While this is advertising blog post with some possible interesting backstory, you have severely misjudged the main audience of this site which is a bunch of nerds.
Not an MBA but have dealt with licensing throughout my career, so I’ll try taking a whack at it:
Under the prior Enterprise Agreement structure, Microsoft would basically sell licenses to channel partners at decreasing costs based on KPIs like volume. This works for physical goods where big vendors get bigger discounts for bigger volume commitments, but leaves a lot of money on the table for software vendors while making it difficult for channel partners to compete with established players (who in turn can bully software makers into more lucrative terms).
So Microsoft - or the author, rather - moved to the Software Assurance model: everyone fits into the same tiers depending on size, and everyone gets the same margins. This changes incentives to reward bundling, multi-year deals, and broader portfolios of software instead of just straight volume. Putting everyone on equal footing for comp also incentivizes services - MSPs, consulting, architecture, etc - which then also feeds into the original incentives of growing multi-year deals and broader portfolio adoption, hence the “Perpetual Motion Machine” comment attributed to Ballmer.
Except Microsoft now feels they’re such the dominant player in the market that they can handle billing outright, relegating partners solely to advisors and consultants in an era where Microsoft sells the very services partners used to make bank on. This is cutting out the middleman (channel partners), but also exposed Microsoft to a litany of government regulation as a result. This is because the SA model concentrates pricing in Microsoft’s hands, and thus gives them outsized power and influence in the market.
That’s my understanding as an outsider though; I fully admit I am likely wrong on some points that OP might be able to clarify or correct.
> Except Microsoft now feels they’re such the dominant player in the market that they can handle billing outright, relegating partners solely to advisors and consultants in an era where Microsoft sells the very services partners used to make bank on. This is cutting out the middleman (channel partners), but also exposed Microsoft to a litany of government regulation as a result. This is because the SA model concentrates pricing in Microsoft’s hands, and thus gives them outsized power and influence in the market.
This seems incompatible with the description in the article:
>> The model split the EA channel into three tiers covering 75,000+ addressable accounts and an $11.5B opportunity envelope: 1,150 Microsoft-led global strategic accounts at a 4% ESA fee, 14,000 channel-assisted corporate accounts at 9%, and 60,000 channel-led medium enterprise accounts at 15%. Microsoft billed the customer directly across all three tiers. What changed was who led the sale, what role the partner played, and how the partner got paid. The channel was converting from a margin model, where partners set end price through discounts, to an advisory fee model, where Microsoft set price and partners earned fees for services delivered. An ESA was required on every deal.
Emphasis mine in both cases.
That said, I can't really be sure what's going on, because the author hasn't bothered to explain any of it. There is clearly some set of material that he assumes I know, but he hasn't even stated what that is.
Under the prior Enterprise Agreement structure, Microsoft would basically sell licenses to channel partners at decreasing costs based on KPIs like volume. This works for physical goods where big vendors get bigger discounts for bigger volume commitments, but leaves a lot of money on the table for software vendors while making it difficult for channel partners to compete with established players (who in turn can bully software makers into more lucrative terms).
So Microsoft - or the author, rather - moved to the Software Assurance model: everyone fits into the same tiers depending on size, and everyone gets the same margins. This changes incentives to reward bundling, multi-year deals, and broader portfolios of software instead of just straight volume. Putting everyone on equal footing for comp also incentivizes services - MSPs, consulting, architecture, etc - which then also feeds into the original incentives of growing multi-year deals and broader portfolio adoption, hence the “Perpetual Motion Machine” comment attributed to Ballmer.
Except Microsoft now feels they’re such the dominant player in the market that they can handle billing outright, relegating partners solely to advisors and consultants in an era where Microsoft sells the very services partners used to make bank on. This is cutting out the middleman (channel partners), but also exposed Microsoft to a litany of government regulation as a result. This is because the SA model concentrates pricing in Microsoft’s hands, and thus gives them outsized power and influence in the market.
That’s my understanding as an outsider though; I fully admit I am likely wrong on some points that OP might be able to clarify or correct.