Microsoft has announced major updates to its Cloud Solution Provider (CSP) program that will raise the bar for partner eligibility and performance starting October 1, 2025. These changes affect Direct Bill CSP partners, Indirect Resellers, and even Distributors, introducing stricter requirements and new opportunities. According to Microsoft Chief Partner Officer Nicole Dezen, all the updates are “designed to fuel growth in the small and medium enterprise customer segment through our partners,” ensuring customers have “the utmost confidence that they are selecting a partner and provider that can deliver all the value that they need… including AI transformation.”
In this blog, we’ll break down the Microsoft CSP program changes, explain what they mean for partners, and discuss how you can adapt and thrive with the right strategy and support. (Spoiler: A specialized indirect provider like Stratos Cloud Alliance can make a big difference.)
Major Changes to the Microsoft CSP Program
Microsoft’s new CSP program requirements introduce higher performance thresholds and validations for partners. Here’s an overview of the key changes coming in FY26 (effective Oct. 1, 2025):
- Three-Year Term Offers: First, Microsoft is expanding CSP licensing options by introducing 3-year subscription terms for Microsoft 365 E3 and E5 (and related suites) starting June 2025. This move mimics Enterprise Agreement terms, giving customers price predictability and partners new upsell opportunities over longer commitments. Eligible customers (100+ seats) will be able to lock in three-year subscriptions with upfront or annual billing, and Microsoft is even offering 10% discounts to encourage adoption of these long-term plans.
- New Partner Authorization Requirements: More critically, Microsoft is tightening the eligibility criteria for those who can sell via CSP. New authorization rules will apply to all partner types – Direct CSPs, Indirect Resellers, and Distributors – with enforcement on the anniversary of each partner’s enrollment. The goal is to ensure each CSP partner meets a “high bar for quality and capability” so that customers can trust their expertise. Below we detail the new requirements by partner type.
Direct Bill CSP Partner – Stricter Requirements
If you are a Direct Bill CSP partner (meaning you buy licenses directly from Microsoft and bill customers yourself), the bar is about to get much higher. Key changes include:
- Higher Revenue Threshold: Direct partners must generate at least $1 million in trailing 12-month CSP revenue, up from the previous $300,000/year threshold. This tripling of the revenue requirement is a significant jump. As one Microsoft partner put it, “[$1 million] is a big number.” Many smaller direct CSPs who comfortably met the old $300K bar may find $1M daunting, potentially forcing some to rethink their status.
- Solutions Partner Designation: Direct CSPs will need to hold at least one Microsoft Solutions Partner designation (in a relevant solution area) to continue as direct partners. There are six Solutions Partner designations (e.g. Business Applications, Modern Work, Security, Data & AI, Digital App Innovation, Infrastructure), and this requirement ensures direct partners have proven solution area expertise. In fact, by FY2027 Microsoft will require direct CSPs to earn a new “Support Services” designation as well, replacing the current support capability assessment.
- Annual Capability Assessment: Beyond revenue, Microsoft is introducing an annual automated assessment of each direct partner’s capabilities. This assessment will evaluate your operational capacity, sales strength, customer support practices, compliance framework, and security posture. (In other words, Microsoft wants to verify you have the systems and skills to reliably sell, bill, support, and secure your customers.) This assessment was already used for new direct partner applicants; now it will apply to all direct partners yearly.
- Advanced Support Plan Requirement: Direct CSPs must maintain an active Microsoft support plan – either Advanced Support for Partners (ASfP) or Premier Support – and Microsoft will enforce this annually (previously it was only checked at onboarding). ASfP plans start around $16,500 per year and provide enhanced cloud support and advisory services. Premier Support is even more comprehensive (managed support across all Microsoft products, with options for on-site help and dedicated engineers). This requirement ensures direct partners can provide high-quality support to customers and have fast access to Microsoft expertise when needed.
- Security Requirements: All CSP partners, including direct, must have a Partner Center Security Score of 80+ (out of 100). Microsoft calculates this score based on whether you’ve implemented security best practices in your tenant. For example, partners earn points for enabling multi-factor authentication (MFA) for all admin roles, designating a security contact, enforcing MFA for customer tenant admins, setting Azure spending budgets, and promptly responding to security alerts. The score requirement pushes partners to “maintain security postures that build… customer trust,” as Microsoft puts it, and mitigate risks. In short, if your internal security isn’t up to par, you’ll need to fix that fast.
What happens if a direct partner fails to meet these criteria? Microsoft has made the consequences clear. Partners who fall short by the deadline will lose their CSP authorization, undergo off-boarding and deauthorization, and even have their customers notified that the partner is no longer CSP-authorized. Microsoft will guide those customers to find a new (compliant) reseller. This is a worst-case scenario that every direct partner will want to avoid.
