The Future of Microsoft ISPs Is Not Technical

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If your Microsoft practice still tries to differentiate itself

through deployment expertise,

you are competing in a market that no longer exists.

Pause on that for a second.

The future of Microsoft ISPs is not technical,

and the partners who fail to grasp that shift

will slowly become interchangeable.

This won't happen overnight over the sudden burst of drama,

but over the next 18 months,

these firms will watch their pricing pressure increase

while customer acquisition costs rise.

The very thing they built their business on,

technical excellence, will become a completely assumed baseline.

Here's the uncomfortable reality of the situation.

CSP margins are structurally compressing

because Microsoft announced this shift two years ago,

and the impact is finally landing now.

By January of 2026, all large enterprise agreements

will transition directly to Microsoft,

which represents a $2.5 billion commission wipeout

across the entire partner ecosystem.

65% of partners are simply not equipped

to survive this transition,

not because they lack the ability to execute,

but because their entire model depends

on someone else's pricing structure.

When your strategy relies on a price list,

you don't control, you don't actually have a strategy,

and that exposure is now closing in.

At the same time, automation is standardizing everything you sell.

Co-pilot is now embedded directly in the interface,

lighthouse performs deployment health checks

without needing human interpretation,

and autopilot reduces onboarding to something

a competent customer can handle alone.

The skill gap between a certified partner

and a disciplined customer team is narrowing every day,

and it will continue to shrink as Microsoft's own

native diagnostics commoditize the implementation layer.

You can already feel this shift in deal conversations

where customers ask fewer questions about

how you'll configure a system and focus entirely on the price.

Feature parity across the ecosystem means customers

no longer compare you based on capability.

They compare you on cost.

The certification arms race,

the endless pursuit of solutions partner badges

and security specializations proves you can do the work,

but it doesn't prove you should be paid a premium for it.

These credentials signal basic hygiene

rather than actual leverage.

Microsoft is also moving upmarket

by deploying their own large account teams

and handling transformational deals directly.

Mid-market customers now receive cloud incentives

and direct technical support,

leaving the partners in the middle squeezed from both sides.

They are not large enough to be strategic

and not specialized enough to be necessary,

trapped between Microsoft's direct motion

and a marketplace where implementation services

are three clicks away.

Many of you built these practices from nothing

by coding, learning the platform,

and earning customer respect through sheer technical competence.

That pride is legitimate,

but it has become obsolete as a business model

because the work itself stopped being differentiated.

Everyone has the same certifications

and everyone knows the same feature sets,

so the badges just multiplied,

as if more credentials could rebuild a mode

that automation already demolished.

This is the core tension.

Implementation revenue is episodic.

You perform a migration or configure defender

and then the contract ends,

meaning your growth depends entirely on deal velocity

and utilization rates.

Your retention relies on finding excuses

to touch the customer again before they realize

they don't actually need you.

Economic advisory revenue is structural

because you become the operator

who owns the tenant's cost-to-value equation.

You run the quarterly reviews,

adjust entitlements to prevent waste

and guide license consolidation

while measuring co-pilot adoption

against actual outcomes.

This creates retainable,

repeatable revenue that compounds over time,

building a dependency based on clarity,

rather than a fee of technical errors.

One is a project, the other is a practice.

One scales with sales,

while the other scales with outcomes.

When a capability becomes expected,

it stops being strategic

and that transition is now complete.

The market no longer values technical implementation.

It values economic stewardship.

The discomfort.

If your Microsoft practice differentiates

on deployment expertise,

you are competing in a market

that no longer exists, pause on that.

The future of Microsoft ISPs is not technical.

Partners who don't understand that shift

will slowly become interchangeable.

It won't be a sudden collapse,

but over the next 18 months,

they will watch pricing pressure increase

and acquisition costs rise

while their technical excellence

becomes a basic expectation.

CSP margins are structurally compressing right now.

Microsoft announced this two years ago,

and the impact is finally hitting the bottom line.

By January of 2026,

all large enterprise agreements

will transition directly to Microsoft,

resulting in a $2.5 billion commission wipeout

for the partner ecosystem.

65% of partners won't survive this

because they built a model

that depends entirely on someone else's pricing structure.

When your strategy relies on a priceless

you don't control,

you don't have a strategy.

You have exposure,

and that window is closing.

Automation is standardizing your catalog.

Co-Pilot is embedded in the UI,

lighthouse handles health checks,

and autopilot makes onboarding

simply enough for customers to run themselves.

The skill gap between a partner

and a disciplined customer team

is narrowing because

Microsoft's own managed services

are commoditizing the implementation layer.

You can hear it in your sales calls

when customers stop asking about configuration

and start asking about the bill.

Feature parity means customers

no longer compare you on capability,

and they compare you on price.

The certification arms race,

the badges on top of badges,

proves you can do the work,

but it doesn't justify your margin.

These are signs of hygiene,

not signs of leverage.

Microsoft is also moving upmarket

with their own teams and direct deals.

Mid-market customers now get direct support

and co-sell incentives,

which compresses the partners stuck in the middle.

You are being squeezed from above

by Microsoft's direct motion,

and from below,

by a marketplace

where implementation is a commodity.

The emotional reality for ISPs.

Let's talk about what this actually feels like.

You built these practices

from nothing through late nights

and deep technical learning.

You earned respect because you knew

how to make the technology work,

and that pride is real.

However, that pride has become a liability.

The old MSP model was simple.

You had a capable team,

you won deals based on trust,

and the business grew

because technical knowledge was scarce.

You showed competence,

built a reputation,

and won at scale.

That model is now collapsing.

The certification arms race only accelerated

because the work itself

stopped being unique.

Everyone has the same badges now,

and everyone can deploy,

autopilot,

or set up conditional access in Entra.

