ISV Connect: Microsoft sees momentum in a program that is dividing Dynamics 365 ISVs (Part 1)

As of mid-October, Microsoft has officially activated ISV Connect, its new partnership program for the Dynamics 365 and Power Platform ISV community. The program sets new rules and conditions for how ISV solutions for the Power Platform, Dynamics 365 Customer Engagement, Finance, and Supply Chain Management will be developed, marketed, and sold, and it imposes new fees and standards on vendors who wish to sell into the Microsoft business applications channel.

Since Microsoft announced the program in July 2019, about 500 compliant solutions have been published in Microsoft AppSource from more than 250 vendors, Microsoft reports. The details of the program, including its new rules, have been provided to partners as an addendum to the Microsoft Publisher Agreement and they spell out the fees, the definition of "paid eligible sales", the benefits, reporting requirements, and more.

For a non-lawyer's view on the rules, Microsoft MVP Steve Mordue's analysis provides a good starting point on areas like where the fees appear to start and end, whether an ISV's Microsoft license margin is included (it appears to be), the impact on an ISV's own customer service, and support fees. He also shares copies of the documents.

ISV Connect is overseen by Microsoft corporate vice president Steve "Guggs" Guggenheimer. His ISV Connect presentation from Inspire 2019, stepped through both the systems and strategy of ISV Connect. The presentation also featured endorsements from several early adopters including Avalara, To-Increase, Veripark, and Flintfox.

At one point in the presentation, Guggs addressed the idea of whether the new fees associated with ISV Connect, either ten or twenty percent of the solution value, amounts to a tax on vendors. He explained (at 36:20) that he prefers the fees not be called a tax and said that they are being levied because the economics of the enterprise software market have changed with the transition to the cloud: