In the digital world, software is a product like any other. Just as B2C brands aim to get their products stocked on the shelves of major outlets, software vendors collaborate with authorizes resellers of their software. In the case of Microsoft, these approved resellers are known as License Solution Providers (LSPs). However, the concept of the reseller applies to all major vendors: SAP, Oracle, Salesforce, IBM, etc.

In this article, we’re breaking down what an LSP or reseller is, why they exist, and the benefits and drawbacks of partnering with one for your software purchasing. Let’s dive in!  

What is a License Solution Provider (LSP)?

A License Solution Provider is a third-party (usually a large corporation) that has been authorized to resell enterprise software licenses. Traditionally, an LSP is responsible for:  

• Procuring licenses for software in bulk.

• Managing enterprise agreements (EAs) — which bundle licenses, services, and cloud subscriptions.

Some LSPs also offer other services themed around basic licensing and compliance hygiene.  

Microsoft LSPs: Microsoft coined the term License Solution Provider to describe companies that are specifically authorized under Microsoft's partner program to manage and resell license for Enterprise Agreements (EA). As such, they must meet strict requirements. Microsoft defines them and only a select group of large partners meet these criteria.  

Other Resellers: While only Microsoft owns the term LSP, many vendors have partners that perform the same reselling function. These companies are authorized to resell licenses for other vendors (i.e. Adobe, Oracle, SAP, Salesforce, IBM) to enterprise customers. These resellers fulfil pretty much the same purpose as those listed above (simplifying bulk buying and enterprise agreement procurement).

Why Go Through an LSP or Reseller for Your Software Procurement?

The function of an LSP is pretty simple, but why would companies want to go through a reseller for software procurement when they could just purchase directly? There are a few common reasons:

• It's traditionally accepted as best practice for large companies. Much like contracting a traditional Managed Service Partner (read more on that here), going through an LSP is something that most enterprises are expected to do.  
  

• Because a company is large and needs to purchase in bulk, an LSP may seem like the simpler and easier option.  
  

• A company has no in-house vendor expert (Microsoft, SAP, Oracle, etc.) to focus solely on securing discounts, optimizing product bundling, or negotiating concessions for that specific vendor on top of their other responsibilities.

Overall, the reseller model rose in popularity because of its position as a simpler and more effective way for enterprise companies to manage and get more value from their software agreements.  

The LSP and Reseller Pricing Model

Reselling is an attractive offer to many partners because of the pricing model incentives. There are two ways in which resellers benefit, either by placing a margin on top of the licensing costs which is footed by the end user, or by collecting a fee for their license sales directly from the vendor (not footed by the end user).

Are LSPs Still Delivering Value? A Few Considerations

Microsoft first implemented this system in the late 90’s with their Large Account Reseller program, which was later subsumed into the LSP framework. Since then, using an LSP has become the accepted best-practice among enterprise companies. But do they still deliver value to companies today?  

The purpose stated by vendors for reseller programs is to help customers manage increasingly complex and large-scale agreements. But it’s important to remember that Microsoft, and all these other software vendors, are businesses. And the chief incentive of any business is to drive profit.  

Reseller programs wouldn’t exist if there were no commercial benefit for software vendors. While LSPs and resellers are pitched as licensing advisors, they’re more like Microsoft salesmen, checking in with you around true-ups or renewals to make sure you’re still a happy customer. And this brings us to the primary drawback of using an LSP: conflict of interest.  

The Truth About Conflict of Interest

The primary purpose of any LSP or reseller is to make profit. They make profit by selling companies more licenses, creating an inherent conflict of interest between a company and their LSP. Research suggests that up to 76% of companies over-license to avoid audit penalties. This kind of “spray and pray” approach to compliance creates a sense of security, but it also creates a massive sinkhole in your software budget.  

With a reseller incentivized to sell you more licensing than you actually need, it’s nearly a certainty that they’re inflating your software spend in the name of compliance. This is a huge barrier to ongoing optimization efforts, and one of the biggest roadblocks to achieving true, measurable ROI with a reseller or LSP.  

Limited Scope of Service

Another consideration is the low personalization of services available through an LSP. It's likely that they offered more expert services in the past, but as they’ve grown to cater for larger and larger enterprises (and higher profit margins), the personalization of their services has decreased. Audit and compliance support is basic, focusing mostly on fulfilment, licensing hygiene and general true-up or renewal management rather than genuine partnership to realize value on a dynamic, ongoing basis.  

5 Signs That It Might Be Time to End Your LSP or Reseller Relationship

If you’re a company that’s been working with an LSP or reseller for a while, it might be time to consider the real value they’re delivering. Here are a few signs to look out for. If you tick off more than 2, it’s probably time to reevaluate.  

• You’re paying for one or more services that used to be free (e.g., basic EA management).
  

• Your LSP pushed you toward CSP but it hasn't been a great fit for you.  
  

• Your standard of support is unsatisfactory. You don’t know your point of contact, have a point of contact that changes frequently, or get the sense that you’re “just another account.”
  

• You’re still unsure what your LSP actually does beyond order fulfilment. Some key signs of this are past audits with unsatisfactory outcomes, major price increases at your true-ups or renewals, and limited communication from your partner on strategies they’re using to optimize your environment.  
  

• You have no defined metrics for assessing the value or ROI that your LSP/reseller provides, and you’ve never cost-modelled any alternatives.  

How to Evaluate Alternatives to LSPs that Drive More ROI

So, you’re no longer getting value you want from your LSP or reseller. Our advice is to put together a team of relevant stakeholders and turn this into an ongoing project. Whether it takes weeks to months, these are the key steps we’d recommend in the process.

