What should you do if you are a consultant or managed service provider (MSP) when a partner/vendor tries to sell direct to your clients? This question came to my attention some weeks ago when a colleague who runs an IT consultancy received a disturbing indication that a major vendor they partnered with was trying to “muscle in” on the relationships he had with the businesses he provided consulting services to. And “muscle in” is probably the right metaphor here because the vendor he partnered with was a big one — namely Microsoft.
‘Coming for their clients’
Several days later, I heard on the grapevine that others who provided IT services to businesses, either as consultants or managed service providers, were seeing similar occurrences of Microsoft apparently “coming for their clients” in the form of offering competing services directly to businesses these consultants and MSPs provided IT services for. An article soon appeared on ThirdTier (an MSP owned by TechGenix contributor Amy Babinchak) that appears to substantiate these claims and which later was confirmed by Susan Bradley. What’s worrying, of course, is that from the point of view of a consultant or MSP, your relationship with your customers is everything. So, when someone attempts to disrupt this relationship, you have a right to feel upset. And especially so when the one doing the disrupting is a large IT vendor whose products, services, or solutions you resell — for a profit — to your customers.
Microsoft: A lopsided partner
Undercutting your partner isn’t anything unusual in the business world. It happens all the time. Business — any kind of business, including IT — is a cutthroat game underneath the publicly visible veneer of good intentions and win-win philosophy. The difficulty happens when one side of the partnership has much greater leverage than the other side. And in the case of a consultant or small MSP that partners with Microsoft, it’s pretty clear who has the most leverage. One should naturally be wary of entering into such lopsided partnerships because even if the terms are clearly laid out as fair in your partnership agreement with them, when push comes to shove, and the bigger partner “breaks the rules,” your only recourse (legal) is likely to cost far more than you are willing to spend to defend your rights. Unless, of course, a large number of such smaller partners band together and attempt a class action against the alleged offender. But even that course of action is likely to last years in the court system and end up with a settlement that makes no one wealthy except the lawyers involved. So usually, the smaller partner can at best raise a stink to try and discourage the larger partner from continuing with actions that intervene with the smaller partner’s relationships with their customers.
Craig Hollins is an IT professional who has experienced something of this kind of thing firsthand recently. Craig has been working in IT for over 25 years and is currently the business manager at PPS, a small MSP that provides IT support for smaller businesses in and around the area of Perth, Australia. When I asked Craig if he had seen any evidence of what the ThirdTier article claimed was happening, his response was to give an example of his own frustration dealing with Microsoft.
“I too have seen Microsoft muscling in on some of our customers as their annual renewals come up,” Craig says. “I’m not 100 percent sure what their intent is. (I don’t support vendors that have a direct model that is cheaper than ours — I’m talking about you, Dell.) For example, last year, we won a 50-seat client that had existing Office 365 E3 licenses on an annual. As they didn’t need the features with E3, they decided to change them to Business Premium and save a few dollars, as we as go to monthly billing. We migrated them when there were still about 30 days left in their old agreement.
“Not long after, the client receives a call from Microsoft sales offering to review their licensing requirements free of charge. They referred Microsoft to us as we are their trusted IT advisor (we replaced an in-house person). If Microsoft wants to sell it to them, they have to sell it to us first. So, I get a call with the person who wanted to discuss, with the client, Microsoft licensing options so ‘the client can be sure they are using the right product,’ He was somewhat shocked to learn I had already done that, and I requested he not bother the client again. He agreed. Then two days later, I get an email from Microsoft that was forwarded to me by the client. The client wasn’t happy that Microsoft had now seeded doubt that they may not have made the best decision. A bit of explanation from me settled them down. That email was sent less than an hour after my conversation with Microsoft sales.”
Microsoft’s own services: A real concern for MSPs
During the last five years, Microsoft has become heavily invested in pushing members of their Microsoft partner network into providing cloud services like Microsoft 365 to the customers their partners work with instead of just selling them software (Windows and Office) to install on their PCs. The rationale behind this is likely the decline of PC sales resulting in declining revenue from Windows and Office. While Microsoft portrays becoming a partner as a way of building your business, these recent actions bring into question the whole value of consultants and MSPs joining the Microsoft Partner Network. Craig admits that the success of his own business as a small MSP is partly because of his offering Microsoft cloud services to his clients. “About half our clients use Office 365 in one form or another. We’re successful with it because, as Microsoft suggested early on, we bundle it with other services, and that helps bind the customers to us. My concern is Microsoft is going to start offering the other services we bundle it with (AV, backups, helpdesk, etc.), and we’ll have very little choice but to watch our business float away.”
And it’s not only Microsoft that Craig is worried about. “That’s Microsoft,” he says. “But now we are also seeing other vendors going down the same path. For example, Cisco, like an increasing number of vendors, won’t sell a router through distribution unless they know who the end-user is. And there is no reason for them to know unless they intend to market directly to them sometime in the future.”
Does the future for IT consultants and small MSPs look bleak then? How should a consultant or MSP prevent their business from going down the drain when the large vendors they partner with do these kinds of things? If you have any experience in this area and have suggestions you can offer, feel free to use the Comments feature below to share your thoughts with our readership.
In the meantime, watch your back!
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