Office Pricing Gaps

Microsoft has cut everyone a break on Office XP pricing and licensing except for perhaps the most vocal of its critics: system builders.

Last week, the software giant dropped retail pricing on Office XP bundles by about 15 percent. That news came a day after Microsoft said it would provide free tech support, services and home-use rights for Office 2003 to customers licensing software through its Select and Open programs under Licensing 6.0.

Microsoft last week promoted Margo Day to vice president of U.S. channels.

"I wouldn't say it's a gap, it's a cavern," said Matthew Barto, owner of Columbus Networking, a Powell, Ohio-based system builder that sells about 125 white-box systems per month and pays $450 per Office XP license.

By contrast, a Dell Precision 360 workstation with a 2.6GHz Intel Pentium 4 processor running Windows XP Professional Service Pack 1 without Office XP Professional is $1,383. Adding the productivity suite costs an extra $339,or $160 less than Microsoft's retail price, according to the Dell Web site.

Margo Day, who was promoted last week to Microsoft's vice president of U.S. channels, and Kevin Wueste, Microsoft's general manager of worldwide partner sales for SMB, did not respond to questions and requests for interviews last week.

"I don't think they're going to change," said Jim Heustess, sales manager at system builder Quality PC, Tulsa, Okla. "It'll go on as business as usual. I'd like to have [changes] happen."

Randy Metzger, CTO of Vintage IT Services, said Office terms are a hot topic. He said there is a lot of talk among system builders and that as a group, they are "extremely powerful, but as individuals, [they are] small fish in a big pond.'

Non-system builder partners see it differently. "I'm never going to make money on Microsoft software, even with Open Value," said Roger Otterson, president of Qualitec, San Diego. "So if Dell gets a break and a PC with Office is cheaper than buying it from [Hewlett-Packard] and IBM, does it matter? Yes. But not in my business."

In a sign of Microsoft's continuing cozy ties with Dell, Microsoft's U.S. Small Business Team recently sent out a direct-mail promotion offering customers the opportunity to save 5 percent on a Dell server, and an extra $100 when it is preloaded with Microsoft Small Business Server 2000. Microsoft also offered customers an 85 percent savings on Software Assurance (See related story on page 10).

Microsoft said in a statement that it offers partners the same deal as well as another $500 Small Business Server rebate program and similar marketing materials.

BARBARA DARROW contributed to this story.

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