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What is CSP? Microsoft Cloud Solution Program explained

If you are purchasing or considering Microsoft software and cloud services, you've probably heard of the Microsoft Cloud Solution Provider program – CSP. But what is it? And how can it benefit you as an end-user, not a reseller or a Microsoft Partner?

Let's begin with the basics of CSP, how it works, and what products are available. Then, we'll review licensing differences compared to traditional Microsoft agreements. And, of course, we'll cover the topics of discounts and migration from an Enterprise Agreement.

IMPORTANT: This article was updated to reflect the Microsoft licensing changes in October 2022. Don't worry. They are favourable for CSP partners, clients, and even service providers.

What is CSP?

CSP is a licensing agreement that Microsoft introduced in 2015 to allow Microsoft partners to sell Microsoft products and cloud services to customers, often bundling them with the partners' services.

Products and services in CSP include Office 365, Azure, and a limited subset of traditional server and desktop licences.

CSP is a relationship between you and Microsoft with a partner in between. The partner will manage the subscription for you, which gives them more control over your customer experience and how you are billed.

For you, not much has changed from the licensee's point of view. You must still sign a licensing agreement with Microsoft – your CSP partner will facilitate it. That gives you licenses and services from Microsoft through the partner responsible for billing and support.

However, there are significant differences between CSP and traditional Microsoft licensing channels:

  • There are differences in how they operate.

  • Not all Microsoft products and services are available.

  • The licensing terms and conditions are also different.

Benefits of Microsoft CSP

From the customer perspective, you have more flexibility over how you're billed - you can be invoiced monthly or annually, for example. Annual subscriptions in CSP have a monthly billing option.

You also get one point of contact for support and billing, which can be helpful.

How CSP works

  1. You work with an authorised Microsoft Cloud Solution Provider program partner.

  2. The Microsoft CSP partner will provide you with a Microsoft Customer Agreement – MCA – form. That is an essential step. Signing this form creates a licensing relationship between your organisation and Microsoft.

  3. The partner is your first line of communication. Depending on their "partner tier", they will provide you with billing and technical support directly (Tier 1 or "direct model" partners) or via their distributor ("indirect CSP partners"). Microsoft itself will not offer billing or technical support.

  4. The Microsoft Cloud Solution Provider program partner will help you manage your Microsoft Online Services portal.

What is an MCA Agreement?

MCA stands for "Microsoft Customer Agreement". It is a standard agreement between Microsoft and the end customer.

When you acquire Microsoft software licenses and services from a Cloud Solution Provider (CSP), the first step is to sign an MCA.

MCA Agreement is not exclusive to the CSP program. When you purchase Microsoft services through the Microsoft web portal ("Web direct") or from a Microsoft sales representative ("Microsoft Enterprise Motion"), you must also sign an MCA.

That is why, when you search for CSP licensing terms on the Microsoft Product Terms website, there is no "CSP program" in the drop-down menu. The option you need to choose is "Microsoft Customer Agreement".

Microsoft Customer Agreement MCA Product Terms

Microsoft CSP subscription and perpetual license availability

CSP was designed to help organisations procure subscription licenses and online services more efficiently.

CSP also offers some perpetual licences, but please be wary and enquire your CSP partner about perpetual license limitations.

Since Microsoft stopped its Open License program, clients and partners needed a new way to get traditional licenses without making the same commitments as in an Enterprise Agreement.

CSP partners also needed a way to remain the single point of contact for all their clients' licensing needs and sustain a more consistent customer relationship.

Microsoft responded by adding a limited number of perpetual licenses to CSP. But that is not the only product availability limitation. Some enterprise-grade products are unavailable even if you buy them as a subscription. For example, System Center is not available at all.

Not all server products are available as subscription licenses, either. To check subscription license availability, the best way is to visit the "Server Subscriptions for Azure" page on the Microsoft Product Terms website.

