“We’re really going into a world of change and a lot is unknown” about Dynamics 365. So says Joe Longo, chief operating officer of SBS Group, a national Microsoft Master VAR (Value Added Reseller) and Gold Certified Partner.

Microsoft Dynamics 365 will launch this fall, and veteran Dynamics partner executive Terry Petrzelka likens it to a hurricane for partners. “You want to get ready for that hurricane when they tell you a few days before,” he says. “You don’t want to be putting that wood on your windows as the winds are blowing.”

Microsoft announced Dynamics 365 just a few weeks ago at the Worldwide Partner Conference, giving partners just a business quarter to ready themselves before the official launch event. Just how they get ready is the subject of the MSDynamicsWorld webcast “Microsoft Dynamics 365: What Does it Mean for Dynamics ERP VARs?” (click here to register), scheduled for Thursday, August 18 at 2pm ET. Both Longo and Petrzelka will present.

The sales model: CSPs vs Master VARs

“Dynamics 365 will be the primary focus of Microsoft going forward in the Dynamics space, and it will only be sold through CSP (the Cloud Solution Provider program),”, says Longo. “Partners will have to make a decision whether to invest heavily to become a CSP, or to align with a CSP, or in our case, with a Master VAR.”

Partners will either need to be 1-Tier CSPs if they want to order Dynamics 365 directly, or otherwise work through a 2-Tier CSP – a distributor like an Ingram Micro or TechData. This cadre of distributors connects Microsoft on one end with resellers in a geographic market. Resellers in turn get prepackaged offerings, simplified invoicing, and as much end-user support as the 2-Tier CSP is willing to provide.

Petrzelka advises that “Provided those Master VARs are CSP certified, [VARs] can work with someone that provides a knowledge that they understand partners’ business models and can add value to them, and actually give them other offerings that they can take to market that are really more business-oriented and enterprise-related than maybe a distributor can do.”

Differentiation = survival

Longo advises that “Another area they’ll really have to focus on is differentiating their businesses in order to succeed in a new revenue model.”

But that does not call for a race to the bottom in pricing and incentives. Longo believes that traditional Dynamics partners can succeed in this new era if they “really differentiate their solution offerings. Differentiate via vertical solution,” or offer white-label products or implementation services. “They have to have knowledge around an industry, plus the knowledge to assist with the implementation – the training, and potentially some IP to help differentiate themselves.”

Invest in becoming cloud conversant

Longo observes of the Dynamics channel that it is traditionally, and still, on-premise centric. “So everybody’s conversant in that – all the consultants, all of the sales people. But now you’re flipping that into a cloud conversant set of resources that you’re going to need to stay competitive. Even though some partners have gotten ahead of that and are in tune to that, I’d say 80% of the channel is not even there.”

Expect new competition

At WPC 2016, Microsoft announced a new role of Partner Channel Development Manager, or PCDM, with a focus on recruiting new partners. Microsoft has previously made similar changes. For example, when the company shifted its focus from on-premise CRM to Dynamics CRM Online, partner managers were charged with recruiting new partners as well as supporting existing ones, and even Salesforce and SalesLogix partners joined the channel. SBS expects that Microsoft will not only recruit and enable existing Microsoft platform partners, but also NetSuite, Intacct, and Acumatica resellers as well.

So, Dynamics partners not only have to concern themselves with changing their business models, but must expect new competition coming from partners they’ve never competed with before.

Longo and Petrzelka will present more strategies for adapting to Dynamics 365 in Microsoft Dynamics 365: What Does it Mean for Dynamics ERP VARs?, which will also be available after the event as a recording on MSDynamicsWorld’s Webcasts page.