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How Mature is Software Channel Transformation?

by Stephen White  |  January 15, 2019  |  Comments Off on How Mature is Software Channel Transformation?

Channel transformation is a term readers may encounter infrequently.

The phrase represents a business model shift from fulfillment and transactional activities, to solution and services selling. From a software selling perspective that implies dealing less with licensing technicalities, shifting to the needs and outcomes required by the customer*.

Reality. Licensing remains fundamentally complex. The occasional representation of licensing simplification through cloud adoption contrived. Demand for licensing services and advice to support right sizing scenarios, complex use rights interpretation, hybrid scenarios, effect of integrations, and advising on changes to models/metrics/programmes continues and shows little sign of abating.

IaaS and PaaS may be an exception, at least in part. Whereby complexity is less oriented to use rights from what is acquired, instead, managing effective use and consumption of the services billed, and use rights of software run on those services.

Are Microsoft shifting gears?

Microsoft’s announcement last week that Azure will be available directly through a new Microsoft Customer Agreement (MCA) from March 2019, represents an opportunity to execute the transaction themselves, with less partner involvement.

Introduction of Cloud Solution Provider (CSP) in 2014 broadened the Azure transaction channel from several hundred partners, to many thousands. Microsoft’s 2019 shift demonstrates intent to focus partners back onto services, not executing the transaction.

Is this demonstrably sensible?

This change hasn’t been made in isolation. Following the flood of organizations enrolling as CSP partners, Microsoft announced additional pre-requisites for the Direct CSPs in May 2018 (effective end of August 2018. Collectively, these changes put an emphasis on capability, and delivering services rather than reselling).


Potential for channel partners to grow revenues and profit from the transaction may start to diminish. However, those partners who drive use and effective management of Azure may be unperturbed. Be that by earning service fees from; developing applications run on Azure, building out major transformations or migrations, running monitoring or managed services, or support that address the health and utilization of the service.

Multiple aspects

Given absence of use rights advisory services required for Azure, the role of the licensing advisor is somewhat diminished. Options still exist however. Multiple programmes (EA/MCA/CSP) require analysis, support and service options assessed, and the myriad of workload classes and specifications require considered choice. The channel’s role aiding selection and right sizing thus remains. Where customer needs, and the corresponding solution, represent a package of requirements beyond Azure, the channel has a greater role enabling selection and MCA will be less relevant.

Winners and Losers

Some channel partners have culturally committed to the transformation journey, others may be laggards. It appears however Microsoft has begun making the line in the sand more visible – providing licensing without services, and lightweight services providers seeking to leverage the transaction may be on the wrong side of that line moving forward.

* Software resellers have been evolving their role and type of business engagement in many organizations, becoming software solution and service providers on a growing scale. For more on that subject see our Market Guide for Software Resellers


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Category: cloud  it-cost-optimization  licensing  reseller  

Tags: azure  cloud-contract  digital-transformation  licensing  lsp  microsoft  reseller  

Stephen White
Research Director
4 years at Gartner
16 years IT Industry

Stephen White is a Research Director in Gartner's IT Asset Management, Vendor Management and Procurement team, focusing on strategic licensing and negotiation strategies, asset management, and reseller engagement. Mr. White leverages his experience in software sales and consulting to assist IT leaders through his coverage of best practices in license life cycle strategy and trends, license metric and pricing practices, contract negotiations, optimizing terms and conditions, sourcing, and relationship management. Read Full Bio

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