By the time of October 2022, these are the available server subscription licenses:

  • SQL Server Enterprise Core (2-pack of Core Licenses),

  • SQL Server Standard (2-pack of Core Licenses),

  • Windows Server Active Directory Rights Management Services CAL,

  • Windows Server CAL,

  • Windows Server Datacenter (8-pack of Core Licenses) added in October 2022,

  • Windows Server Remote Desktop Services CAL (User),

  • Windows Server Standard (8-pack of Core Licenses).

You can check all the current CSP license availability using the same website.

Microsoft CSP billing and flexibility

CSP was pitched as a flexible licensing program at its introduction, a program that allowed you to re-adjust your subscription licences every month.

You may still do so. However, in March 2022, Microsoft made the most flexible monthly subscription 20% more expensive than before. That is in addition to the most prominent Microsoft 365 price uplift in history.

You may choose one of the three subscriptions, all of which have a seven-day cancellation period:

  1. Monthly subscription. Your partner will invoice you every month for how much you use. It is the most flexible option but costs 20% more than an annual subscription.

  2. Annual subscription. You commit for the year in advance, but you may be billed monthly. You can't downsize until the end of the subscription unless you cancel it in the first seven days. After that, you will have to pay for the rest of the subscription.

  3. 3-year subscription. It is like an annual subscription, but it lasts longer, and there is no monthly billing option for server subscriptions. The only good thing about it is that the cost is more predictable.

Microsoft CSP licensing differences

Microsoft products are licensed differently in CSP. If you currently purchase your licenses through a Microsoft Enterprise Agreement, you may find that similar CSP licenses have more restrictive terms and conditions.

Here are a few examples:

  1. Microsoft 365 E3 and E5 have reduced benefits compared to the Microsoft Enterprise Agreement. For instance, they do not permit installing on-premises Exchange and SharePoint servers.

  2. Microsoft Windows Server and Microsoft SQL Server licences may not be deployed to a hyper-scaler like Amazon AWS, Google Cloud (GCP) or Alibaba. Azure has a backdoor through Azure Hybrid Benefit. And from October 2022, these licenses may be taken to any other provider using the Flexible Virtualisation benefit.

In October 2022, Microsoft finally allowed virtualising Windows 11 on-premises, thus eliminating one of the most annoying limitations of CSP.

Who is the target audience of CSP?

It may appear that Microsoft designed CSP licensing for smaller businesses with less than 2400 employees. Indeed, considering available discounts and Microsoft Partner-targeted incentives, you will find that the small business segment benefits from CSP the most.

However, If you represent a large company, Microsoft may offer you a similar licensing solution without a partner intermediary. They call it "Enterprise motion". That is why there is no "CSP licensing program" in the official Microsoft licensing guides. The official name of the licensing framework that underpins both CSP and Microsoft's direct initiatives is "Microsoft Customer Agreement" (MCA).

Target audience for Microsoft CSP

Negotiating discounts in CSP and MCA

Microsoft Cloud Solution Provider program does not have discounts given automatically, unlike Microsoft Enterprise Agreement. The price of licenses in CSP is the same for every company, regardless of how big it is.

When you order licenses through a Cloud Solution Program partner, you must agree on a price with the partner. Microsoft will only be willing to negotiate with you if you purchase directly from Microsoft.

Migrating to CSP from an Enterprise Agreement

Even though CSP changed in a way that makes it less flexible in March 2022, it may be a viable option for your organisation.

Microsoft Enterprise Agreement may still be the best choice if you have over 2400 employees, and the way your IT infrastructure is designed may require standard licensing terms and conditions that you get through EA. But you might consider using CSP to get more out of your Microsoft licenses and investments in the cloud.

If you are evaluating a full or partial switch from an Enterprise Agreement to a Microsoft Customer Agreement, here are a few things you should think about:

  • What are the differences between licensing through CSP and Microsoft Enterprise Agreement? Do the new rules match how you use Microsoft licences in your company?

  • Will you lose the discounts you get through EA?

  • How will you be invoiced?

  • Do you want to commit to one or three years, be flexible and pay 20% more, or mix-and-match flexible and long-term licenses?

  • How does CSP benefit your business growth, digital transformation and cloud migration?

  • And more.

Consider the above factors and talk to an independent Microsoft licensing specialist in SAMexpert before deciding.

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