1 Anthony Ferry Neudesic FY14 Managed Reseller Incentives Incentives Guide April 21, 2014
2 TABLE OF CONTENTS Version History... 2 Overview... 3 Partner Eligibility Requirements... 4 MPN Competency Requirements... 5 Revenue Requirements... 5 Managed Status Requirements... 5 Partner Participation... 5 Enrollment and Contracts... 5 Incentive Structure and Rates... 6 Global Incentive Components... 6 Eligible Revenue... 7 Global Accelerators... 8 Locally-Chosen Accelerators Activity Definitions and Requirements... 9 Treatment of Public Sector... 9 Office 365 and Cloud Other (Power BI & Intune) Incentives... 9 Duration of Open and Open Value Contract Terms and Office 365 Subscriptions...11 Sales Order Process Flow...11 Earning Incentives: Managed Reseller versus Advisor...13 Incentive Calculation Example...13 Mechanics of Earning and Usage Periods...14 Payment Frequency...15 Payout Mechanics...15 Compliance and Performance...15 Understanding Coop...16 Marketing Activities Eligible for Coop...16 Aligning Marketing Coop Activities to Microsoft Priorities...16 Resources...17 Other Incentives...17 Support and Questions...17 Microsoft Corporation Managed Reseller Incentives Page 1
3 Version History Version Modification 1.0 First release 2.0 H2 Updates - Office 365 Midsize Business (Update) - Local Accelerators Open Annuity and Open Renewal (Update) - Cloud Other (Power BI and In-Tune (New) - Q4 O365 Promotion (New) Microsoft Corporation Managed Reseller Incentives Page 2
4 Overview Microsoft is pleased to offer the Managed Reseller Incentive, dedicated to supporting partners who drive the product portfolio through the Open Licensing program. Managed Resellers broaden Microsoft s customer reach (sales and deployment) for Open License Agreements and Office 365 Small Business Premium and Midsized Market offerings, particularly within the vast Small and Mid-sized business (SMB) market, as well as the public sector markets. In FY14, the Managed Reseller Incentive will continue to reward partners as they accelerate sales and share of Microsoft s newest products while growing the established base of well-known products. It balances rebates with coop marketing funds to enable partners to increase profitability through cash rewards, and reimburse them for the sales and marketing efforts that generate demand and awareness for the product portfolio. These partners vary in their focus and contributions to Microsoft s business. Some are large resellers that leverage their marketing and sales engines to scale Microsoft s license sales reach into the market. They generally have nationwide or multi-country coverage, focus on Direct Marketing activities such as selling online and through outbound telesales teams, sell in high volumes, and differentiate themselves through their licensing expertise. Others leverage their local and regional brands, established solutions practices, and sales and marketing engines to help extend Microsoft s solution reach into the market. Over the coming years, Managed Resellers will also be a significant sales engine for Microsoft cloud offerings. Managed Reseller Incentives for FY14 promote: Increasing and accelerating customer reach and expansion Growing sales of key workload and cloud solutions that address critical customer requirements, and improving product attach to customer solutions Growth of revenue and profitability, and enhancing the value of partner s sales and delivery practices For the purpose of this document, fiscal year 2014 is the period running from July 1, 2013 to June 30, It can be designated as FY14. In addition, the first fiscal half of fiscal year 2014, running from July 1, 2013 to December 31, 2013, may be referred to as H1FY14, while the second fiscal half of fiscal year 2014, running from January 1, 2014 to June 30, 2014, may be referred to as H2FY14. Key Updates for H2 FY14 1. Office 365 Midsize Business The definition of eligible revenue for the Office 365 Midsize Business incentive has been updated for H2 FY14. This is to include additional products that were released during H1 FY14. Performance Area Office 365 Midsize Business revenue Office 365 products including Midsize Business, Enterprise, Government/School, and online products of Exchange Online, Lync Online, SharePoint Online, Visio Online, and Project Online. Qualifying products are contingent on Microsoft product launch and schedule changes and could change over time. Note that Office FPP/ESD, Office 365 Home Premium and Office 365 University are not included. Earning Percentage Apportionment to Rebate Apportionment to Coop Funds 8% 50% 50% Microsoft Corporation Managed Reseller Incentives Page 3
