Azure Cloud Billing Wiki

CSP Program Overview

Introduction to Cloud Solution Provider (CSP)

The Microsoft Cloud Solution Provider (CSP) program enables MSPs and partners to resell Microsoft cloud services, including Azure, Microsoft 365, and Dynamics 365. For Azure-focused MSPs, CSP is the primary commercial model for delivering managed cloud services.

CSP Program Models

Microsoft offers two CSP engagement models with different partner relationships and responsibilities.

Direct Bill CSP (Tier 1)

Requirements

  • Direct billing relationship with Microsoft
  • Minimum $300,000 annual Azure consumed revenue (ACR)
  • Legal entity in supported CSP country
  • Ability to provide 24/7 customer support
  • Financial capability to manage invoicing and collections

Benefits

  • Direct access to Microsoft commerce platform
  • Full control over customer relationships
  • Higher potential margins
  • Access to all CSP features and APIs

Responsibilities

  • First-line support for customer billing and technical issues
  • Payment collection from customers
  • Invoice reconciliation and payment to Microsoft
  • Compliance with CSP agreement terms

Indirect CSP (Tier 2)

Model

  • Partner works through an Indirect Provider (distributor)
  • Indirect Provider handles Microsoft billing relationship
  • Lower entry barriers than Direct Bill

Benefits

  • No minimum revenue requirement
  • Reduced financial risk (provider handles invoicing)
  • Support from Indirect Provider
  • Access to provider's tools and resources

Tradeoffs

  • Indirect Provider takes margin (reduces partner profitability)
  • Less control over billing processes
  • Dependent on provider's capabilities and terms

Choosing Your CSP Model

Start as Indirect CSP If:

  • New to CSP program
  • Azure revenue <$300K annually
  • Limited financial resources for billing float
  • Want training wheels before going direct

Move to Direct Bill When:

  • Consistently exceeding $300K Azure ACR
  • Want full control and maximum margins
  • Have billing infrastructure and support capabilities
  • Comfortable managing Microsoft relationship directly

CSP Billing Mechanics

How MSPs Get Paid

Partner Purchase Price

  • Microsoft sells to CSP partner at wholesale price
  • Wholesale price is retail price minus partner margin
  • Partner free to set retail price (markup) to customers

Typical Margin Structure

  • Azure services: 10-18% partner margin on Microsoft retail price
  • Higher margins for managed services and professional services
  • Partner Earned Credit (PEC) adds 15% on managed Azure consumption

Example Calculation

  • Microsoft retail price: $1,000
  • Partner purchase price: $850 (15% discount)
  • Partner sells to client: $1,200 (41% markup on cost, 20% on retail)
  • Gross margin: $350

Invoice Timing

Microsoft Invoices Partners

  • Invoices generated between 6th-8th of month
  • Cover previous calendar month's consumption
  • Payment terms: 60 days from invoice date
  • Late payments can result in account suspension

Partners Invoice Clients

  • Timing flexible (monthly in arrears is common)
  • Many MSPs invoice early in month (1st-5th)
  • Provides cash flow advantage: collect before paying Microsoft

Reconciliation Files

Microsoft provides detailed reconciliation files:

License-Based File

  • Covers Microsoft 365, Dynamics 365 subscriptions
  • Lists seat counts and subscription changes

Usage-Based File

  • Covers Azure consumption
  • Line-item detail for every meter
  • Maps to customer, subscription, resource

Daily Rated Usage File

  • Real-time daily usage data
  • Allows mid-month billing if needed
  • Useful for cost alerts and monitoring

Partner Earned Credit (PEC)

A significant financial benefit for MSPs actively managing Azure environments.