Microsoft does offer a fallback: if you can’t meet direct CSP requirements, you have the option to transition to an Indirect Reseller status by October 1 to stay in the program (more on that below). But the bottom line is that Microsoft is serious about trimming the direct channel to only those partners who demonstrate strong sales, support, and operational capabilities.
Indirect Resellers – New Baseline Expectations
For Indirect Resellers (partners who purchase through a distributor/Indirect Provider), the changes are less onerous but still important:
- Minimum Revenue: Microsoft will enforce a minimum of $1,000 in CSP revenue over the trailing 12 months for each indirect reseller. This is a low bar (just $1K annual), and most active resellers already meet it. However, it serves to weed out dormant partner accounts that aren’t selling anything. New resellers joining after Oct 1, 2025 will need to show they can at least make some sales within a year.
- Security Score 80+: Indirect partners must also meet the Partner Center security score ≥80 mandate, just like direct partners. This ensures even smaller resellers follow security best practices (MFA, etc.) to protect customer data. In today’s climate, Microsoft is uncompromising about ecosystem security – every partner is expected to “lead with compliance practices” and secure their own house to maintain customer trust.
- Business Vetting & Agreements: New indirect resellers will have to complete Microsoft’s business vetting process and accept the updated Microsoft Partner Agreement for indirect resellers. These are formalities to verify the legitimacy of your business and ensure you agree to program terms. Existing resellers would have done this already, but it’s worth noting Microsoft’s emphasis on compliance checks even at entry level.
Overall, indirect CSP partners face relatively minimal changes – if you’re selling actively and keeping good security hygiene, you should be fine. In fact, Microsoft’s new rules practically invite smaller partners to stay in the indirect program (or move into it) if they aren’t ready to meet the hefty direct partner requirements.
Why Microsoft Is Raising the Bar for CSP Partners
What’s driving these stringent new rules? In short, Microsoft wants to ensure high-quality partner engagement for customers and maximize the huge market opportunity in SMB. At Ignite 2024, Microsoft highlighted a “$661 billion” total addressable market in the small and medium enterprise segment for FY25 and beyond. To capture this opportunity, Microsoft needs a channel of partners who are skilled, committed, and trustworthy.
Nicole Dezen emphasizes that “it’s fundamentally important that customers can trust the partners with whom they do business.” Part of building that trust is “having an incredibly high bar for quality and capability” in the CSP partner ecosystem. In other words, Microsoft is raising standards so that end-customers get only the best-prepared partners advising them on cloud and AI transformations.
What Do These Changes Mean for CSP Partners?
For many partners, the new CSP program rules may be unsettling. Let’s break down the practical implications:
For Direct Bill CSP Partners: If you’re currently a direct CSP and your business is below the $1M annual CSP revenue mark or you lack a solutions designation or support plan, you face a tough decision. Microsoft’s stance is clear: come FY26, you either meet all the criteria or lose direct authorization.
- If you remain direct: Prepare to invest heavily – in sales growth, in earning Microsoft certifications/designations, in bolstering your support infrastructure (including purchasing ASfP/Premier), and in tightening security/compliance. The costs and effort will increase, but the reward is you keep Microsoft’s direct relationship and incentives. Some partners will rise to this challenge and emerge stronger and more specialized. Others may find the ROI isn’t there, especially if cloud licensing is not their primary business.
- If you switch to indirect: Partners who don’t meet the new bar by their annual CSP renewal date can opt to become Indirect Resellers instead. Microsoft has said that if you switch to indirect before the deadline, your existing customers can remain under your management (with you transacting through a distributor) until at least your next assessment date. This route can be much more forgiving – you offload the heavy requirements (revenue threshold, support contract, etc.) to an indirect provider, while still serving your customers. No partner wants to lose clients due to deauthorization, so transitioning to indirect can be a safety net that ensures continuity of service. We’ll discuss how to make that transition smooth (and even advantageous for your growth) in the next sections.
- For Indirect Resellers: The vast majority of Microsoft partners fall in this category – working with an indirect CSP provider (aggregator) to resell Microsoft cloud. The new rules likely won’t disrupt your day-to-day. Hitting $1,000 annual revenue is trivial if you have even a couple of small business customers. You should, however, use this moment to double-check your security posture and compliance with Microsoft’s requirements: – Ensure you’ve enabled MFA for all users and admins, – designate a security contact in Partner Center, – and follow any guidance to get that Partner Center security score up.
On the upside, Microsoft’s increased focus on CSP and moving more customers from Enterprise Agreements to partner-led CSP deals (with the new 3-year SKUs, etc.) could mean more opportunity for resellers. Microsoft is actively steering mid-market and smaller enterprise clients toward CSP for flexibility. If you are equipped and ready to scale, you could capture business from direct partners who drop down, or new customers entering the CSP sphere. The condition is: be a capable, customer-focused partner. This is where working with the right indirect provider becomes crucial (more on that below).
