The Importance of Ecosystems
Last July I published some of our thinking around the case for AI systems integrators in this tech cycle. Core to that thesis were two beliefs: (1) every company is going to require hand-holding through the change management AI entails, and (2) the ecosystems around large enterprise platforms (Microsoft, Salesforce, ServiceNow etc.) are mispriced sources of durability. As AI saturates outbound and customers need to be supported through adoption, the trusted human relationships in your channel ecosystem only grow in importance. 12 months later all major AI labs have launched a version of a partner ecosystem.
Naturally, we went hunting around this theme and soon realised Microsoft is the mother of all ecosystems. Around 500,000 partners globally, the average one running about 10 employees, so call it 5 million people who wake up every morning to sell, support and maintain the Microsoft stack. For every $1 of Microsoft licensing sold, the ecosystem realises another c.$8–10 in attached channel services. This creates real zealots. During our research we met the owner of a Microsoft partner so devoted to the ecosystem they’d named their child Bing!
Five cold emails later, we tracked down the Onyx team at a conference in Heathrow T5. Neil Lomax, Chris Brown and Stewart McLean had spent the best part of two decades building SoftwareOne — taken public by KKR in 2019 at a c.CHF 2.85bn market cap, transacting c.$20bn of software volume — and John Dusett had spent nine years at Ingram Micro. Between them, nobody understands the plumbing of Microsoft licensing distribution better and fortunately for us, their experience had led them to a unique insight …
Microsoft’s Channel Strategy Just Changed
A quick primer on how Microsoft actually sells software: mostly, it doesn't. Large customers buy through Enterprise Agreements (EAs),bespoke three-year volume contracts brokered by a small club of Licensing Solution Providers (LSPs), who handle the negotiation, compliance and annual true-ups in exchange for a cut of contract value. It's low-margin, high-volume work: SoftwareOne, the biggest of the club, was transacting c.$20bn of it a year. Smaller customers buy monthly subscriptions through the Cloud Solution Provider (CSP) channel, typically resold by the local IT partners (MSPs) who already manage their environments, with wholesale distributors like Ingram Micro or Pax8 sitting behind them to provide the billing and credit rails.
From November 2025, Microsoft removed the incentives that made EAs economic for the big LSPs, pushing the mid-market to buy through the CSP channel instead. As Microsoft’s product velocity increases to meet the AI moment, it’s pushing responsibility outward so that licensing and support should sit with the partner closest to the customer. As a consequence LSP margins on legacy EAs have collapsed, and it is no longer viable for them to serve much of their base.
The result is tens of billions of licensing spend hunting for a new home over the coming transition period. The natural heirs are MSPs given they already run the customer’s environment. The problem is that most MSPs have spent their careers actively avoiding licensing. It’s low margin, brain-meltingly complex (Microsoft reportedly has ~1,800 attorneys updating terms and conditions on a rolling basis, so the right answer today is wrong in 30 days), and a single mis-sell can wipe out months of contribution margin. The opportunity is there for MSPs but they need some help, which is where Onyx comes in.
Unbundling SoftwareOne
Onyx’s insight is the mirror image of the business they built: rather than rebuild SoftwareOne, unbundle it and give every MSP the machinery the LSPs spent decades and millions assembling.
We’re excited to be backing Neil, Chris, Stewart and John as they roll out their CSP Growth Engine to do exactly that.
The platform does three things:
- automates CSP proposals with live deal economics, incentives and funding baked in;
- runs an AI-powered licensing helpdesk with human experts in the loop; and
- mines tenant data for the upsell and Microsoft-funded opportunities MSPs currently leave on the table.
Generic AI support tools fail in high-liability domains, and licensing is about as high-liability as it gets. Onyx’s answer is to corner the scarce resource of genuinely good Microsoft licensing specialists put them in the loop on edge cases, and then guarantee the accuracy of the advice, with bounded liability if they get it wrong. Every expert verification produces labelled ground truth and a provenance trail, compounding a service workflow into software. Onyx stands behind its advice and we don’t think you can vibe-code someone to blame.
We love finding businesses like this: exceptional people aggressively going after a unique insight the rest of the market doesn’t even know how to find. A 21-year-old out of YC is not reading Microsoft channel incentive documents for fun, and wouldn’t get the meetings anyway as this market runs on decades of relationships and the credibility of having done it before. That unsexiness is the opportunity.
When the people who built the largest Microsoft transactional partner in the world decide this is the problem worth solving, you pay attention.
If you’re building in an ecosystem everyone else finds boring, I’m on jamie@triplepoint.vc