The badges multiplied.

Advanced Solutions Partner,

Security Specialization,

AI Cloud Partner,

as if more credentials could fix a mode

that automation had already destroyed.

Five years ago,

being a Solutions Partner meant

you were in the top percentile

of capable firms.

That credential had weighed

because it represented validated

scarce skills.

Today, that status is just table stakes.

It's what customers expect you to have

before they even pick up the phone.

You cannot rebuild a business mode,

using credentials

that every one of your competitors can attain.

The real issue

is that you've been racing to prove

you can do what Microsoft's own tools now do automatically.

Feature-based sales decks are dead.

You've felt it in the room

when customers stop caring about

Defender or E5 capabilities,

and start asking if they are getting value

from what they already bought.

They don't want to see deployment slides,

they want to see business outcomes.

Yet, the industry keeps doing more of what failed.

More feature deep dives,

more co-pilot use cases,

and more marketing that leads

with technical specs instead of business impact.

It is like competing to be the best driver in a world

that no longer needs people behind the wheel.

The core tension,

episodic versus structural revenue,

you need to understand the fundamental shift

in how money is made.

Implementation revenue is episodic

and usually lasts for a few months of effort.

You configure the environment,

hand it off,

and send the final invoice.

Once the contract ends,

you need a brand new deal to keep the lights on.

This model is built on velocity,

forcing you to constantly ask how many migrations

you can staff before customers stop needing you.

This creates a specific kind of internal pressure.

You focus on sales targets and utilization metrics

because the revenue doesn't compound.

It just terminates.

Growth is measured by how many new deals you can harvest,

making retention a secondary concern,

rather than a requirement for survival.

Profitability in this model depends on keeping your people billable.

You have to charge enough to cover overhead

while finding enough deals to keep the bench full.

This is a project services business

with project services economics.

When the work becomes a commodity,

your margins shrink because customers can find

the same standardized service cheaper elsewhere.

Economic advisory revenue is structural.

You become the operator who owns the cost of value equation

for the entire tenant.

You run the business reviews.

Adjust entitlements based on actual usage

and prevent waste.

You guide license consolidation

and measure co-pilot adoption

against actual workflow improvements

rather than just usage metrics.

This creates repeatable revenue that compounds.

Once you own the economic relationship,

you have visibility that the customer lacks internally.

You can measure the things the CFO cares about

and prevent costs the CIO doesn't even see yet.

You become structurally necessary,

not because you are technically superior,

but because you own the information on the economic side.

This model changes your internal psychology

from sales pressure to advisory discipline.

Instead of chasing a pipeline of new deals,

you manage a portfolio of deepening relationships.

Growth comes from wallet expansion

and prevented costs rather than just finding new logos.

Retention isn't a nice to have.

It is the entire business.

Profitability here depends on value realization.

If you can connect what a customer pays

to what they actually use,

you gain pricing power.

You aren't competing on the cost of delivery anymore.

You are competing on economic outcomes

which are far more valuable to the client.

One is a project, the other is a practice.

One scales with sales while the other scales with outcomes.

One ends when the work is done while the other grows over time.

One competes on price because there is nothing else left

while the other competes on impact.

Your customers already know this.

They aren't fighting you on your margin.

They are fighting you because you aren't giving them

economic visibility.

They don't care if you are technically better than the next guy.

They care if you are creating clarity and stopping waste.

This isn't just a preference.

It is the maturation of the market.

When a capability becomes expected, it is no longer strategic.

The market has moved past deployment.

What comes next is economic stewardship.

The partners who embrace this shift

will own their customer relationships,

while those who don't will watch their clients become interchangeable.

When everyone looks the same, price is the only thing that matters.

That is the discomfort you feel right now.

The margin pressure and the constant need for velocity.

There is a way forward, but it requires a diagnosis of what value

actually looks like in a mature market.

The diagnosis.

Now that you understand the discomfort,

we need to diagnose what is actually happening.

This is not random market chaos.

This is a predictable structural change following a pattern

that occurs in every mature technology market.

Understanding that pattern is critical

because it explains not just where you are,

but where you are headed if you do not act.

The commoditization curve.

Every technology market follows the same progression.

This is not an opinion.

This is observable across industries, decades, and vendors.

The pattern is complexity emerges.

A new capability appears.

It is hard to understand.

It requires specialized knowledge.

Barious to entry are high.

Early adopters invest heavily to master it

because mastery creates a competitive advantage.

Specialists emerge.

As complexity proves durable,

specialist form around it.

Consulting firms.

Implementation partners.

Training academies.

The specialist become essential because the work is still complex

and capital intensive.

Customers need experts.

Experts command premium pricing.

Standardization follows.

As the market matures, patterns become visible.

Best practices crystallize.

Automation tools emerge to reduce manual effort.

Methodologies replace artistry.

The complexity does not disappear, but it becomes repeatable.

The work starts to feel like a process instead of a craft.

Commodization accelerates.

Once work is standardized, it becomes higherable.

You do not need a specialist anymore.

You need competence.

The skill gap between a master craftsman and a competent technician collapses.

Marketplace platforms emerge.

Competitors multiply.

Price competition begins.

The margin that specialists enjoy evaporates.

Value migration moves upstream.

By the time commoditization is complete,

the real value has shifted to the layer above.

It is no longer about doing the work.

It is about optimizing the outcome of the work.

Orchestrating multiple commodities.

Preventing inefficiency.

Guiding decisions that compound advantage.

The vendors and partners who understand this migration early capture it.

The ones who do not become interchangeable.

Watch this pattern unfold in real time across the Microsoft ecosystem.

Azure migration was cutting edge in 2015.

Maybe 2016.

