Office 2007 Referral Payment Pilot Irks Some Partners

Coffield added that he's also concerned that customers who activate through online discounters or other vendors won't get media and will turn to him for service if their PCs crash. He said he has ordered more copies of Office 2003 and will push that version.

"If they fix the program, great, it would be good for us," Coffield said. "But now, if a customer buys Office 2007 through NewEgg and has a problem, they're going to come to me, and I'm going to fix it?"

Microsoft has acknowledged such concerns by system builders and understands they may not opt to preload Office 2007 on their systems. But company executives said they don't want to roll out the program to all system builders nationwide until it's proven to work.

Microsoft said it's a small referral fee but didn't specify the amount.

"In the first instance, we're trying not to go too broad and want to make sure it can scale," said John Ball, general manager of U.S. local OEM business at Microsoft. "It's a pilot program, so it's tough to make it operational to 30,000 partners."

Ball said the intent is to determine if the program drives a higher Office attach rate through the channel and then make it available to all system builders if it goes well. Microsoft sells the vast majority of Office through licensing, he said.

Other system builders say they hope to see more Office 2007 attach rates on system sales.

"Microsoft has given system builders the ability to load a 60 -ay free trial of Office on every computer, so if we don't get the sale up front, we can now get it after the 60 days," said Joe Stinner, president of USitek Group, a system builder in Kenmore, N.Y.

Todd Swank, vice president of marketing at Nor-Tech, a system builder in Burnsville, Minn., said he's pleased that Microsoft is taking steps to help compensate channel partners, especially since customers can donwload Vista and Office 2007 direct from Windows Marketplace.

"If end customers are able to get the new products direct from Microsoft, there's a definite concern that would take away a revenue stream from us," Swank said. "That being said, Microsoft is taking steps to help compensate channel partners in different methods than they have previously."

Large system builders may have to work with resellers cooperatively to make the referral program work, said one system maker, who asked not to be named.

"Anytime I can increase the attach dollars per system is a good thing," the system builder said. "The challenge to anyone selling to resellers is to manage the pass-through of dollars. Our resellers will want a piece of the action. I think some system builders that think they can capture the entire upgrade without compensating their reseller partner run the risk of alienating them."