5 2. O365 added to Local Accelerators for Open Annuity and Open Renewal (applicable only if these Local accelerators have been selected in your Region) Office 365 products sold via Open will be included as eligible revenue for incentive earnings under the Local accelerators Open Annuity and Open Renewal 3. Power BI and In-Tune Revenue generated from Power BI and In-Tune will be eligible incentive earnings as follows: Earning Percentage Apportionment to Rebate Apportionment to Coop Funds 8% 50% 50% A new Performance Goal (Incentive) called Cloud Other will be configured on the H2 FY14 statement in CHIP. This will include all revenue, rebate and coop achievements for both Power BI and In-Tune. This will be configured in CHIP during the month of April Q4 FY14 Office 365 Promotion Microsoft is offering an incremental incentive in Q4 FY14 (April 1, 2014 thru June 30, 2014) to eligible Managed Resellers for Office 365 and Power BI products sold through Open. This offer will provide an additional 8% incentive for qualified sales made during this period. The incentive will be made entirely as coop funds, which will be available to claim against approved activities during H1 FY15 (per standard coop program guidelines). Incentive Summary: Earning Percentage Apportionment to Rebate Apportionment to Coop Funds 8% 0% 100% The eligible products are the same as per the Office 365 Midsize incentive under the Global Managed Reseller Incentive Program and Power BI products sold through Open. The FY14 Program is currently being updated with the products qualifying for Office 365 and Power BI through Open. Please note: 1. This is for Q4 FY14 only. It will not extend to Q1 FY Office 365 Small Business Premium and In-Tune are not included in this Q4 Office 365 promotion. Partner Eligibility Requirements Every six month period, Microsoft invites and enrolls partners into the Managed Reseller incentive. There are three requirements: Microsoft Managed status (Partner Sales Executive), Sales history, and MPN Competency attainment. Microsoft Corporation Managed Reseller Incentives Page 4
6 MPN Competency Requirements To attain eligibility for this incentive, a partner must attain one of the following MPN Competencies at the Silver or Gold level in either the Active-Earned, Active-Non Compliant, or Active Preapproved status per Microsoft subsidiary by June 1, Partners that cannot meet this eligibility requirement by June 1, 2013, have an opportunity to earn the incentive for the H2 period by achieving the MPN competency requirement by December 1, 2013 (assuming other eligibility criteria are met). The following MPN competencies fulfill the eligibility requirement for the Managed Reseller Incentive: Application Integration Business Intelligence Communications Collaboration & Content CRM Data Platform Devices and Deployment Identity and Access Management & Virtualization Messaging Midmarket Solution Provider Server Platform Small Business Software Asset Management Volume Licensing To view the specific requirements to attain a Silver or Gold-level MPN Competency, please access the MPN website here https://mspartner.microsoft.com/en/us/pages/membership/competencies.aspx. Revenue Requirements The second requirement is that a partner must sell more than $75,000 per year USD in Open License revenue during the 12-month period from June 1, 2012 through May 31 30, 2013 in Mature Markets, or $50K/year USD in Emerging Markets. In the US, partners designated as Scale Resellers and VAR Champions will be eligible for this incentive and are considered to meet the eligibility criteria. Managed Status Requirements The third requirement is that the partner must be managed by a Microsoft resource, either a Partner Sales Executive or Tele-Partner Sales Executive at the global or local level. Partners must also have an MS Sales ID. Partner Participation Enrollment and Contracts Partner Sales Executives notify partners of their selection and enrollment into the Managed Reseller Incentive. Eligible partners receive incentive contracts from the Microsoft Regional Operations Center (ROC) during the first month of the fiscal year (July). To be successfully enrolled, Partners must have received an incentive contract from Microsoft each year. Additionally, Partners must have successfully completed incentive tool registration, provided valid Microsoft Corporation Managed Reseller Incentives Page 5
7 banking information and an updated address. In the Europe and Middle East, Africa (EMEA) subsidiaries, the incentive contract is communicated via the MS Club Tool that partners use to review incentive earnings and submit coop claims. The incentive contracts contain the description of key terms and definitions, payment dates and an incentive rate table. The incentive rate table communicates the types of products rewards and the associated percentage rates, based on the revenue and/or activity. Incentive Structure and Rates Managed Reseller Incentive rewards sales of Incubation, Growth and Core products on Open License Annuity and Non-Annuity revenue. Additionally, the incentive includes local accelerators that address the specific sales and marketing goals within individual subsidiaries. Global Incentive Components Rates for corporate-defined, global Open VL incentives are seen below. In this model, higher rates are paid for Growth products over core products, and even higher rates are paid for Incubation products. In addition, Open annuity contracts are incented at higher rates than non-annuity contracts. Details are illustrated below. Microsoft Corporation Managed Reseller Incentives Page 6