Complexity was high.

Few partners understood cloud architecture.

Customer risk was real.

If you got it wrong, the migration failed.

Specialist commanded premium rates.

Implementation teams were small and expensive.

Migration projects were high value engagements with strong margins.

By 2019 patterns were clear.

Best practices had been documented.

Tools had emerged.

Methodologies were standardized.

Azure Migrate did discovery automatically.

Rehose became template driven.

The skill gap collapsed.

By 2022, Azure Migration was wrote.

Marketplace partners could do it.

Customers could do significant portions themselves.

The margin on migration revenue compressed hard.

You could feel it.

The deals that cost $500,000 in 2017 were being bid

at $300,000 by 2021.

Now watch E5 security.

When E5 was introduced,

it represented a major complexity jump.

Threat and vulnerability management.

Advanced auditing.

Privilege access management.

Per view for data governance.

These capabilities were cutting edge.

Not many partners understood the full value.

You could command premium pricing for E5 advisory and deployment

because customers could not do it themselves.

Then standardization happened.

Defender patterns became documented.

Security baselines emerged.

Pilot programs became common.

By 2024, E5 deployment was expected knowledge.

Not cutting edge.

Assumed.

Customers stopped paying premium rates for E5 implementation

because the work was standard.

The mode that existed in 2018 had completely eroded.

Now watch what is happening with endpoint onboarding

and copilot deployment.

Endpoint onboarding through Intune and Entra was one specialized work.

Now autopilot has reduced it to a process.

Copilot is embedding into the interface.

The deployment is becoming native.

In 24 months, you will be past standardization

and entering commoditization.

This will compete on price because the work will be repeatable

and higherable.

Customers will assume your team knows how to do it.

Anything beyond that will be treated as nice to have.

Not strategic.

This is not a slow change.

This is not subtle.

This is structural.

And it applies to every implementation service you currently offer.

The key insight.

If you can hire it in three clicks on a marketplace,

it is not a mode.

It is a commodity.

And commodities are priced accordingly.

The partners who are currently compressing on margin

are the ones who build their practices on the commodities of 2015 through 2020.

As your migration, security deployment and point management,

these were high-value engagements five years ago.

They are low margin today.

And the partners offering them are wondering why their deals are harder to close.

And their margins thinner than they used to be.

That is because the value migrated upstack.

The question is no longer, can you migrate?

It is.

Are we getting value from what we migrated?

The question is no longer, can you deploy E5?

It is.

Are we actually using the capabilities we are paying for?

The question is no longer, can you enable Copilot?

It is.

Is Copilot actually reducing our cost of work in measurable ways?

Those questions require completely different expertise.

And those answers are what the market will pay for next.

The three ISP models that are dying.

I want to be specific about which partner models are hitting a wall right now.

Within the Microsoft ecosystem, three dominant archetypes exist

and none of them are ready for what comes next.

Every one of them is watching their margins shrink for the same structural reason.

They built their entire business on capabilities that are now expected,

automated or completely commoditized.

Model 1, the license reseller.

The license reseller operates on a single, simple premise.

If you can buy a license for less than you sell it for, you have a business.

The mechanics are straightforward.

You establish a relationship with Microsoft, negotiate volume discounts,

and buy licenses at scale.

Then you flip those licenses to customers at retail price

and keep the spread as your profit.

You win by offering better pricing than a customer can get going direct

and you grow by stacking more seats and managing renewals.

This model has worked for decades and represents how a massive portion

of the partner world functions.

It is simple, mechanical and highly scalable,

but the structural flaws are becoming impossible to ignore.

Your only real competitive advantage is negotiating power and deal flow

rather than actual value creation.

Because your margin depends entirely on someone else's pricing structure,

you have no control over your own fate.

Microsoft changes the rules whenever they feel like it.

When they announce CSP compression or move enterprise accounts

to direct sales, your margin simply evaporates.

You cannot protect it or argue against it.

You just absorb the hit, which is exactly what we are seeing today.

The billions in commission revenue currently vanishing from the ecosystem

aren't being taken from the partners who fail to provide value.

Instead, that money is being redistributed based on Microsoft's

new direct sales motion and CSP restructuring.

Your customers aren't staying because of your unique brilliance.

They stay because the cost of switching is a headache.

However, the check that comes with that renewal is getting smaller

and you have no lever to pull to change that reality.

Furthermore, you have no real economic relationship with the customer.

You buy, you sell and you renew,

but you have zero visibility into whether those licenses actually do anything.

If a customer buys E5, you have no idea if they are using it

or if they are seeing a return on that investment.

You actually have no incentive to find out

because your revenue is flat regardless of whether they use 5% or 95% of the product.

Finally, you have no switching costs to keep people around.

When a customer realizes buying direct is cheaper

or finds a partner with a better discount,

they have no structural reason to stay with you.

You have no embedded data and no measurable value that they would lose by leaving.

You have licensing competence, but since every other certified partner

has that same competence you are entirely interchangeable.

I saw one partner survive this by restructuring their entire business

to keep licensing at only 40% of their revenue.

They built advisory services and managed offerings

that connected finance directly to IT,

becoming stewards of the environment instead of just resellers.

By 2023 their total revenue grew even as their licensing income shrank

while their competitors who stayed in the old model

saw revenues crater by 65%.

The license reseller model is dying because it creates no defensible value.

Licensing is critical, but the model itself is purely transactional.

When transactions become a commodity, the model collapses.

Model 2, the migration factory.

The migration factory is built on the idea

that cloud adoption creates a never-ending mountain of work.

You build a specialized team.

Create a repeatable process and execute migrations at scale.

You grow by riding the wave of cloud adoption

and turning that momentum into billable hours.

