Microsoft is heavily promoting the Cloud Solution Program as the mainstream distribution model for cloud subscriptions. Besides that, Microsoft promotes the CSP program as ‘being a global program’.
We at the Global Software Licensing Specialist Expert Circle have received numerous questions about the ‘global’ part. This is because CSP resellers (both direct (Tier 1) and indirect (Tier 2)) are told by Microsoft that they can now sell globally, but their agreement states otherwise. We took a deep dive into the agreements, rules and legislations and found out that CSP isn’t a global program, but it is in the same time. Here is why …
Cloud Reseller Agreement
Every ‘wannabe’ Microsoft Cloud Solution Provider Program partner has to sign the Cloud Reseller Agreement with Microsoft. The July 2016 version of this agreement says under article 3. Authorization, Customer Orders and Territory:
a. ‘Authorization. This Agreement gives Company the right to resell Products through the Microsoft Cloud Solution Provider program to Customers in the Territory….’
b. ‘Orders and Territory. Company is only authorized to resell, distribute, or market Products within its designated Territory. Company may not collect orders or receive payments for Products from any Customer located outside the Territory. …’
When we take a look at the Definitions (Chapter 1. In this Agreement) we can read that Company is the CSP partner, Customer is the ‘end customer’ in the Territory and Territory means the country that the CSP partner is located in and enabled to resell through the CSP portal. When the CSP partner is located in one of the countries belonging to the EU or EFTA, the Territory is EU and EFTA.
So, we may conclude that a CSP partner in Brazil is only allowed to supply Office365, EMS and other CSP subscriptions to customers in Brazil. But is the CSP partner located in Denmark they can supply to a customer in Italy. Conclusion: CSP is NOT a worldwide program and has many restrictions.
After we drew this conclusion we took a closer look at the Cloud Agreement, which the customer (the end user) has to agree upon when receiving and activating cloud subscriptions from the CSP program. Here is what we read under 2. Subscriptions, Ordering – c. Ordering (i):
‘Orders must be placed through Customer’s designated Reseller. Customer may place orders for its Affiliates under this agreement and grant its Affiliates administrative rights to manage the Subscription, but, Affiliates may not place orders under this agreement. Customer also may assign the rights granted under Section 1.a and 1.b to a third party for use by that third party in Customer’s internal business …’
At the end of the Cloud Agreement (instead at the beginning) we can find the Definitions, which states:
“Affiliate” means any legal entity that a party owns, that owns a party, or that is under common ownership with a party. “Ownership” means, for purposes of this definition, control of more than a 50% interest in an entity’
Our conclusion is that the end-customer is only allowed to subscribe to cloud subscriptions through the CSP portal provided by a CSP partners in customers country or in EU/EFTA for customers located in EU or EFTA. But, the customer is allowed to ‘sublicense’ the subscription to a sister, child or grandparent company. For example: customer has it’s HQ in Munich Germany with 200 employees, a subsidiary in New Dehli India with 100 employees and a company of which customer owns 51% stock in Melbourne Australia with 300 employees. Customer may order and subscribe to 600 Office365 subscriptions through any German Direct or Indirect CSP partner. Customer may grant use the right to use these subscriptions as follows:
200 Office365 for own employees
100 Office365 sublicensed to the subsidiairy in New Dehli
300 Office365 sublicensed to the company the ‘own’ in Melbourne
When we look at this agreement with our ‘global glasses’ CSP is a global solution, but there are some remarks:
1. The tenant (for any cloud subscription other than Azure) rests in the default datacenter(s) in the region where the subscription is sold (in our example above this would be in the EU). Possible latency for users in New Dehli and Melbourne are to be expected;
2. There is no solution for Affiliates or third parties to buy outside their territory, for example because they have separated accountings but want to use one and the same tenant.
Lot of agreements
We can conclude that CSP is indeed a global program, but not in an easy way. Because besides the two agreements of which we wrote above there are also the Online Subscription Terms, the license agreements, the various Service Level Agreements for various cloud services and a couple of other legal documents. This doesn’t make doing business through CSP an easy thing.
Request to Microsoft
The members of the Global Software Licensing Specialist Expert Circle like to publically request Microsoft to streamline al the legal documents regarding CSP, lowering the number of legal documents and -if possible – make CSP a ‘real’ global solutions program.
Members of GSLSEC will start discussions with Microsoft VPs and program managers as early as November 14th 2016 when visiting Microsoft HQ in Redmond, WA, USA.
We will keep you posted on any updates through this article.