Migrating Customers from an Indirect CSP Distributor to a Direct CSP Agreement

1. Clarifying the scenario

This article discusses transitioning existing customer tenants from an indirect Cloud Solution Provider (CSP) model, where a distributor serves as the transacting partner, to a direct CSP agreement between the partner and Microsoft. In other words, this articlehow a partner that currently operates as an indirect reseller under a distributor can transition to become a direct bill CSP partner and bring its customer tenants with it.

2. Who is who in the CSP model

There are four key actors to keep in mind:

• Customer tenant: The Microsoft 365 or Azure tenant where the users, groups, and workloads live. This does not move.
• Indirect provider (distributor): The CSP partner that Microsoft invoices today. They transact in Partner Center on behalf of many resellers.
• Indirect reseller: The partner that owns the customer relationship today but buys CSP services through the distributor.
• Direct bill CSP partner: The status the indirect reseller is aiming for. In this model, Microsoft invoices the partner directly, and the partner is the transacting CSP for its customers.

When you move from indirect to direct, the goal is to update the transacting CSP partner for each customer from the distributor's CSP tenant to your own direct bill CSP tenant, while keeping the customer tenant and workloads unchanged.

3. How CSP subscriptions move between partners

Technically, Microsoft treats this as a CSP to CSP transfer. The customer tenant is initially associated with the new partner, and then specific subscriptions are transferred from the old CSP partner to the new one. The key mechanisms are:

• New commerce licence-based subscription transfer, for example, Microsoft 365 and Dynamics 365. These transfers move billing responsibility mid-term from one CSP partner to another, without recreating the subscription or reassigning users.
• Legacy subscription transfer, for older CSP offers that have not yet been migrated to the new commerce experience.
• Azure subscription transfer, which uses a separate Azure subscription transfer process to move billing ownership for Azure subscriptions between CSP partners.

From the customer's point of view, the tenant, users, and workloads stay in place. From Microsoft's point of view, the Partner of Record and billing owner for each subscription changes.

4. Prerequisites for operating as a direct CSP

Before you start moving customers, you must already be authorised as a CSP direct bill partner in the region where you want to transact. Microsoft's current requirements include:

• Verified revenue and business capability at CSP scale.
• An active Microsoft AI Cloud Partner Program membership and relevant Solutions Partner designations.
• A mature support function that can provide first line support for all CSP services you sell.
• Automated billing and provisioning systems that integrate with Partner Center APIs.
• Security baselines, including multifactor authentication, fraud monitoring, and compliance oversight, for your CSP tenant.

Only once your direct bill tenant is approved and active it makes sense to plan the migration of customer subscriptions away from your distributor.

5. End to end migration approach

At a high level, migrating from an indirect distributor model to a direct CSP model involves four stages.

5.1 Inventory and segmentation

Start by building a comprehensive inventory of CSP subscriptions currently under your distributor for your customers.

• List every customer tenant you serve as an indirect reseller today.
• For each customer, list all CSP subscriptions, including offer type, new commerce versus legacy status, term, renewal dates, and promotions.
• Separate Microsoft 365 and other licence-based subscriptions from Azure subscriptions, since they follow different transfer processes.

This inventory will drive your migration waves and help you decide whether to transfer mid-term or align transfers with renewal dates.

5.2 Establish the relationship between the customer and the new CSP partner

Before any subscription transfer can occur, the customer tenant must have a relationship with your new direct bill CSP tenant. In practice, this means:

• You send a reseller relationship invitation from your direct bill Partner Center tenant to the customer tenant.
• The customer accepts this invitation in their Microsoft 365 admin portal, which creates the partner relationship.
• Once the relationship is in place, your direct bill tenant appears as another CSP partner for that customer, alongside the existing distributor.

You repeat this step for every customer that you plan to move. Many partners combine this with customer communication about the upcoming change in invoicing and support.

