Microsoft Considers Changes To SMB Channel Licensing Policies

The plan, which may be announced at Fusion 2002 in July, would allow SMB VARs to sell portions of the existing Enterprise Agreement (EA) license to the SMB market segment. However, the policy and specific details are not yet finalized, sources familiar with the plans said.

The software giant is mulling the policy change in light of concerns expressed by some SMB channel players that Enterprise Software Agents (ESA), formerly known as Large Account Resellers (LARs), are moving down the food chain and into their accounts.

"Here I am bringing in Microsoft's technologies to the small customer, building a relationship with them, and when they surpass 250 desktops, in order to get a better price, the door is open for them to go to 19 authorized LARs," said Todd Barrett, networking sales manager for CPU Sales and Service.

"We have a bunch of customers in that space exploring buying software from some of these LARs. It locks us out of hundreds of thousands of dollars on new Microsoft sales, and we get nothing at all, except a potential for leads," he said. The Waltham, Mass.-based solution provider estimated it could lose from $250,000 to $500,000 over the next two years.

Microsoft declined to comment, but a spokesperson said the company must work to find a licensing balance that works for both customers and SMB solution providers and noted that it is committed to solving channel issues.

As part of the new Licensing 6.0 strategy and new agent model unveiled last May, Microsoft took control of the negotiations and licensing away from LARs and renamed them Enterprise Software Agents (ESAs). In that role, ESAs offer services around licensing only and don't derive any revenue from the transaction.

But to appease those resellers, Microsoft dropped the requirement for EAs to 250 PCs from 500 PCs and authorized ESAs to sell licensing to companies with between 250 and 5,000 PCs.

Some solution providers say they are worried about losing customer account control, services revenue and referral fees to ESAs in the midmarket. Under the agent model, solution providers can earn a 12 percent margin on referrals for small businesses to license fulfillment houses.

Roger King, president of product services at Software Spectrum, a Garland, Texas-based ESA, said that "smaller VARs and resellers don't have the systems and process wherewithal to help customers manage complex licensing agreements."