This model has created massive wealth

and some of the largest service providers on earth

are essentially just giant migration factories.

You hire specialists, staff projects and build a machine

that converts digital transformation into a steady stream of revenue.

The problem is that migrations are a finite resource.

Cloud adoption is a phase, not a permanent state of being.

Every business that intends to move to the cloud

will eventually finish that move

or they will settle into a hybrid strategy.

At some point, the work of shifting workloads

from on-premises to the cloud simply concludes.

The migration wave peaked over the last two years.

And while it isn't over, the velocity is clearly slowing down.

We have entered the tail end of the gold rush.

Fewer projects are transformational in scope

and more are incremental, which leads to lower margins

because everyone is fighting over the same shrinking pool of work.

A migration factory works perfectly when the pool of work is expanding

but it breaks the moment the work becomes finite.

Your entire business is predicated on finding the next big wave

and if that wave doesn't arrive, you are left with massive overhead

and empty promises to investors.

The market that built your revenue model is cooling off.

Partners who saw this coming started pivoting long before the wave crested.

They moved into operational management

and created services for post-migration optimization.

They stopped saying, we'll help you move

and started saying, we'll help you run what you have.

Those partners are still growing while the ones stuck in the factory model

are fighting for low margin scraps and struggling to keep their staff busy.

The migration factory is dying because it solves a temporary problem.

Once the problem is solved, the model has no natural second act.

Model 3, the feature-driven MSP.

The feature-driven MSP is perhaps the most dangerous model

because it looks like a strategy but it is actually just marketing theatre.

This model leads with whatever is new.

If Microsoft releases a co-pilot capability or a defender upgrade

that becomes the sales pitch and the webinar topic.

The strategy is simple.

Microsoft releases a feature, you market it as critical

and you get paid to turn it on.

The foundational mistake here is believing that feature adoption

is the same thing as business transformation.

Customers do not actually care about features.

They care about outcomes.

If you deploy co-pilot into a company that hasn't redesigned its workflows

adoption will stay low and no value will be created.

You've turned on a light switch in an empty room

when you build your business around the Microsoft roadmap.

You have effectively outsourced your thinking.

You are reactive and subservient to someone else's velocity.

Microsoft releases features to build a platform

not to create revenue opportunities for you.

This also creates a skeptical customer.

They see a never-ending parade of pitches for co-pilot agents

and new AI models each coming with its own implementation cost

and training requirements.

Eventually the customer asks if they actually need any of this

or if they are just being sold to.

Once that doubt enters the room, you lose your position

as a trusted advisor and become just another vendor defending the hype.

The feature driven MSP is dying because it sells complexity instead of preventing it.

Customers have become much better at spotting the difference.

Why technical excellence no longer differentiates?

When you bring these three failing models together,

you can see why technical competence has lost its strategic value.

Being good at the technology is now the baseline.

It is documented, automatable and increasingly handled by AI.

Your customers already assume you can handle deployment, security configuration

and identity management.

These are no longer differentiators. They are just the cost of entry.

However, there is something your customer does not have.

Economic telemetry.

They lack any systematic way to see the relationship between what they spend and what they get.

They don't know what percentage of their E5 licenses are actually active

or which security tools they are paying for that overlap with things they already own.

They cannot tell you if co-pilot is reducing work or if employees are just playing with it.

They also lack architectural clarity.

Most organizations have no governance model to stop permission entropy or align their information architecture.

They don't have a way to connect the CFO to IT operations.

So the person signing the checks understands what is actually driving the cloud bill.

Your customer can find technical implementation anywhere.

What they cannot find is the discipline to measure whether that implementation actually matters.

This is not a technical hurdle. It is an economic one.

And that is where the real leverage is found.

The opportunity isn't in turning features on.

The opportunity is in preventing inefficiency and connecting technical choices to financial outcomes.

It is about being the bridge between the CO and the CFO that makes the entire conversation make sense.

That isn't technical expertise. That is structural economic stewardship.

And that is exactly what the market is going to pay for next.

The evolution.

Now that we have identified what is dying, we have to look at what is being born.

This is not a theoretical exercise.

I am describing an operating model that is already surfacing in the market.

The partners who grasp this will own their customer relationships for the next 10 years.

While those who ignore it will watch their clients become interchangeable with any other certified firm.

This shift requires you to completely reframe your identity and your offering.

You are no longer an implementer. You are an operator.

You are not selling one-off projects. You are providing long-term stewardship.

Your value no longer lives in what you can turn on, but in your ability to prevent what shouldn't happen and guide what should.

The Microsoft economic steward reframing the ISP role.

Let me introduce a new archetype for the industry.

The Microsoft economic steward.

An economic steward functions differently than a traditional implementer.

While an implementer configures a system, a steward operates it.

An implementer fixes a problem after it breaks, but a steward prevents the break from ever occurring.

One responds to a request while the other anticipates a business need before it is even voiced.

Here is how an economic steward actually functions.

They map license investments directly to realized capabilities.

They ask what you bought and what those tools were designed to do versus what you are actually getting from them.

This process identifies capabilities you pay for but never use.

Or features you use that could be delivered through a cheaper, more efficient license.

They eliminate the overlap across your various tool sets.

Most organizations suffer from massive software sprawl.

They bought third-party security tools before moving to E5,

or they pay for backup solutions that overlap with native Azure capabilities.

They might have identity providers that duplicate entry or communication platforms that create redundant noise.

An economic steward finds these gaps and guides consolidation to cut both cost and complexity.

They align co-pilot with measurable business workflows.

They don't just ask if people are using the AI.

They ask which specific workflows the AI is actually changing.

Whether it is document creation decision making or reporting cycles, they measure the impact.

They connect the act of adoption to a specific business outcome

to create a clear line of sight between the AI and the bottom line.

