Changing role of the LSPTo be honest, we struggle with the role of the Licensing Solution Provider (LSP). Generally we see that the LSP does not deliver the work they should be delivering and that there is a lack of knowledge within many of the LSPs. Traditionally the LSP was an intermediary between Microsoft and the clients providing the licenses, advice and dealing with any and all of the paperwork. This worked well in streamlining the process. Now the LSPs are trying to add more value into their offer, as this is forced on them by Microsoft. This usually results in them not delivering on their core business anymore. A lose-lose situation.
This is article seven in a series of eight blogposts in which we share our learnings and some of the biggest changes to Microsoft’s negotiation tactics in 2022. Insights from last year can help your strenghten your position in the upcoming negotiations.
Diffculty finding the right people
One of the reasons for this could be the difficulty in finding the right staff. To do this role well you need knowledge of and experience in Microsoft licensing and contracting. This is not something that can be easily picked up within six months. It takes years of working in the field to build up in-depth knowledge.
Changing revenue model
Another reason the role of the LSP is changing is the revenue model. Microsoft reduced the ‘kickback fee’ amounts with regards to normal Microsoft technology and it is only granting higher rebate percentage. LSPs no longer earn as much as before. At the same time, Microsoft is reducing their own staff and moving Account Managers into channel (partner) roles thus putting more work on the LSPs.
We regularly experience that our clients have been misinformed by their LSP, for instance on making use of the extended term of their agreement. The client’s best interests should always be the guiding factor, not the LSP’s. LSPs are paid by Microsoft to sell their licenses, however some LSPs charge their customers money to buy the licenses too. This means both the customer and Microsoft pay the LSP for the same license. To us this doesn’t make sense.
One of the reasons we founded LicenseQ is to be able to add value for clients. We want to provide independent insights, knowledge and expertise that clients can no longer find anywhere else. We work with the client’s best interests in mind. What we most want to see in the LSP market is transparency. If you are working with a LSP, don’t be afraid to challenge them and demand transparency on their margins.
Watch our YouTube video for more context
Prefer to watch a video instead? In the YouTube video below Floris and Erik discuss the changing role of LSPs. Prepare yourself for any upcoming contract renewals or mid-term new business negotiation in Microsoft’s Fiscal Year 2023.
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