Microsoft “may not know what it’s started” by imposing a $30m revenue barrier on its distributors, the CEO of Danish Microsoft distributor Cloud Factory has said.
Talking to IT Channel Oxygen, Jacob Schaumann Schmidt said the move has sparked furious discussions among Microsoft distributors across Europe, many of whom will not meet the threshold when it kicks in on 1 October.
Microsoft Chief Partner Officer Nicole Dezen on 1 May announced it will be raising partner requirements for its Cloud Solutions Provider (CSP) programme, which it sees as the “hero motion” for accelerating AI in the SME space.
While Direct Bill partners will need to hold at least one Solutions Partner Designation (among other things), distributors must from 43 days’ time boast a minimum $30m (TTM) revenue per authorised region.
“Some whiplash”
The CEO of US-headquartered distributor Climb earlier this month predicted the move would spark a wave of consolidation across Europe.
Schaumann Schmidt agreed, saying the announcement has created “some whiplash” among Microsoft distributors across Europe who he said are “talking to each other around the clock”.
Operating in Denmark, Sweden, Norway, Finland, the Netherlands and Germany, Esbjerg-headquartered Cloud Factory boasts Microsoft revenues “well above” the incoming $30m threshold, he emphasised.
“I’m not sure if Microsoft knows what they’ve started,” Schaumann Schmidt said.
“Everybody’s talking to everyone else to find out where they are on size and whether they want to sell or get out.”
According to some estimates, the number of Microsoft distributors worldwide could be as high as 180. It is thought that as many as 120 (mainly those operating in just one or two countries) will not hit the threshold.
“On my list, I have 20 [distributors] that I have been working on since May. And if everyone has 20 on their lists, it’s really interesting,” Schaumann Schmidt said.
“No one knows right now”
Microsoft is moving partner incentives towards SME and midmarket vehicles such as CSP as it takes more global accounts direct.
“They want to put more revenue through CSP and need to make sure those they put the revenue through can handle it from a platform, technical, support and invoice perspective,” Schaumann Schmidt said.
But with just 43 days until deadline day, it’s still not clear whether Microsoft will let sub-$30m distributors simply “hit the wall”.
“I hope Microsoft won’t let that happen,” Schaumann Schmidt said.
“Let’s imagine you have a distributor with $27m revenues. That’s a lot of partners, customers and subscriptions. Maybe Microsoft will give them six months, or four months… or ten days. No one knows right now.”
“I had dreams about the US – I can’t go there now”
Having recently expanded into Germany and Finland, Riverside Acceleration Capital-backed Cloud Factory now has its sights on organically growing into France, Spain, Italy, the UK, Poland and Belgium.
Around a quarter of its circa 60 employees work in its platform development team.
Microsoft’s new requirements have put the kibosh on its ambitions to expand outside of Europe, Schaumann Schmidt said, however.
“I had dreams about the US and UAE, but I can’t go there now because I need to have $30m TTM per region,” he said.
“So I will take care of Europe and someone else will take care of the other regions.”
Microsoft did not immediately respond when asked for comment.
Doug Woodburn is editor of IT Channel Oxygen
