CSP Hoster Program explained
CSP Hoster is a recently announced program for Microsoft partners, allowing them to pre-build SaaS applications and hosted desktop solutions using their own keys and media.
This article was updated to reflect the changes on October 01, 2022. Further details were added and clarified on October 18.
What is a CSP Hoster?
CSP Hoster or "Cloud Solution Provider-Hoster" is a hosting provider or outsourcer who is an enrolled member of 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. 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 language of the program guide, 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 existing SPLA providers with existing QMTH status. Microsoft promises to expand it to all partners later. 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(!). If the former was expected, the latter is new.
Who is a Hypercaler provider? It's an entity that:
Owns at least 750,000 physical servers in data centres worldwide;
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?
Hosts more than 1 million seats of Microsoft 365 during any 12 months under the CSP-Hoster program; Again, and then what?
Or earns more than $1 billion in annual revenue from licensing its own software and Software-as-a-Service offerings. No comments.
The program is fresh, so it'll be interesting to see how the requirements will evolve.
Is the CSP Hoster program replacing QMTH?
Yes and no. QMTH is no longer a requirement to host Windows 11 and Microsoft 365 Apps. And that is the only value of QMTH.
However, QMTH will remain for the time being, so if you want to continue QMTH participation, there's no rush to terminate it. The question is, why would you need it if hosting Microsoft 365 Apps and Windows 11 won't require QMTH anymore?
Is the CSP Hoster program replacing SPLA?
No. Microsoft didn't terminate the SPLA program, and existing SPLA providers may continue business as usual.
Licensing CSP Hoster solutions
Providers 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:
The end customer signs a Microsoft Customer Agreement,
The provider sells the licenses to the end customer together with deploying the hosted solution.
As an alternative, clients are permitted to bring their own licenses of one of the following types:
Licenses with Software Assurance,
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?
Yes, 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 also be subscription licences or have active Software Assurance.
Opinion: It is a bit frustrating. Microsoft pitched the October 2022 update as levelling the playing field between Microsoft's own Cloud – Azure – and hosting providers. But 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:
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 VLSC.
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:
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.
Unlike the License Verification process in SPLA, the responsibility to submit the verification is on the provider (CSP Hoster), not the end client. The provider must submit the form to Microsoft no later than 24 hours after starting to provide the services. The window is much shorter than in SPLA, where it is up to 10 days.
Microsoft may come back and ask for additional evidence. You will have five days to provide it.
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 terminate the services immediately.
CSP Hoster reporting
Each month, no later than the 10th day, you must submit a report including the following:
End-customers' tenant IDs,
End-users per product.
Surprisingly, there's nothing said about core or instance licenses.
There are two types of support:
Support for the Hosting services is on the provider.
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. If you are a QMTH, we recommend applying to become a CSP Hoster.
The terms are better and clearer than QMTH. The processes are better stipulated. Plus, it gives you a competitive advantage over other Authorised Outsourcers.
Beware potential audits
No matter how softly pitched, the CSP Hoster program shall instigate a tectonic shift in the service provider landscape. As a result, we expect more SPLA audits by Microsoft in 2023.
In addition, the CSP-Hoster Program Guide expressly stipulates that Microsoft has the right to audit CSP-Hosters and their Subcontractors (infrastructure providers).
We'll be watching this space closely.
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