They run rigorous entitlement reviews.

They look at how many identities are provisioned and how many are actually active or sitting dormant.

They find accounts with excessive permissions that were never cleaned up.

By systematizing what usually happens by accident, they turn basic hygiene into a form of cost prevention.

They bridge the gap between finance and IT operations.

They build a discipline where the CFO finally understands what is driving the cloud bill.

And the CIO can explain why certain capabilities are necessary.

This moves budget conversations away from guesses and grounds them in hard data.

They design quarterly optimization cycles rather than annual reviews.

Every 90 days they ask what changed, what is working and what needs to be adjusted.

This turns your work into a continuous operating rhythm instead of a series of episodic, disconnected projects.

This approaches architectural and economic at the same time.

It requires you to understand the platform, but it also demands an understanding of cost, efficiency and business impact.

You stop speaking the language of features and start speaking the language of risk and cost.

The economic steward is not a technical implementer. They are a tenant operator.

They don't just set something up and leave the building. They operate the environment and stay.

They don't hand off the keys. They own the results.

This represents the shift from a deterministic model to a probabilistic one.

In a deterministic world, you configure a policy and assume security is handled.

In a probabilistic world, you continuously monitor access patterns and adapt policies based on threat data.

One is a binary switch. The other is a continuous process.

The tenant stewardship model. To make this work, you need a framework.

I call this the tenant stewardship model.

It stands on three pillars that separate the true stewards from the basic implementers.

Pillar 1. Economic telemetry.

Economic telemetry is not what you think it is.

It has nothing to do with adoption metrics or login counts.

It is not about how many people use teams or how many SharePoint sites exist.

Those are vanity metrics that prove activity happened but fail to prove that any value was created.

Economic telemetry is about cost-to-value visibility.

It requires specific questions and quantified answers.

You must ask what percentage of E5 capabilities are actually active.

It isn't enough to know if E5 is deployed.

You need to know which of the 17 major capability areas are being used and which are dormant.

You might find features you pay for that should be provisioned on demand rather than through a permanent license.

You need to know how many identities are provisioned but underutilized.

You might have a license for every employee but not every person needs every high-end feature.

Some roles don't require advanced security and some contractors only need limited access.

An entropy audit usually reveals that 20% of identity spend is pure waste.

You have to identify which security features duplicate tools you already own.

If you have defender but also pay for third-party firewalls or per view DLP alongside a legacy tool, you have a redundancy problem.

Consolidation in this area alone often recovers 30% of the total tool spend for a customer.

You must determine which co-pilot usage actually reduces workflow time.

Don't look at adoption percentages. Look at outcomes.

If co-pilot summarizes meetings or drafts customer responses, you need to quantify the minutes saved.

If a team produces the same output with 5% less labor, that is a measurable economic win.

You need to see where license spend is concentrated and where it is being thrown away.

Some departments use their tools heavily while others barely touch them.

You might have teams on E5 who only need E3 or people on basic who actually require premium.

Economic telemetry means you understand this distribution and can fix the over provisioning.

This requires you to look past the native Microsoft reporting tools.

The admin center tells you what is deployed but it won't tell you if it's delivering a return.

You have to build visibility that connects technical metrics to financial impact.

You need to know the cost per user to deliver a capability versus the output that user produces.

The CFO wants this visibility and the CIO assumes you already have it.

Neither of them actually does. This information gap is where your competitive mode lives.

Once you can answer these questions with data, you have leveraged that the customer cannot replicate internally.

That is the basis for structural revenue.

Pillar 2, architectural stewardship.

Architectural stewardship moves you away from the help desk and into a proactive role.

It covers four specific areas of the environment.

First is identity lifecycle management.

This includes provisioning, deprovisioning and constant access reviews.

Identity is the control plane of the modern enterprise.

If you do not control the identity, you do not control the access and you certainly cannot govern the system.

This is a continuous job, not a one-time setup.

Second is the reduction of permission entropy.

This is a silent cost multiplier.

Every project that gets abandoned leaves behind often accounts and excessive permissions.

Every time a company reorganizes access rights drift away from actual job roles.

Over time, the principle of least privilege disappears.

This entropy is a security risk but it is also a massive driver of hidden costs.

Third is the design of a governance operating model.

This is structural work.

You define who approves access when they do it and what the process looks like.

You establish the escalation paths and the exception handling.

These become repeatable and auditable processes that prevent the ad hoc decisions that lead to system sprawl.

Fourth is information architecture alignment.

The way data is structured in Microsoft 365 should mirror the way the business actually functions.

You manage how SharePoint is organized and how teams discover information.

This prevents duplicate versions and fragmented data.

It is not a design you finish, it is a discipline you maintain.

None of this is a project, it is a retainer-based service.

You run the quarterly reviews and update policies as the business evolves.

You audit the roles and prevent the technical drift.

This becomes an operating cost the customer gladly accepts.

Because the alternative of uncontrolled sprawl is much more expensive.

Governance is not overhead, it is risk reduction and cost prevention.

Once a customer understands that, they will fund it.

The cost of not governing is invisible until it turns into a crisis.

Your job is to make the cost of doing nothing visible so that the cost of your stewardship is an easy choice.

Pillar 3. AI Value Governance

This is the newest pillar and the highest leverage opportunity in the market today.

Copilot is not just another feature, it is a workflow multiplier.

However, without governance, Copilot adoption is just hype pretending to be a transformation.

If you just turn on the capability without changing how work happens, you haven't actually improved the business.

You have to ask which workflows are actually changing.

Are people drafting emails faster?

Is meeting summarization reducing the time spent on notes?

Is data analysis in Excel becoming more efficient?

You need to find the specific processes that show a measurable reduction in time.