8 Eligible Revenue For the Managed Reseller incentives, revenue is categorized as shown in the table below. Microsoft Corporation Managed Reseller Incentives Page 7
9 The section above shows the products in each of the product categories of Core, Growth, and Incubation that are eligible for incentives. NOTE - In H2 FY14, Lync Online, Exchange Online, Project Online, SharePoint Online, Visio Online, and Office Web App Online will be incented at the Office 365 rate of 8%. Below are the license types eligible for these incentives: Global Accelerators Every eligible partner participating in this incentive is eligible for an accelerator for Office revenue sold via Open license agreements, which is paid in addition to the Core Product rates that are applied to Office revenue. The accelerator is paid as 50% coop and 50% rebate. Accelerator for Office sold via Open License Agreements Accelerator paying for Open Office sales Total, effective rate (Core Product Rate + Accelerator rate): 2.5% Non-Annuity, 3.0% Annuity Microsoft Corporation Managed Reseller Incentives Page 8
10 Locally-Chosen Accelerators Activity Definitions and Requirements The subsidiary/area augments the globally-driven incentives through accelerators, selected to address local market conditions. Customer Reach: Incremental incentives for the Open License revenue (including Open L, L&SA, OV, OVS, Open SA, and Office 365 Midsized Business & Small Business Premium SKUs) produced by customers that are new to Microsoft (have not purchased an Open License agreement for at least 2 years). OVS Growth: Incremental incentive rates for the 1 st year billed revenue of all Open Value Subscription licenses to drive annuity growth and cloud adoption Open Renewals: Accelerated rates for Open License Renewal Revenue Anti-Piracy: Accelerated rate for revenue from Legalization SKUs Public Sector: Incremental incentive rate for Core and Growth products sold via Open and Academic licenses to public sector organizations Cash Back: locally-defined incentive to partners via customers to fund service engagements or directly to partners for short-term incentive campaigns. Treatment of Public Sector All Public Sector revenue booked via Open and Academic License agreements are included in the Managed Reseller incentive calculation. Office 365 and Cloud Other (Power BI & Intune) Incentives Customers are increasing their purchases of Microsoft cloud-based solutions. To help meet this growing demand, Microsoft offers exciting Office 365 Midsize Business, Small Business Premium, Power BI and Intune products. These cloud offerings enable Office 365 to be sold by a Distributor to a Managed Reseller, who subsequently sells the service directly to an end customer. Thus, a Reseller can manage the billing relationship with their custome r and combine Office 365 with other services to deliver a comprehensive solution and manage all aspects of the customer engagement. Office 365 Midsize Business helps to address the needs of companies with users and may be purchased via Open licensing. Office 365 Small Business Premium focuses on supporting companies with 1 10 users and may be acquired similar to how FPP is today. Managed Resellers, who sell these offerings, can earn incentives on the Office 365 SKUs comparable to what on-premise products earn when sold through Open. Partners also may earn incentives for selling Office 365 Small Business Premium subscriptions in the same way FPP currently is sold. The Office 365 incentives are an added component to the existing Managed Res eller Incentives and follow the same guidelines as the other eligible products do within the framework. Managed Resellers are incented on Office 365 Midsize Business and Office 365 Small Business Premium SKUs as follows: Microsoft Corporation Managed Reseller Incentives Page 9
11 Office 365, Power BI & Intune Offers 1, 2, 3 & 4 Plans License Type Length of Subscription SKU Bundle 5 Incentive Rate (Based On Billed Revenue) Lync Online Plans 1 & 2 Exchange Online Office 365 Enterprise Office 365 Midsize Business Office 365 Pro Plus Project Online SharePoint Online Visio Online Plans 1 & 2, Commercial, Government, Faculty and Student Plans E1, E3, E4, A3 & A4 for Faculty and Student, E1, E1 + Archiving & E3 for Government All seat definitions Commercial, Faculty, Government and Student Project Online, Project Online with Project Pro O365, Project Pro for O365, Project Online for Students Plans 1 & 2 with Yammer, One Drive Business w/office Online Commercial, Faculty and Student Open, Open Value, Open Value Subscription 7 12 months (Paid Upfront) Single User 8% 6 Power BI Commercial, Faculty and Student Windows Intune Office 365 Small Business Premium Windows Intune Office 365 Small Business Premium FPP Please note the following: 1 Products qualifying for Office 365 incentive may change during H2 FY14. 