Resellers Unhappy About Microsoft's Windows XP, Office XP Deals With CDW

Microsoft CDW Computer Centers PC Connection

In one of two recent letters mailed to SMB customers in the United States, Bob Clough, vice president of U.S. small business, sales and marketing at Microsoft, claims customers can save up to 42 percent on Office XP Professional and Windows XP Professional through July 31 through a special offer with CDW.

While the savings are linked to the benefits of Microsoft's Upgrade Advantage and Software Assurance programs, resellers take issue with the fact that Microsoft appears to be steering SMB customers to dial a telephone number at CDW, a move interpreted as a direct poaching on SMB accounts typically served by smaller resellers and solution providers.

"CDW can show you how through Upgrade Advantage and Software Assurance," said the Clough letter, dated April 30, which points customers to a toll-free number. "The combination of CDW and Microsoft solutions can help take your business to new heights."

Independent dealers have lost millions of dollars in business because of the mailings to their SMB customers within the past month, said Alan Weinberger, chairman of the ASCII Group, a Washington organization that represents resellers in the United States.

"This is an outrage. These mailings seem to be unfair federal and state trade practices on their face. We're not thinking of lawsuits, but resellers have long memories and this won't be forgotten," said Weinberger, who added that Microsoft's attempt to bypass its independent reseller channel is a major stab in the back to resellers. "The customers are getting the mailing and doing it because they're told by Microsoft to order now from this 800 number. The dealers won't forget this. They lost millions of dollars."

In response, Clough said this is a typical co-marketing deal, similar to ones it has done in the past with Dell Computer, Hewlett-Packard and Insight. He added that CDW initiated this co-marketing mailing piece with Microsoft, not the other way around, and said the fine print indicates that the 42 percent discount comes from the transition to Upgrade Advantage and Software Assurance licensing and this information has been available to all resellers and solution providers to market as they wish.

"There are no special things we did for CDW with pricing. We chose CDW, or they chose us, because CDW wanted to do the co-marketing piece with us," said Clough, adding that Microsoft has worked with its top 1,000 VARs and they got similar marketing materials.

When asked why so many resellers are outraged by the mailing, Clough said partners are sensitive in a tough market. "Part of it is feeling concern in a competitive environment in a down economy and they're hurting," he said, adding, however, he would like VARs to work more closely with Microsoft on the matter. "Both Microsoft and VARs can do a better job of interacting on opportunities we can provide on servicing our customer base."

Clough said he has only received one e-mail objecting to the mailing thus far.

However, the ASCII Group is dealing with a "firestorm" of angry resellers and the incident could have a long-term impact on Microsoft's channel, according to Weinberger. "It's taking all business away from authorized dealers. This has never happened before; it's terrible and it's most likely illegal," said Weinberger, who is also an attorney. "We're not going to go to the U.S. government, but IBM and Sun have come to us and we're going to start doing deals with them."

Solution providers sent numerous e-mails to ASCII Group and posted similar sentiments on the ASCII Group's online forum expressing their anger.

"This doesn't surprise me as some of our clients are getting these as well," wrote one angry Microsoft Certified partner on the online forum. "Microsoft has done little to direct business our way. It is irritating to see this kind of mail campaign directing customers to a competitor such as CDW, particularly when we are the ones who are called when something doesn't work."

A second letter sent by Microsoft's U.S. small business team informs SMB customers about the approaching deadline for License 6.0, and invites customers to save 42 percent by adding Upgrade Advantage or Software Assurance to their current Open License agreement. Both letters also encourage SMB customers to take advantage of a special 7.9 percent financing deal Microsoft arranged through Household Finance.

That second letter urges customers to contact PC Connection at another 800 telephone number, but it also urges them to "contact your reseller." However, providing two telephone numbers and singling out CDW and PC Connection as authorized dealers for this special offer on Microsoft stationery effectively takes traditional resellers and dealers out of the loop, Weinberger and others said.

Another solution provider said the flyer and other attempts to entice SMB customers to specific dealers is a bad deal for the entire reseller and solution provider channel, and that Microsoft has been aware of these concerns for months.

"This strategy frustrates me," said the solution provider, who asked to remain anonymous. "If Microsoft has signed some big marketing deal with CDW or whoever else, they can still send a message that a successful sale cannot occur in the SMB space without a service partner. This strategy will not work. Although they may be able to pick up a few customers this way by shoving XP down a customer's throat, it is a bad strategy in the long term for the SMB space. If they go out and buy XP, and whatever else without engaging a service partner to do it right, the chances of success are much lower. What happens next is that the customer tried to implement XP on their own, it doesn't work, and they become a Microsoft basher because they think the stuff doesn't work."