You need to calculate the actual time savings per user.

If you are paying $30 a month for a license and a user saves 10 minutes a day,

you can calculate the economic value of that tool.

You have to prove whether the customer is getting their money back or just wasting it on a shiny new toy.

You also need to see where adoption is stalling.

Some departments will embrace the AI while others will ignore it or use it incorrectly.

Identifying these patterns tells you where to invest in training and where to admit the tool isn't a good fit.

This information is vital for guiding future investment.

AI Value Governance connects usage to outcomes like decision latency and knowledge retrieval.

These things are measurable, they provide the justification for spending more or the evidence needed to scale back.

This is how you differentiate yourself in the coming years.

Without this pillar, you are just selling licenses and hoping for the best.

With it, you are architecting the customer's AI maturity.

You are the one guiding the adoption and proving the impact with hard numbers.

Putting it together, the tenant stewardship model.

When you integrate these three pillars, you change the game.

Economic telemetry shows you what is happening.

Architectural stewardship creates the model to manage it.

AI Value Governance measures the impact of the new tools.

Together, they form the tenant stewardship model.

This is not a consulting engagement where you write a report and disappear after 90 days.

This is a permanent operating model.

You become the tenant operator.

You take responsibility for the economic outcomes, not just the technical ones.

You run the reviews, maintain the dashboards and conduct the audits.

The finance team finally gets visibility into what they are paying for.

The IT team gets a framework that scales without them having to build it from scratch.

The business leaders get proof that their technology spend is actually working.

This moves you from being a cost center to a value center.

You are no longer a line item in the IT budget that can be cut.

You are a strategic necessity that prevents other costs from spiraling out of control.

You become structural to their business.

Your revenue model shifts from one-off projects to steady retainers and optimization fees.

Your margins are no longer tied to the cost of your labor, but to the value of the problems you prevent.

This is how you escape the commodity trap.

Partners who work this way are growing while everyone else is shrinking.

They keep their customers longer and they command higher prices

because they aren't competing on the cost of delivery.

They are competing on the scale of their economic impact.

The future ISP is not a technical implementer.

You do not implement Microsoft 365.

You operate it.

You do not deploy co-pilot. You govern it.

You do not manage licenses. You optimize them.

That is the only sustainable position left in this market.

The mandate.

We have now reached the point where the diagnosis must become a decision.

You understand what is dying and you see what is emerging.

The only question left is whether you will act on this or just treat it as an interesting theory

while you keep doing what you've always done.

Let me be very clear about this.

This is not a slow drift that will take a decade to arrive.

These structural shifts are happening right now.

The margins are already shrinking and the services are already becoming commodities.

The question is not whether the change is coming.

The question is whether you will lead that change or be crushed by it.

The time to decide is right now.

You cannot wait for next quarter or wait until the pain becomes unbearable.

You have to move.

The structural reality. What is actually happening?

Let me state the structural realities clearly.

Because clarity removes the option to pretend you don't understand.

Margin pressure is structural rather than cyclical.

And the compression of the CSP program combined with the direct EA transition and pricing volatility

are not just temporary market disruptions.

These shifts are the inevitable consequence of a market maturing from being dependent on specialists

to becoming self-service capable.

Microsoft improves its own margins as it captures revenue directly from the source

while partner margins compress as their value shifts from intermediation to implementation

and eventually to optional advisory.

That compression will continue as long as the underlying economics haven't shifted

to where the market actually values stewardship over deployment.

You cannot price your way out of this and you cannot certify your way out of this

because the only real move left is to shift your entire model.

Commodity services will increase in volume and decrease in price

which is not an opinion but an observable economic law.

As services standardize they become hierarchable and as they become hierarchable

they become competitive until price is the only variable that matters anymore.

The partners who continue offering simple deployment and implementation services

will see their volume increase because there is always more work to do

but the price for that work will compress relentlessly.

You will find yourself doing more work for less margin which is not a scaling strategy

but a treadmill that eventually breaks the people running on it.

Technical competence is now assumed rather than valued

and your customer does not pay you for knowing how to deploy autopilot

because they simply assume you already know.

Your customer does not contract with you because you understand conditional access

and they do not choose you because you have mastered the defender suite.

As they believe those skills are just your baseline.

You have built your entire market positioning on capabilities that have become table stakes

and that is not a sustainable position in a mature market.

It is a slowly eroding one.

Value migrates upward from implementation to optimization

and from deployment to stewardship.

Economics of the cloud are not based on deploying infrastructure

but are instead based on optimizing utilization, preventing waste and realigning costs to actual outcomes.

The partners who understand this shift early will be the ones to capture the value

while the partners who stay focused on implementation will watch that value disappear upstream.

This is not something that might happen in the future but is something that is happening right now.

The partner economy is dividing rapidly into two distinct categories rather than shifting gradually.

There are those who deploy technology and those who own economic outcomes

and this division has nothing to do with company size.

You can be a 10 person shop operating as an outcome provider

or you can be a 500 person shop operating as a technology deployer

because the distinction is the operating model and not the scale.

A 10 person shop that operates as an economic steward will command pricing power

and they will see customer retention stay above 90% while they expand their share of the wallet.

A 500 person shop that operates as a deployment factory

will face constant customer churn and margin compression while competing on price.

They will require constant pipeline velocity just to offset their natural attrition

which makes the business model increasingly fragile over time.

The question is not whether you have the capability to shift

but whether you have the discipline to actually do it.

You have to decide if you will stop measuring success by deal velocity

and start measuring it by customer outcomes instead.

You must decide whether you will stop staffing projects and start operating portfolios

which requires reframing your entire organization around a completely different value proposition.

The mandate, what partners must do.