2 An order is allowed only in those Subsidiaries where Office 365 is available. 3 The 8% rate is applicable for FY14. 4 Customers will have a license for 1 user/employee. That user can install Office on up to 5 of his PCs or Macs plus his or her mobile devices. 5 Open, Open Value and Open Value Subscription: Open licenses currently are for Commercial only and do not apply to Open and Open Value Government and Academic. The 5 License minimum order requirement is waived while the 5 desktop minimum still applies to start Open Value and Open Value Subscription Organization-wide commitment contracts. To enable the addition of seats at any quantity, Microsoft has removed the minimum order validation from Open License. Therefore, an order of 1 seat will still be accepted. Open Value and Open Value Subscription organization-wide committed end customers will receive a migration solution if they have Office and/or CAL Suite from Open Value and Open Value Subscription. 6 This SKU includes Midsize Business, Enterprise, Government/School, and online products of Exchange Online, Lync Online, SharePoint Online, Visio Online, and Project Online. Qualifying products are contingent on Microsoft product launch and schedule changes and could change over time. 7 These SKUs are for Power BI for Office 365. Microsoft Corporation Managed Reseller Incentives Page 10
12 Duration of Open and Open Value Contract Terms and Office 365 Subscriptions All existing program rules and ordering processes of Open and Open Value remain the same for Office 365 as they do for on-premise licensing. What differs is the duration of Open and Open Value license contract terms, 2 and 3 years respectively, and an Office 365 subscription period of 1 year. The expiration of an Office 365 Subscription is independent from the Open and Open Value contract terms and their expiration dates. They are not coterminous as depicted in the example below. Users can be added to the subscription midterm. If additional seats are purchased through the Open Programs, the service time will be distributed evenly across all users to maintain the same coterminous end-date and ensure the simpler renewal management. Once the 1 year subscription is close to its expiration date, renewals can happen in a number of ways: buying the same Office 365 SKU from Open and Open Value licensing, renew directly with Microsoft, or renew with the support of Microsoft Online Services Advisor Partners. Sales Order Process Flow For Managed Resellers, acquiring Office 365 Midsize Business follows the same path as on-premise products sold under Open, Open Value and Open Value Subscription agreements: purchase the Office 365 subscriptions through the Distributor. Upon receiving the purchase order, the Distributor places the order with Microsoft. Microsoft then sends an to the end customer and the partner that contains the link to the Volume Licensing Service Center (VLSC) where the Product Keys are provided to access Office 365. Partners can retrieve the Keys from the VLSC on behalf of their customers and assist in the activation of customers subscriptions. Additionally, Partners invoice their customers directly and ensure the Partner of Record (POR) has been set up correctly. Microsoft Corporation Managed Reseller Incentives Page 11
13 The flow for this sales process for Office 365 Midsize Business is shown in the table below. Office 365 Small Business Premium is acquired the same way as traditional FPP is today: purchase the physical inventory from a Distributor. The sales process of Office 365 Small Business Premium differs from the one for Office 365 Midsize Business in that customers purchase Office Small Business Premium via a physical FPP box, Product Key Card or a POSA card. Once the sale is made, customers redeem their Product Key and activate their subscription without assistance from partners. The sales process for Office 365 Small Business Premium is as follows: Microsoft Corporation Managed Reseller Incentives Page 12
14 Earning Incentives: Managed Reseller versus Advisor Customers have two options to purchase Office 365. The first option is to buy directly from Microsoft and leverage a Partner as an Advisor. In this instance, the partner can earn Advisor Incentives under the Microsoft Online Services Partner Agreement (MOSPA) Partner Incentives. For the second option, a customer can buy Office 365 Midsize Business and Office Small Business Premium SKUs directly from a partner. If the partner is an eligible Managed Reseller, then they can earn incentives for the sale as outlined in this document. Partners cannot earn both Advisor Incentives and Managed Reseller Incentives on the same transaction. For more detailed information on the Advisor Incentives, please refer to FY14 Online Services Advisor Incentives Guide. Incentive Calculation Example In the following example, we assume a Managed Reseller sold $3.5M in Open License revenue for the year. This reseller sold 25% of revenue under annuity contracts and their revenue was split by Core, Growth, and Incubation products per the example. Microsoft Corporation Managed Reseller Incentives Page 13
