Most Microsoft partners know they have access to co-op funding. Far fewer realise that FY27 introduces a separate investment opportunity that can sit alongside co-op rather than compete with it.
We’ve broken it down into the essentials so you can understand what matters, what doesn’t and how to take advantage of the opportunity.
These engagements are not co-op funding.
That distinction matters because many partners are assuming Microsoft has simply added performance rules to the traditional co-op programme. It hasn’t.
Traditional co-op funding is an accrued marketing balance earned from qualifying incentive activity. You build up that balance over time and spend it on approved marketing activities.
Performance-gated engagements work differently. They do not draw from the same funding bucket as co-op; they do not reduce your co-op balance, and they are not a replacement for co-op.
Most are fixed-fee investments attached to a specific customer engagement, paid separately from co-op. A few use a two-stage structure, where part of the fee is paid on delivery and a second portion depends on hitting a consumption target within a short window afterward.
In practical terms, a partner can have:
- A traditional co-op balance for marketing activity, and
- Approved performance-gated engagements for deployment and adoption work.
Those are two separate funding streams with two separate rule sets.
Microsoft is shifting part of its investment strategy from ‘Did the deployment happen?’ to ‘Did the customer actually start using the workload?’
The engagements are designed to fund activities that help customers move beyond purchase and into active usage. Depending on the programme, they can support deployment, configuration, security and governance setup, user enablement, adoption planning, optimisation and other post-sales activities that increase the likelihood of sustained usage.
This is why the opportunity is larger than a normal co-op claim. Microsoft is not only paying for delivery; it is trying to create measurable customer outcomes.
The lifecycle is surprisingly simple. You nominate the customer, deliver the approved engagement and submit Proof of Execution (POE). POE generally includes the customer attestation, partner survey and partner invoice.
Once Microsoft approves the POE, the engagement becomes eligible for payment. For most engagement types, this is a single fixed-fee payout. For a smaller set of consumption-linked engagements, POE approval releases a guaranteed first payment, with a second, smaller payment conditional on the customer hitting a usage target within the following few months.
That does not mean adoption is irrelevant. Microsoft can still measure whether the customer uses the workload after the engagement is completed. Those adoption results feed into the partner’s portfolio performance and can influence future engagement opportunities, even though the current engagement may already have been paid.
POE approval is the payment checkpoint; it is not the final success checkpoint. The engagement then enters a 12-month monitoring period in which Microsoft evaluates customer adoption against the pre-engagement baseline.
Once your POE is approved, Microsoft measures adoption using the telemetry and commercial data already available inside the customer tenant.
The engagement enters a 12-month monitoring window, with the first three months acting as a grace period. After that, Microsoft evaluates the customer’s progress at quarterly checkpoints across a 12-month view.
The key point is that Microsoft compares the customer against its pre-engagement baseline. Depending on the engagement, the system may track metrics such as:
- Monthly Active Usage (MAU).
- Monthly Protected Users (MPU).
- Annual Recurring Revenue (ARR).
- Azure Consumed Revenue (ACR).
For example, if a customer had 120 active Copilot users before the engagement and 300 active users several months later, Microsoft can see that change through its own usage telemetry. The same applies to Azure consumption, Dynamics usage and other eligible workloads.
Partners are not manually feeding these numbers into the programme. Microsoft is pulling them from the customer’s licensing, billing and product-usage data and then rolling those results into the partner’s performance portfolio.
That’s why this programme is different from co-op. In co-op, you prove what you delivered. In performance-gated engagements, Microsoft can also see whether the workload was actually used after deployment.
The easiest way to think about these engagements is that deployment is only phase one.
During the first 30 days, focus on confirming licensing, configuration and initial user activity. By day 60, review usage trends, identify inactive users and run targeted enablement or adoption sessions. By day 90, measure progress against the customer’s original baseline, document usage growth and identify expansion opportunities.
These are not just customer-success activities. They are the operational habits that feed the metrics contributing to your portfolio performance rate.
POE approval gets the engagement paid; customer adoption helps keep future engagement opportunities flowing.
That’s where Blacfox helps. We help partners understand how these FY27 engagements work, how they differ from traditional co-op funding, which metrics Microsoft is monitoring and how the portfolio-level performance model is structured.
And if you’re still trying to separate traditional co-op funding from these new performance-gated investments, start with our Microsoft FY27 Co-op Funding blog, then come back to this guide to see where the next wave of Microsoft funding is headed. Or simply come to us.