Here is what you must do and I am not talking about what would be nice or what might be advantageous.

This is what you must do if you intend to remain economically viable beyond 2026.

First, you need to audit your current practice against the three dying models

and identify which one describes your business most accurately.

Are you a licensed reseller, a migration factory or a feature driven MSP?

Most partners are some combination of these three so you need to understand your mix

and what percentage of your revenue depends on capabilities that are currently commoditizing.

That is not a comfortable audit to perform but it is necessary because you cannot shift what you do not acknowledge.

If you are a licensed reseller, you need to understand that you have 18 months left rather than 2 years.

The EA transition will be complete in January of 2026

and after that date your licensing revenue does not normalize but instead collapses.

You need to begin rebuilding your practice immediately

by converting licensing relationships into advisory relationships.

You need to be introducing economic stewardship concepts to your customer base now

while you still have the relationship capital to do it because if you wait until after the January transition

you will be fighting for survival instead of fighting for positioning.

If you are a migration factory, you must understand that you have already peaked

and are no longer at the beginning of a long adoption curve.

You are passed the midpoint and heading toward the tail so the real question is not how to grow migration revenue

but how to transition your team from project-based work to operational work.

The migrations that remain will be lower margin and your survival depends on ensuring that you have something to offer after the migration is complete.

If you do not have a plan for operational management and continuous stewardship,

you have a staffing problem and a customer retention problem that are both imminent.

If you are a feature driven MSP, you are competing against automation and native capability.

Every time Microsoft releases a new feature, they make it easier for customers to adopt that feature without you

and every time they embed intelligence into the interface, they reduce your role from implementer to observer.

You cannot outpace the Microsoft product roadmap and you cannot position yourself faster than they can ship new updates.

Your only sustainable position is to stop leading with features and start leading with outcomes

because the market is getting tired of hype and wants to know if work is actually reducing or if costs are declining.

Build an economic telemetry capability because this is not optional but foundational to your future.

You need to move beyond the native reporting Microsoft provides and build the ability to answer what a customer is actually getting for the investment.

This requires looking at cost per user, utilization rates and consolidation opportunities rather than just listing features.

This requires an investment in analytics and discipline in how you report data but once you have it,

you have something your customer desperately needs and cannot easily build themselves.

Establish architectural stewardship as a formal service offering because this is where structural revenue lives.

You should design a repeatable and documented approach to identity governance while developing a permission audit and remediation process that customers can rely on.

Create a governance operating model that your customers can follow and you can monitor and make it something they want to fund because the alternative of uncontrolled sprawl is clearly more expensive.

Invest in AI value governance as this is the new frontier where partners who lead will own the customer relationship for the next decade.

You need to build the capability to answer what co-pilot is actually doing for a customer by looking at which workflows are changing and what costs are being prevented.

Build the measurement discipline and the advisory framework now because the partners who can credibly answer these questions will be in enormous demand.

Shift your sales conversation away from what is new and start talking about what is not being used and why that matters.

Your pitch should not be about what e5 can do but should instead focus on the fact that the customer is paying for capabilities that nobody is using.

That conversation moves you from being a seller to being an advisor and it transforms you from a feature advocate into an economic operator.

Shift your engagement model from projects to retainers which requires the patience and discipline to turn down project work that does not serve your strategic model.

Once you have customers on retainers for quarterly business reviews and monthly optimization cycles your revenue becomes predictable and your retention becomes defensible.

Your ability to expand into other areas becomes natural because you are already embedded in the customer's decision making process.

Shift your revenue recognition so that you build structural revenue that compounds instead of relying on episodic invoicing when projects complete.

You are building advisory margins instead of project margins and you are building a portfolio of deepening relationships instead of needing constant pipeline to offset churn.

This is not just a revenue increase but a complete revenue model transformation that has become necessary for survival.

The competitive advantage why this matters.

Let me explain exactly what happens when you successfully execute this architectural shift.

You begin to own the economic relationship with the customer by gaining visibility that they simply do not have internally.

Because you understand their cost structure and utilization patterns better than their own teams do you can identify every opportunity for consolidation and optimization.

This information asymmetry is not just a technical edge.

It is your primary competitive advantage that translates directly into money, loyalty and long-term retention.

Your influence over budget allocation will far exceed anything your competitors can offer.

When a customer is debating whether to purchase more licenses or consolidate their existing stack they will call the person who holds the economic telemetry.

You have the data and the analysis to back up a real recommendation while your competitors are stuck offering nothing but generic opinions.

That distinction matters because facts create influence that a sales pitch cannot replicate.

This model builds a level of customer loyalty that price-driven competition can never touch.

Your customers stay with you not because the cost of switching is high but because you have become operationally embedded in the fabric of their business.

By running quarterly reviews and optimization cycles you provide a level of visibility that creates necessary organizational discipline.

Another vendor might try to undercut your price by 10% but switching to them means losing the governance and optimization you enforce.

Turning a simple cost-benefit calculation into a massive risk to business continuity.

The CFO will trust you because you have learned to speak the language of costs and outcomes instead of technical jargon.

You are no longer viewed as a technical vendor but as a financial operator who reduces waste and connects every dollar of spending to actual business value.

The CFO values this clarity and will protect your budget even when other IT expenditures are being squeezed or eliminated entirely.

Your customers CIO will advocate for you because you understand the relationship between governance and risk.

You prevent the kind of sprawl and architectural entropy that eventually creates massive security vulnerabilities.

By enforcing controls and conducting regular audits you improve the overall posture of their infrastructure which makes you an essential partner in the eyes of IT leadership.

Business leaders will trust your direction because you can finally prove the impact of their technology investments.

You can show them that co-pilot adoption is actually driving productivity or that your consolidation efforts are lowering the total cost of ownership.