15 Office accounted for $1.04M of the Open license revenue. In this case, the local subsidiary applied 2 locally-chosen accelerators. In this example, the partner would earn annual incentives of $106,413 (3% of revenue). Mechanics of Earning and Usage Periods The two periods that make up the Incentives business cycle are: Earning Period: the 6 month period where partners earn rebates through their sales performance against the incentives objectives and eligibility criteria. A new Earning period will overlap with a current Usage period, based on 6-month cycles as shown in the figure below. Usage Period, or the claim period, is the 6 month timeframe that immediately follows the Earning" period. If partners have met the eligibility criteria, then they are awarded the rebate funds and can claim earned coop funds for eligible marketing, business development and readiness activities. Upon the awarding of funds, partners in the EMEA region can make rebate claims at any time during the six-month usage/claim period. In the Asia, Latin America, and Canada regions rebate payments are paid on the scheduled date without needing to make a claim. Microsoft Corporation Managed Reseller Incentives Page 14
16 Unclaimed funds are forfeited at the end of the Usage period. Partner is eligible to earn rebates and coop funds through sales of eligible licenses and products during the Earning period (6-month) When partner meets all requirements, rebate and coop funds are then AWARDED for Payment & Usage. Rebates are paid automatically and coop funds are paid against eligible activity claims. Partner claims earned coop funds after an eligible market development, demand generation, or readiness activity is performed during the 6-month USAGE period. Payment Frequency Rebates are paid during the month following the earning period after the calculations have been conducted and verified. Coop is paid during the Usage period after the activity has been completed and approved by Microsoft as successfully submitted. Payout Mechanics Wire transfer is the preferred payment method for all Managed Reseller partners. Compliance and Performance Use of Coop Funds Coop funds must be claimed during the six-month usage period that follows the Accrual period. If funds are not claimed during the six-month usage period, they will be taken away with no possibility of reinstatement. Additionally, Microsoft expects participating partners to be prepared with their marketing and sales teams by the beginning of their usage period, to be prepared to perform marketing activities in accordance with the coop marketing guidelines. Microsoft Corporation Managed Reseller Incentives Page 15
17 Understanding Coop Marketing Activities Eligible for Coop The eligible coop activities for Managed Reseller are listed in the figure below. For a detailed description of these activities, please refer to the Coop Guide available on the online Managed Reseller Activation Kit at: Please note that eligible activities can be leveraged to develop new business for either on-premise or cloud-based solutions. Aligning Marketing Coop Activities to Microsoft Priorities Microsoft has defined key priorities for FY14. Microsoft will be developing and launching sales and marketing campaigns around these priorities worldwide. Many Microsoft investments related to these priorities are driven locally as promotions, offers, and activities. Managed Resellers are encouraged to work with their PSE, T-PSE or Channel Development Manager (CDM) to align coop investments to these priorities and understand how to participate in those local initiatives throughout the fiscal year to best leverage Microsoft s investment. Microsoft Corporation Managed Reseller Incentives Page 16
18 Resources The following resources are available, explaining the Managed Reseller Incentive: Managed Reseller Activation Kit Coop-eligible activities must meet the requirements as defined in the Coop Guide. Partners in Asia, Latin America, and Canada are strongly encouraged to submit activities for pre-approval by to before they are performed. Other Incentives Partners eligible for Managed Reseller incentives may also meet the eligibility requirements for: Online Service Incentives: Earn advisor incentives for Office 365 bout directly by customer from Microsoft, Windows Intune, and Dynamics CRM Online incentives. Support and Questions For questions related to the Managed Reseller Incentives, please contact your local Partner Sales Executive or the Regional Service Center at https://mspartner.microsoft.com/en/us/pages/support/partner-network-support.aspx Microsoft Corporation Managed Reseller Incentives Page 17
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