Partners Shocked By New Microsoft Financing Terms7:55 PM EST Wed. May. 27, 2009
Solution providers who've long raved about the convenience of Microsoft's financing program say they're stunned by a new Microsoft mandate that requires them to include a larger amount of Microsoft products in deals.
Microsoft is now requiring that Microsoft software and/or services represent 35 percent of the customer's total financed amount, including taxes, according to Karl Palachuk, founder and CEO of KPEnterprises Business Consulting, a Sacramento, Calif.-based solution provider.
In addition, when partners have multiple financing submissions, at least one of the invoices must include Microsoft software and/or services listed as a separate line item, and the total amount of Microsoft software and/or services must be at least 35 percent, Palachuk wrote in a Tuesday blog post.
Microsoft insists that the policy isn't new and represents a clarification of its existing stance regarding Microsoft products in financed deals.
"This is a modification to a longstanding policy of including Microsoft content in all financed originations," a spokesperson said in an e-mail.
Nonetheless, the new requirements are a marked departure from the past, when partners needed only to include a single Microsoft product in a deal -- such as a Windows XP or Vista license -- in order to qualify for financing.
Until recently, Microsoft Financing has imposed very few limitations on partners. In the U.S., the minimum deal size to qualify for financing is $3,000 and Microsoft offers terms of anywhere between 24 and 60 months, depending on the program.
The tightened financing terms are another example of the effects of an economic downturn that shows few signs of ending anytime soon. Microsoft's last few quarters have had shareholders reaching for the Advil, and company executives have painted a grim picture for Microsoft's business outlook that all but rules out any short-term rebound.
In light of this, it's likely that the bean counters at Microsoft simply wanted to tighten up financing terms to lower the company's risk profile and stop subsidizing deals that involve competitors' products.
Most partners agreed that the previous financing requirement wasn't advantageous to Microsoft, and many would've been open to a lower percentage requirement. But Dave Sobel, CEO of Evolve Technologies, a Fairfax, Va.-based Microsoft Gold Partner, says the 35 percent requirement could be "devastating" to Microsoft Financing's power to help close deals.
"Microsoft Financing in the past has been very, very generous, and I'm not surprised to see them tighten things up and require more Microsoft products in deals. But 35 percent is simply too high," Sobel said.
Palachuk, who described his prior experience with Microsoft Financing as "spectacular," says the new requirements will make it virtually impossible to work with Microsoft on conventional multivendor deals. In addition to less favorable interest rates, solution providers will also miss out on Microsoft Financing's ability to "pull-through" additional product and services offerings, Palachuk said.
Sobel echoed that sentiment and said Microsoft Financing was actually a selling point for many customers.
"Every deal we've done through Microsoft Financing has always ended up becoming bigger -- the financing was so easy that customers willingly added more items to the deal," Sobel said.