The Need for a Partner That Focuses on You
Amid these program changes, one thing becomes clear: partners will need more support than ever to navigate Microsoft’s complexities. Microsoft, for all its channel-friendly rhetoric, is a massive organization with over 500,000 partners. If you’re a small or mid-sized partner, you may have already felt that Microsoft’s attention is limited – you’re one of many, and Microsoft’s direct support to you is mostly through automated programs, documentation, or occasional calls. With the new CSP rules, Microsoft is effectively saying “step up or step aside.” But they aren’t necessarily going to help each individual partner meet those standards if you’re not among their top-tier contributors.
This is why having an indirect provider (distributor) who truly prioritizes your success is critical. If you choose to become (or remain) an Indirect Reseller, you’re placing a bet on a distributor to be your link to Microsoft. Not all distributors are the same:
- Large broad-line distributors might treat CSP as just one of many businesses, and smaller resellers can get lost in the shuffle.
- Some indirect providers focus on high volume and offer self-service portals but minimal one-on-one guidance.
- In contrast, a focused CSP indirect provider can act as a true partner, providing the personalized attention, resources, and expertise that Microsoft itself may not give you.
In the new CSP landscape, you should look for an indirect provider who will “focus on YOU,” the partner. This means they will help you scale your cloud practice, not just resell licenses. Key qualities to seek include:
- Hands-on enablement: Do they offer training, consulting, or onboarding to get you up to speed with new Microsoft offerings (like those 3-year subscriptions, or new Azure services)? Will they help you attain certifications or Solution designations by providing guidance?
- Sales and marketing support: A good provider will assist with go-to-market efforts – e.g. sharing leads, co-marketing funds, or pre-sales engineering help so you can win deals you might otherwise miss.
- Technical and customer support: Rather than you paying Microsoft $16k+ for support, your indirect provider should include robust support. Top indirect providers have dedicated support teams for their resellers and can escalate issues to Microsoft on your behalf. They might also offer white-labeled support you can extend to your end-customers.
- Business advisory: The best partners act almost like coaches or consultants. They will review your business goals and help chart a path (perhaps even aiming to get you to that $1M revenue so you could become direct again in the future if you wanted). They focus on enabling your growth, not just taking a cut of your sales.
In short, Microsoft’s changes make the choice of indirect provider more consequential than ever. You need a provider that sees your success as their success, and invests accordingly. Let’s look at an example of what such a partner offers.
How Stratos Cloud Alliance Helps Accelerate Your Microsoft Practice
Stratos Cloud Alliance (SCA) is an example of an indirect CSP provider that is laser-focused on the Microsoft channel and on partner success. In fact, Stratos is “the only indirect CSP specializing in the Microsoft channel platform,” meaning all of their expertise and resources go toward Microsoft cloud solutions. Stratos has roots in the Dynamics 365 space and has spent over a decade helping partners build successful Microsoft cloud practices. If you’re considering a switch to an indirect model – or simply looking for a better CSP distributor – here’s how a partner like Stratos can empower you:
- Easy Transition & Onboarding: Stratos offers a concierge onboarding for partners moving from Direct to Indirect. Their motto is “We’ve Got Your Back,” and they can get a new partner up and running in as little as one day on their CSP platform. For example, the Stratos Cloud Marketplace (an e-commerce portal) is provided to you, even in a white-label fashion with self-service options for your customers. This means you don’t lose functionality by giving up direct status – you gain a ready-to-use sales portal branded for your company.
- End-to-End Service & Support: Unlike a basic distributor, Stratos doesn’t just transact orders. They provide end-to-end services from pre-sales assistance to consulting support across Microsoft Cloud solutions.
Need help designing an Azure solution? Need an expert to assist with a tricky Dynamics 365 customization? Stratos has a deep bench of 500+ Microsoft-focused experts who can step in as an extension of your team. This allows you to offer a wider range of services (Azure, Microsoft 365, Dynamics 365, Power Platform, even the latest AI/Copilot solutions) without having to hire all that talent yourself.
In the new CSP world, this kind of support is gold – it helps you drive more revenue (and meet those Microsoft metrics) by expanding what you sell and deliver.
- Personalized Attention: One common complaint about big distributors is that a small reseller feels like a drop in the ocean. Stratos turns that around by giving individualized attention from an experienced team that genuinely cares about your success. When you partner with Stratos, you’re not just a number – you get a dedicated channel manager and access to experts who know your business. As Stratos puts it, partners reap the rewards of “individualized attention from an experienced team” that has transitioned many direct partners to indirect with “no interruptions to your business.” This hands-on approach can be a game-changer as you plan growth or navigate challenges.