1. Define What Value Means to Your Organization

When you evaluate whether an LSP is providing value, it’s important to define what value means for your organization. That may be financial, or it may be based on efficiency gains from having a third-party handle your licensing needs, or strategic.

Some important questions to ask to determine your definition of value:

• Are we primarily seeking cost savings, contract simplicity, or strategic licensing guidance?
  

• Do we need support for on-premises infrastructure, cloud transformation, or hybrid models?
  

• How important is scope flexibility, responsiveness, and transparency?
  

• Could we benefit from a higher-touch model?  

By determining what matters most for your business needs, you can evaluate LSPs against tailored criteria, not just cut-and-paste industry standards that no longer earn their place on your bottom line.  

2. Audit Your Current LSP Relationship

If you're already working with an LSP or reseller, assess how they're performing across multiple dimensions:

Pricing: Are we getting competitive pricing, or just list rates with added margins? Are fees clearly explained?

Support & Expertise: Do we receive proactive advice and support, or just transactional order processing?

Service Scope: Are key services still included, or have they become paid add-ons?

Transparency: Can we see how our pricing is calculated? Is the LSP clear about Microsoft’s role in the contract?

Responsiveness: Are queries handled quickly and accurately? Is there a named point of contact?

Strategic Input: Has the LSP or reseller helped us right-size or optimize our licensing? Are they guiding us through changes like the Microsoft Customer Agreement (MCA) or cloud transitions?

3. Compare Alternatives, Including Non-LSP Options

Many companies assume only LSPs can support licensing at scale, but that’s no longer true and hasn’t been for many years. Some poplar and effective alternatives include:

• Cloud Solution Providers (CSPs) for subscription-based services (e.g., Microsoft 365, Azure).

• Independent advisory or service-only partners (like 2Data) who provide licensing strategy and support without selling licenses.

• Direct relationships with Microsoft, especially under the Microsoft Customer Agreement, which removes the need for an LSP entirely in many cases.

When you’re looking at these alternatives, consider the following: Do they offer licensing expertise without a sales agenda? Can they work with existing LSPs or CSPs as neutral advisors? Will they help us stay in control of our agreements, not just push more purchases? If you can confidently answer any of these, you’re in a better position than a lot of companies.  

4. Run Scenario-Based Value Comparisons Based on Your Needs

To really understand ROI for your business, it’s important to simulate some unique scenarios. Pick scenarios that happen frequently, scenarios you feel are your weakest points and therefore where you need the most help, or scenarios that may be less frequent but high impact, like an unexpected audit. Weigh up whether an LSP or reseller adds measurable value in these cases, or list out what value is missing in these situations.

Here are some examples lines of enquiry based on common scenarios:

Cost Reduction: What is the current percentage of your licensing spend that you estimate could be reduced? Is your LSP or reseller helping you achieve measurable cost reduction or cost avoidance? What cost reduction support are you missing?  

Renewals: Who provides better negotiation leverage - your current LSP or an alternative advisory model? Do you feel these benefits around renewal time? What renewal support is missing?

True-up Event: Does your provider help minimize unplanned cost spikes at renewal or just process the forms? Do they provide any reasoning around cost increases, or detail efforts they made to reduce them? What true-up support are you missing?

Cloud Migrations: Can your LSP or reseller guide licensing transitions? Could they explain CSP vs. EA cost impacts? Do they offer specialized support for other vendor cloud migrations, like an ECC to S/4HANA migration with SAP? What migration support are you missing?

Unexpected Audits: When unexpected events come up, like an audit, do you feel that the support you receive is worthwhile or helpful? Does it assist you in achieving more positive audit outcomes? What audit defence support are you missing?

Business Growth: When your company grows or changes, are you having conversations with your LSP or reseller on how your licensing strategy should change to grow with you? Are you able to map out a collaborative plan for any future changes? What kind of flexibility are you missing?  

It's equally important to look at the qualitative value you’re getting (service depth, flexibility, audit defence, time savings) in addition to the monetary impact of your choice. It’s also important to highlight which of these aspects you want more of from a partner.  

5. Establish Clear Metrics for Ongoing Evaluation and Reporting

Once you’ve chosen a provider, LSP or otherwise, set performance metrics. If you’re not tracking ROI, you can’t control it. Some useful metrics to keep track of and report on could be:

• % of cost savings achieved versus the list price.

• SLA adherence (response time, escalation handling)

• Number of proactive licensing optimizations per year

• Financial outcome of optimizations, including direct cost savings, cost avoidance, % savings, audit penalties avoided, etc.

• ROI: The annual cost via the LSP or reseller versus the outcomes they deliver.

• Stakeholder satisfaction (IT, procurement, finance)

Use these criteria to revisit the relationship regularly, not just at renewal time. It will likely be easy to determine the value you’re getting, because the most common problem we see is not that companies can’t determine the answer to these questions, but rather than no one has asked them in a while. Just because something has used to be best practice doesn’t mean it still is.  

Closing Thoughts

Reseller relationships have been a cornerstone of enterprise IT procurement for decades. But just because something used to be best practice doesn’t mean it still is. Today, modern organizations have more options, and more control, than ever before. They also have higher demands than ever on their budgets, and ever expense needs to earn its place on your bottom line with measurable ROI.

By reassessing traditional LSP or reseller reliance based on what you need, what you have, and comparing strategic alternatives, you can evolve your licensing model from a cost centre into a source of value.  

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