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CSP Hoster Program explained

CSP Hoster is a licensing program for Microsoft partners. It allows hosting companies to pre-build SaaS applications and hosted desktop solutions using their own keys and media.

What is a CSP Hoster?

CSP Hoster, or "Cloud Solution Provider-Hoster", is a hosting provider or outsourcer enrolled in the Microsoft CSP Hoster program.

Is it required to host CSP licences for end clients?

No. From October 01, 2022, unless you are Amazon, Alibaba, Google or Microsoft, you may allow your end clients to bring their subscription licenses to your shared and dedicated hosting platforms via the Flexible Virtrualisation Benefit. You do not have to become a CSP Hoster.

I am a CSP Hoster. May I use my CSP licenses to provide hosting services?

No, unless it's for hosting your in-house SaaS applications.

What is the CSP Hoster program? How does it work?

The CSP Hoster program allows participating Microsoft partners to pre-build hosted solutions for their end customers using the provider's activation keys and installation media.

IMPORTANT: CSP-Hosters may not use their licenses. Licenses must belong to end clients, either sold with services or "brought" to the hosting platform.

In the program guide's language, CSP Hosters are authorised to offer Hosting Services with licenses included ("License-included services"). They may also provide hosting services to clients with eligible licences ("BYOL services"). Note, however, that participation in the CSP Hoster program is not required to provide "BYOL services" only.

Who can become a CSP Hoster?

Currently, eligibility is limited to SPLA providers with Tier 1 CSP status.

Microsoft promises to expand it to all partners. Since it is an extension of the Cloud Solution Provider Program, the requirement to be an active Cloud Solution Provider will remain.

An applicant to the program cannot be a Listed Provider or a Hyperscaler Provider.

Who is a Hypercaler provider?

A Hyperscaler provider is an entity that:

  1. Owns at least 750,000 physical servers in data centres worldwide;

  2. Pays more than $200 million (USD) to Microsoft during any 12 months for License-included services provided to Customers under the CSP-Hoster program; This requirement is frustrating. To pay for license-included services, one must first become a CSP-Hoster. Does it mean they must drop out after $200 million per year? And then what?

  3. Hosts more than 1 million seats of Microsoft 365 during any 12 months under the CSP-Hoster program; Again, and then what?

  4. Or earns more than $1 billion in annual revenue from licensing its own software and Software-as-a-Service offerings. No comments.

Did the CSP Hoster program replace QMTH?

The CSP Hoster program made QMTH redundant. It is no longer a requirement to host Windows 11 and Microsoft 365 Apps, and that is its only value.

Is the CSP Hoster program replacing SPLA?

No. Microsoft didn't terminate the SPLA program, and existing SPLA providers may continue business as usual.

How to license CSP-Hoster solutions

There are two types of services defined by the CSP-Hoster program:

  • License-included services exclusive to CSP-Hosters,

  • Bring Your Own License services, for which you do not need to become a CSP-Hoster because every outsourcing company except Amazon, Alibaba and Google may provide BYOL without the burden of CSP-Hosting participation.

Participating providers that want to benefit from license-included services must first sell the required CSP licenses to the end clients. The process is the same as any other license sale in the Cloud Solution Provider program:

As an alternative, clients are permitted to bring their own licenses of one of the following types:

Perpetual licenses are not eligible.

In either case, licensing CSP Hosters is different to SPLA. In SPLA, the provider is licensed to pre-build and host solutions using the provider's SPLA licenses. A CSP-Hoster must first ensure that the end client has the necessary licences in one of the following ways:

  • Sell licenses to the end client together with the services ("License-included services"),

  • Ensure the end client has the necessary eligible licenses ("BYOL services")

Access to media and activation keys does not mean the provider may use its own CSP licenses for hosting.

The above also means that providers will offer most hosted CSP solutions on 1-year or 3-year subscriptions. However, monthly CSP subscriptions are not entirely off the table.

Does hosting with a CSP Hoster require Windows Server CALs?

It depends on who sources the license.

If an end client brings their own licenses, Windows Server licensing for CSP Hosting requires Windows Server CALs. So, you must license Windows Server and all users or devices that will access it. All the Client Access Licenses must be subscription licences or have active Software Assurance.