5.3 Transfer new commerce licence-based subscriptions

For Microsoft 365 and other services that are part of the new commerce license-based model, you use the CSP subscription transfer capability in Partner Center.

• In Partner Center, your direct bill tenant acts as the target partner and creates a transfer request for the customer.
• The distributor, as the source partner, reviews the request and populates the specific subscriptions and quantities to transfer.
• When the source partner approves the transfer, billing responsibility for those subscriptions shifts mid-term from the distributor to your direct bill tenant.
• The customer tenant, subscriptions, and user assignments remain unchanged—only the transacting CSP partner and invoices change.

This process can be done manually in the Partner Center user interface or automated through the Partner Center REST APIs. Most partners begin with manual transfers for a pilot group of customers, then automate the process once they are confident in its effectiveness.

5.4 Handle legacy and edge case subscriptions

If you still have legacy CSP subscriptions that have not been moved to the new commerce experience, you have two options:

• First, migrate them to the new commerce, then use the new commerce transfer flow.
• Use the legacy transfer APIs and guidance for subscriptions where new commerce migration is not yet possible, keeping in mind that Microsoft encourages moving everything to new commerce as soon as practical.

Document which customers and subscriptions fall into this category so you can track them separately and avoid surprises at renewal time.

6. Azure subscriptions

Azure subscription moves require special attention. In many cases, Azure subscriptions can be transferred between CSP partners; however, the mechanics differ from those of license-based subscriptions.

• The customer and both CSP partners must agree on the timing of the transfer, as billing ownership transfers at the moment of transfer.
• You should review any enterprise-scale constructs such as management groups, policies, and cost management setups, so that you can recreate or adjust them under the new CSP relationship if needed.
• For complex Azure estates, it can be safer to create a detailed migration plan that treats the change as a small project, rather than a quick operational step.

The key point is that Azure transfers are possible, but they are not simply a tick box, unlike many Microsoft 365 subscription transfers.

7. Commercial and operational considerations

From a commercial and operational perspective, transitioning from a distributor to a direct CSP relationship alters how you work in several ways.

• You no longer pay a distributor margin, but you take on the cost of your own support contract with Microsoft and the overhead of running billing and collections yourself. So make usable self-service central to your offer
• You gain direct access to Partner Center APIs, which allows for much deeper integration with your billing, automation, and customer portals; however, you must invest in and maintain that integration. This is where full automation should ideally become standard practice.
• In some cases, you may lose access to value-added services or programs that your distributor previously provided. Therefore, review which of these you need to replace or recreate.

These factors should be part of the business case for becoming direct, alongside the pure subscription margin calculations.

8. Common pitfalls to avoid

Partners that have gone through this journey highlight a few recurring pitfalls:

• Confusing tenant moves with partner transfers. The customer tenant usually does not need to move. Only the CSP partner that owns the subscriptions changes.
• Underestimating the time needed to line up all three parties for approvals, especially where the distributor has its own internal processes for approving transfers.
• Ignoring legacy offers and promotions until very late in the process, which can lead to unexpected price changes at renewal.
• Not communicating clearly to customers about what is changing and what is not, for example, invoices and support contacts will change, but the tenant and services will remain the same.

A structured migration plan, clear responsibilities between you and the distributor, and early customer communication go a long way towards avoiding these issues.

9. Summary

Migrating customers from an indirect distributor model to a direct CSP agreement is fundamentally about changing which CSP partner is the billing and provisioning owner for existing customer tenants. Customer tenants, users, and workloads typically stay in place. New commerce license-based subscriptions are transferred through the CSP transfer capability in Partner Center. Legacy and Azure subscriptions follow their own documented paths. A clear inventory, a working direct bill CSP tenant, and close coordination with your current distributor anchor the entire effort.

Suppose you approach the change as a structured program rather than a series of ad hoc transfers. In that case, it becomes a controlled way to gain more control over your Microsoft cloud business while protecting service continuity for your customers.

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