- Incentives to Boost Your Margin: To sweeten the deal for direct partners moving over, Stratos even offers promotional benefits like starting you at a higher margin tier (up to 28% margin for your first year) regardless of your initial volume. This can offset the loss of direct incentives and ensure your profitability in the first year of transition. While specifics may vary, the point is that a partner-centric provider will invest in your business, not just take a cut. They succeed when you sell more, so they provide incentives and rewards to help you ramp up.
- Focus on Microsoft (and You): Because Stratos Cloud Alliance only deals in Microsoft Cloud, their entire organization is aligned with Microsoft’s roadmap and partner programs. They stay on top of updates (like these CSP changes) and help translate them for partners. You can count on them for timely guidance on things like new Microsoft incentives, licensing changes, or best practices to meet security requirements – all critical in FY26 and beyond. This focus also means if you aspire to earn a Solutions Partner designation or eventually qualify as direct, Stratos can help you map out that journey.
- Scalability and Optional Path to Direct: Working with Stratos does not mean you’re forever “just a reseller.” On the contrary, by leveraging their support to grow your customer base and skills, you might eventually reach the scale to revisit direct bill status (should that be your goal). Stratos has openly stated their goal is to help partners make more money and even eventually get back on a path to become a Direct Bill Microsoft partner if they choose – they are truly a growth incubator, not a dead-end[49]. In the meantime, you can enjoy the benefits of the indirect model (lower overhead, rich support) while still building your Microsoft practice under your own brand.
Stratos Cloud Alliance exemplifies the kind of indirect CSP partner you want in this new era: one that provides the tools, team, and dedication for you to scale and thrive despite Microsoft’s higher requirements. They focus on helping you succeed holistically – from quick onboarding, better margins, expert services, to training and one-on-one business guidance. This frees you to focus on selling and serving customers, while knowing the backend logistics and compliance pieces are handled.
Plan Your Next Steps
With Microsoft’s CSP changes on the horizon, now is the time for every partner to assess their strategy. The window to realign your business is open, but you should act before the new rules hit. Here are some final recommendations:
- Audit Your CSP Status: If you’re a direct CSP, honestly compare your metrics to the new requirements. Are you near $1M CSP revenue and growing? Do you have (or can you obtain) a solution designation and an advanced support plan? If these seem out of reach in the next few months, start exploring the indirect route sooner rather than later. It’s better to proactively transition than to be caught off-guard and lose customers if Microsoft deauthorizes your tenant.
- Strengthen Security & Compliance: Regardless of partner type, use the lead-up time to get your security score above 80. Implement MFA everywhere, review your internal compliance, and engage with Microsoft’s partner security resources. Not only will this tick Microsoft’s boxes, it will protect your business and clients from threats.
- Educate Your Team and Customers: Make sure your team understands these changes – not just the requirements, but Microsoft’s direction (e.g. more cloud subscriptions, longer terms, focus on AI services). This will help you have informed conversations with customers who may hear about Microsoft’s programs evolving. You can spin this positively: for instance, the new 3-year subscription option can be pitched as a way for customers to lock in pricing and work with you on long-term planning.
- Choose the Right Partner Path: If you decide to remain a direct partner and double-down on meeting the criteria, consider engaging Microsoft or a consultant about how to improve your score or grow sales. If you decide to go indirect, choose a quality indirect provider that aligns with your needs (as we discussed). Do your due diligence: compare the support, portals, and fees of different distributors. Remember, this is essentially choosing a partner for your business’s next chapter.
- Leverage Expert Guidance: You don’t have to navigate this alone. Stratos Cloud Alliance, for example, offers a “CSP Shift” strategy consultation – essentially a session with their direct and indirect billing experts to map out your best move. It’s highly advisable to schedule a CSP strategy session with a knowledgeable partner advisor. They can help answer questions like: What would moving to indirect mean for my profits? How can I maximize incentives? How do I ensure my customers have a seamless experience during any transition? Getting these answers will give you confidence in executing your plan.
Microsoft CSP changes in 2025 will undoubtedly shake up the channel, but with the right preparation and partnerships, you can turn this into an opportunity. Microsoft is ultimately pushing partners to elevate their game – by aligning with a supportive indirect partner like Stratos Cloud Alliance, you can meet that challenge head on. You’ll be able to focus on growth and customer relationships, while your indirect partner handles the heavy lifting of compliance, support, and solution delivery alongside you.
Bottom line: Don’t wait until the last minute. Evaluate your readiness now, strengthen any weak spots, and align with partners who will focus on you. With a solid strategy in place, you can continue to scale your Microsoft cloud practice and even accelerate it – no matter how Microsoft’s program evolves.
Schedule a CSP “Shift” Strategy Session with Stratos Cloud Alliance to get personalized advice on navigating these changes and accelerating your Microsoft business. The future belongs to partners who adapt and invest in quality – and with the right ally, you’ll be well positioned to thrive in Microsoft’s new CSP era. Schedule Here.