How PEC Works

Eligibility Requirements

  1. Partner Admin Link (PAL): Admin account linked to Microsoft AI Cloud Partner Program ID
  2. Management Plane Access: Admin or owner role on customer subscriptions
  3. Ongoing Management: Regular management activities
  4. CSP Relationship: Active CSP customer relationship

Credit Amount

  • 15% credit on Azure consumed revenue
  • Applied automatically when criteria met
  • Appears as line item on invoice

What Qualifies as Management

  • Deploying and configuring resources
  • Monitoring and performance tuning
  • Security and compliance management
  • Backup and disaster recovery
  • Cost optimization activities

Maximizing PEC

Set Up PAL Association

# Link admin account to partner ID
az managementpartner create --partner-id <YourPartnerID>

Maintain Admin Access

  • Use Partner Center delegated admin privileges
  • Avoid losing admin rights through customer changes
  • Monitor PEC eligibility in Partner Center

Document Management Activities

  • Log regular management activities
  • Maintain evidence of ongoing engagement
  • Protect PEC during Microsoft audits

PEC Calculation Example

  • Client Azure spend: $10,000/month
  • Partner purchase price: $8,500
  • PEC (15% of $10,000): $1,500
  • Net partner cost: $7,000
  • Effective margin: 30% (vs. 15% without PEC)

CSP Customer Lifecycle

Customer Onboarding

  1. Establish CSP Relationship

    • Customer accepts CSP agreement
    • Completed in Partner Center
    • Creates tenant or links existing tenant

  2. Create Subscriptions

    • Azure plan subscription created under customer tenant
    • Partner has delegated admin access
    • Billing flows to partner

  3. Set Up Resources

    • Deploy initial Azure resources
    • Configure access controls and policies
    • Implement tagging strategy

Ongoing Management

Monthly Tasks

  • Review consumption and billing
  • Optimize costs based on usage
  • Generate client reports
  • Reconcile Microsoft invoice

Quarterly Tasks

  • Performance reviews with clients
  • Reserved Instance assessments
  • Architecture optimization reviews

Customer Offboarding

Transitioning Away from CSP

  • Customer can move to another partner or go direct (EA, MCA)
  • 72-hour transition window
  • No refunds on existing commitments
  • Communicate early to avoid surprises

CSP Partner Center

The portal for managing CSP operations.

Key Functions

Customer Management

  • Onboard new customers
  • Manage customer relationships
  • View customer subscriptions

Billing & Invoicing

  • Download invoices and reconciliation files
  • View payment status
  • Access usage data

Support

  • Submit support requests on behalf of customers
  • Track support ticket status
  • Access Premier Support (if purchased)

Analytics

  • Revenue reports
  • Customer growth metrics
  • PEC earnings tracking

Accessing Partner Center

URL: https://partner.microsoft.com/

Requires Microsoft AI Cloud Partner Program membership (formerly MPN).

CSP vs. Enterprise Agreement (EA)

Understanding when CSP makes sense vs. EA.

Factor CSP Enterprise Agreement
Customer Size SMB to mid-market Enterprise (typically 500+ users)
Commitment Month-to-month 3-year commitment
Pricing Flexible, partner-determined Negotiated with Microsoft
Partner Role Full reseller and manager Advisory, less direct control
Best For MSPs providing managed services Large orgs with in-house IT

MSP Positioning: CSP ideal for clients wanting fully managed Azure services. EA better for enterprises preferring direct Microsoft relationship with partner advisory role.

CSP Program Requirements & Compliance

Ongoing Requirements

Support Capabilities

  • Provide billing support (24/7 for Direct Bill)
  • First-line technical support
  • Escalation path to Microsoft

Financial

  • Maintain payment with Microsoft
  • Creditworthiness maintained
  • Tax compliance in operating regions

Legal & Compliance

  • Adhere to CSP agreement terms
  • Respect customer data privacy (GDPR, etc.)
  • Maintain proper licensing

Training

  • Keep certifications current
  • Stay updated on Azure changes
  • Partner University completion

Audit & Compliance

Microsoft May Audit

  • PEC eligibility and management activities
  • Customer consent and documentation
  • Licensing compliance

Best Practices

  • Document management activities systematically
  • Maintain PAL associations
  • Keep customer agreements organized
  • Regular internal compliance reviews

CSP Partner Resources

Partner Center: Primary management portal
Partner University: Training and certifications
Partner Support: Technical and operational assistance
Azure Partner Zone: Technical resources and best practices

Next Steps

  • Learn MSP Billing Best Practices for client invoicing strategies
  • Explore Azure Cost Optimization for MSPs to maximize PEC and margins
  • Review Azure Billing APIs & Automation for streamlining CSP operations

CSP provides MSPs with a powerful commercial model. Mastering it – especially PEC – is key to building a profitable Azure practice.