When you prove that governance improves control business leaders stop seeing you as a vendor serving IT and start seeing you as a structural extension of their own strategy.

All of this creates a defensive mode that isn't based on certifications or basic feature knowledge.

This mode is built on structural integration into the customer's operations and the continuous realization of value.

Your competitors cannot easily dislodge you because you aren't competing on commodities. You are competing on outcomes.

Pricing becomes almost irrelevant when you own the outcome and customers stop asking about your margin because they are too focused on their own return.

This shift is not merely about survival in a changing market. It is about building a practice that is defensible, profitable and scalable.

You are finally moving away from the treadmill of constant project chasing and building an actual sustainable business.

The choice, explicit and unambiguous. Now I want to be absolutely clear about the decision you are facing.

Microsoft partners are not going to disappear and the partner channel will remain a vital part of the ecosystem for years to come.

However, the market is currently dividing into two distinct categories based on their underlying operating models.

The partners who focus only on deploying technology will become increasingly interchangeable and driven entirely by price.

These organizations offer commoditized services that lead to high volume but dangerously low margins.

They face constant pipeline pressure and high customer churn because they are easily replaced by marketplace vendors or customers who decide to self serve.

While this remains a viable business model, it only works if you can achieve the massive scale required to survive on razor thin margins which is an incredibly difficult way to run a company.

On the other hand, those who own economic outcomes will enjoy structural protection and healthy margins.

These partners have defensible positions and high retention rates because they provide the visibility and discipline that customers cannot replicate on their own.

They are valuable to their customers and to Microsoft because they drive real adoption and prevent churn.

This is the only sustainable way to run a modern architectural practice.

This choice is not being forced on you by a single event and you can certainly continue operating exactly as you have been.

You can keep leading with features and measuring your success by deal velocity or utilization rates if you choose.

No one is going to stop you but the economic gravity of the market will continue to compress your margins and increase the pressure on your staff.

That is not a criticism of your work. It is a structural fact of the industry. The real choice is about capability and whether you have the discipline to make this shift.

You have to ask if you are willing to build economic telemetry and develop the skills required to function as an architectural steward.

It takes a specific kind of patience to build long term retainer relationships instead of constantly chasing the next big project.

These are not small questions and answering them requires rebuilding how you sell, how you staff and how you define success.

This decision also requires a significant amount of courage. It is always easier to keep doing what has worked in the past than it is to fundamentally reimagine your entire business model.

You have to be willing to look your team in the eye and admit that the old way of operating is no longer sufficient for the future.

Making a structural shift is difficult but the alternative is watching your competitiveness slowly decline as your margins erode.

Timing is the final factor in this equation. The window to make this shift intentionally is open right now and partners who recognize this structural change early will position themselves far ahead of the market.

They will build these capabilities before they become a matter of survival and establish themselves as stewards before their customers look elsewhere.

They are capturing the value pool before it becomes completely commoditized.

Partners who choose to delay this decision will eventually be forced to make it later but they will be doing so from a position of weakness.

They will be reacting to a margin crisis instead of responding to a market opportunity which is a much harder way to operate.

The window is open today but it will not stay open forever. Within the next 18 months the structural division in the partner channel will be undeniable.

Some will have repositioned and will be thriving while others will still be fighting against the market instead of accepting its new reality.

The economics of this industry will eventually make that choice irreversible.

The final statement. Let me bring this to a close with absolute clarity.

The thesis that opened this episode was simple. Technical excellence is now table stakes while economic stewardship is the only real differentiation.

Everything we have discussed serves as evidence for that reality. We have looked at the commoditization curve, the three dying models and the structural reality of the market.

We have defined the mandate and the competitive advantage. The evidence is overwhelming because these structural shifts are irreversible.

A massive value migration is happening right now and the partners who understand this shift will eventually own their market.

The partners who refuse to see it will simply be priced accordingly.

The future of Microsoft ISPs is no longer a technical challenge. It is architectural, it is financial and it is operational.

Technical competence is still required because you have to understand how the platform behaves.

You still need to know how identity functions and how to grasp the mechanics of Microsoft 365 at scale.

But being good at those things is no longer a way to stand out. It is the bare minimum expectation.

Architecturally you must design governance and operating models that can scale without constant human intervention.

You need to anticipate policy drift and prevent the inevitable entropy that destroys systems over time.

Your job is to build the guardrails that allow an organization to run at scale without falling into a cycle of constant firefighting.

From a financial perspective you have to connect every dollar of spending to a specific outcome.

You must be able to answer the one question that keeps your customers CFO awake at night.

Are we actually getting what we paid for? If you cannot answer that with data and architectural rigor you are just another vendor.

Operationally you are required to run continuous cycles of optimization and improvement.

This does not mean annual strategy reviews or quarterly check-ins that lead nowhere.

It means the work is continuous. You are running a living system not just implementing a one-time project.

This is not a request from Microsoft and it is certainly not a marketing message they are pushing.

This is a demand from the market itself. Your customers are already expecting this level of depth.

And the underlying economics of your business will eventually force you to provide it.

The only real question left is one of timing.

Will you make this shift intentionally using strategy and discipline to define your positioning?

Or will you wait until you are forced into it, reactively, operating at a disadvantage because the market pressures became undeniable?

The partners who move now will position themselves as leaders in a crowded field.

The ones who wait will be seen as followers and in a market where technical skill is becoming a commodity, followers have zero leverage.

So here is the final question. This is not a question for Microsoft or for the market but for you.

Do you intend to evolve or do you intend to be priced accordingly?

The market is making that choice for you whether you acknowledge it or not.

The only variable that remains under your control is whether you make this choice consciously or let the system make it for you.

That choice starts now.