Microsoft's Licensing Plan Takes Shape

Thus far, Microsoft has named six license providers,also known as license aggregators,authorized to handle all billing and collections for the software giant's forthcoming Open Value licensing program. The roster of authorized license providers includes traditional distributors such as D&H Distributing, Synnex Information Technologies, ASI, Ingram Micro and Tech Data, as well as HP, a Microsoft spokeswoman said.

The hefty commissions of between 8 percent and 11 percent are welcomed by most cash-strapped resellers. But concerns remain about the long-term impact of handing over customer account management, billing and fulfillment rights to vendors such as HP.

Some VARs say the move,similar to the changes that transformed large-account resellers into Enterprise Software Agents (ESAs),signals that Microsoft and vendors want a more direct relationship with customers.

"For VARs like us who have hundreds of customers, the agent model is a big deal. As soon as I switch a customer to an agent model, my relationship with that account begins to get diluted. It becomes a battle of mind share," said Todd Barrett, president of CPU Sales and Service, Waltham, Mass. "If Microsoft and HP had it their way, the VAR would only exist for services."

HP, for its part, maintains that its role will not change much, since it has served as a large-account reseller for Microsoft's Enterprise Agreements since 1993 and currently sells Open Business licensing for small businesses. Under Open Value, HP will continue to serve as a dedicated presales team that assists,not replaces,solution providers with their SMB licensing business. However, executives acknowledged that the customer relationship aspect has yet to be worked out. "It does enable us to get customer information, but we're doing that today," said Jackie Johnson worldwide marketing manager for software licensing at HP.

But Johnson did acknowledge that she can't predict how customer relations will change over time. "Microsoft is still trying to figure out how notifications [about renewals will go out," she said. "But we need [SMB resellers to do this successfully."

Like the distributors, HP will recognize the licensing revenue and then submit the money and orders to Microsoft's Licensing division, Johnson said. HP will work with its existing installed base of channel partners and plans to recruit new ones to sell Open Value, she added.