If a license is sold by the provider with the service—the "license included" option in CSP-Hosting terminology—then CALs are not required. Moreover, Windows Server Datacenter virtual machines may be licensed with Windows Server Standard licenses.

Opinion: It is still a bit frustrating, even after the April 2023 update. Microsoft pitches Windows Server BYOL as levelling the playing field between Microsoft's own Cloud – Azure – and hosting providers. However, Azure does not require Windows Server CALs even when end clients bring their own Windows Server subscriptions via Azure Hybrid Benefit. Where's the levelled playing field?

How much does CSP hosting cost compared to SPLA

With some reasonable doubt and healthy scepticism, we believe that Microsoft is trying to make CSP their flagship, if not the only, licensing program. That means that there must be cost leverage. Here's what we know so far, subject to updates:

Monthly subscriptions

1-year subscriptions

3-year subscriptions

Regular CSP monthly subscriptions aren't available for server licenses and are 20% more expensive for M365 plans and components.

1-year subscriptions will include a monthly billing option.

These are on par with SPLA costs.

This option is generally cheaper compared to SPLA. However, Windows Server CALs must be accounted for when comparing the costs.

Where can I get the keys and installation media?

CSP-Hosters can download activation keys and installation media from their own licensing portal.

Do I need my own data centre?

CSP-Hosters may use infrastructure providers that provide the hardware infrastructure necessary to deliver hosting services.

It means that you don't have to invest in your own data centre to become a CSP Hoster.

However, you may not use Alibaba, Amazon AWS, Google Cloud and Microsoft Azure. Fortunately, there are plenty of other infrastructure providers.

Is there a License Verification requirement?

Yes, there is a License Verification requirement for BYOL services. Here's the process:

  1. An end client wants to host their licenses. They inform the provider about it and provide evidence. The form of the evidence is NOT stipulated.

  2. Unlike the License Verification process in SPLA, the provider (CSP Hoster), not the end client, is responsible for submitting the verification. The provider must submit the form to Microsoft no later than 10 days after starting to provide the services.

  3. Microsoft may come back and ask for additional evidence. You will have five days to provide it.

  4. If Microsoft is unhappy about the evidence, you will have five days to terminate the services or sell the missing licences to the end client.

Providers are responsible for tracking subscription and SA expiration and renewal. The verification form must be resubmitted no later than ten days after renewal, or the services must be terminated immediately.

CSP Hoster reporting

Each calendar quarter, no later than the 10th day of the following month, you must submit a report including the quantities of the following CSP-hosted products:

  1. Windows Server Standard Edition,

  2. Windows Server Datacenter Edition,

  3. SQL Server Enterprise Edition,

  4. SQL Server Standard Edition,

  5. System Center Datacenter Edition,

  6. System Center Standard Edition.

Pay attention to detail:

  • You must report the total quantity of single cores, not core packs,

  • You must report separate quantities for License-included Services and BYOL Services.

  • There is no need to report them per customer. Report total quantities only.

There is no requirement to report any other products. Interestingly, SQL Server in the Server/CAL model is also out of scope.

Those who switched to CSP-Hosting from QMTH will also notice that there is no need to report Office 365 and Microsoft 365 licenses, which was non-sensical anyway.

Providing support

There are two types of support:

  1. Support for the hosted services is on the provider.

  2. The CSP-Hoster program does not govern support for the licenses and products. Support requirements can be found in MPA (CSP), MCA and Volume Licensing agreements.

To apply or not to apply?

We at SAMexpert think that the CSP-Hoster program is good overall. We recommend applying to become a CSP Hoster if you want the ability to pre-build and pre-activate virtual machines.

However, participation adds reporting and license verification requirements that some of you may find challenging to implement.

Beware potential audits

No matter how softly pitched, the CSP Hoster program has already instigated a tectonic shift in the service provider landscape. Microsoft's SPLA audits have not yet fully adapted to CSP-Hosting. Auditors misunderstand some of its core concepts and are having a hard time re-learning from their QMTH legacy knowledge. At the same time, the number of service provider audits is growing.

The CSP-Hoster Program Guide expressly stipulates that Microsoft has the right to audit CSP-Hosters and their Subcontractors (infrastructure providers).

We'll continue watching this space closely and inform you of all the important changes and trends.

If you want to discuss your opportunities and challenges, please don't hesitate to contact us using the form below. We promise a genuine conversation, not a sales pitch.