Despite continued cloud advancements, Microsoft (MSFT) Office 365 Open still falls short of the mark for channel partners that want a true, on-demand, pay-as-you-go platform for end-customers. No doubt, Office 365 Open -- which allows partners to manage end-customer cloud billing -- has shown considerable progress in the past year.

But there are still two major problems for potential channel partners.

First, let's give Microsoft some credit: The company keeps getting closer and closer to an ideal cloud partner solution but we're not quite there yet, Talkin' Cloud now believes.

The original Office 365, launched June/July 2011, did not allow channel partners to manage end-customer billing or pricing for Exchange Online, SharePoint Online and Lync Online. Only big value-added service providers -- like telecom companies -- could control the billing and pricing variables under a program called Office 365 syndication.

Partners complained and Microsoft responded with Office 365 Open. It allowed partners to control end-customer billing, but the effort  -- first announced in July 2012 -- wasn't fully rolled out until June 2013. And it was extremely limited -- only available for one SKU and for customers with 250 seats.

At this week's Microsoft Worldwide Partner Conference 2013 (WPC13), Channel Chief Jon Roskill announced expanded Office 365 SKUs. At first Talkin' Cloud was very impressed. And recent Office 365 deployment figures also sounded impressive.

Then partners started complaining to Talkin' Cloud over Twitter, noting:

  • Partners that win Office 365 Open customers have to pay for a full year of cloud service up-front. It's not a true pay-as-you-go model for the partner.
  • And what about if the customer decides to drop a few seats -- say, declining from 150 to 140 user subscriptions. It sounds like the Office 365 Open channel partner can't scale up or down on the fly. 

As one channel partner put it: If a partner buys Office 365 Open, the partner pays for a full-year up front and can't adjust customer user counts based on changing user consumption each month. "The partner," the MSP said, "has all the downside risk."

Alas, some other cloud channel partner programs -- such as Oracle's -- involve similar partner risks.

Bottom Line: True cloud computing is all about pay-as-you-go services. Pay more when you consume more. Pay less when you consume less. And never pay big lump-sums in advance. Until Microsoft addresses that reality with Office 365 Open, the cloud channel partner program will fall short of ideal.