microsoft has simply reduced partner funding. What they’ve actually done is make a conscious decision to stop funding channel churn and start funding customer growth. In many ways, this isn’t just a change to incentives. It’s Microsoft redefining what it believes a successful partner looks like.
Sian Herrington
Sian Herrington is the CEO of Noteworthy Support, who are responsible for helping the Microsoft partner community to understand the Microsoft programmes and incentives.
