Keep It Simple: Microsoft Draws Up New Licensing, Financing Policies

Among other things, the vendor is collapsing best practices from multiple regional efforts into a single, worldwide Open Value licensing program.

Moreover, Microsoft is streamlining its license ordering process. That includes a move away from a controversial program adopted several years ago under which traditional resellers (dubbed Microsoft Software Advisers) were required to work with Authorized License Providers, typically distributors, on licensing deals and were paid a fee for that work. Now, partners can resell Open Value contracts and set their own margins again. Open Value contracts apply to deals of 250 desktops or fewer.

"If you look at some of the things we had in the past, a lot of these one-off singular vertical decisions absolutely made sense either for the customer segment or the business we had. And then over time, the cumulative effect of that is not necessarily great," said Brent Callinicos, corporate vice president of Worldwide Licensing and Pricing at Microsoft, Redmond, Wash.

Margo Day, vice president of the U.S. Partner Group at Microsoft, said the agentlike purchasing model was adopted several years ago to preserve channel margins but often wound up forcing distributors to assume a customer-facing role. Returning to a two-tier model puts the VAR more firmly in control of the customer relationship, she said.

Other upcoming changes to licensing policies include a 50 percent reduction in the length of contract documentation and an option under which free media can be shipped with initial license orders. Both come in response to partners' and customers' requests for reduced complexity, said Sunny Jensen Charlebois, product manager for Worldwide Licensing and Pricing at Microsoft. The Open Value program also is being expanded into Latin America, Japan and other countries in the Asia-Pacific region.

Updates to the Software Assurance program are forthcoming in mid-September, but details weren't available.

"Licensing terms and complexity affect us. We have to have an internal person focusing on licensing, so simplification is huge," said Yacov Wrocherinsky, CEO of Infinity Info Systems, a CRM specialist in New York. "If they can simplify licensing, it will make it easier for customers to buy software through partners."

The licensing changes are accompanied by a heightened push by the newly dubbed Microsoft Financing (formerly Microsoft Capital), which is ramping up efforts in the United States to extend beyond its work with the Microsoft Business Solutions division. "It's not for the sake of making this a separate business that generates a ton of money. It's also not for the sake of acting as a sales subsidy. It is to provide financial flexibility and financial capability that may not exist if we're not there to do this," Callinicos said.

Microsoft is aiming to streamline the process of applying for and receiving credit, Jensen Charlebois said. To do so, it has tightened and simplified the application and approval process; eliminated the cap on total deal sizes that can be financed; and changed the minimum deal size to $10,000.

To get things kick-started, Microsoft is offering a special promotion to attendees of last week's Worldwide Partner Conference under which they will receive 101 percent financing for transactions they submit and initiate between July 7 and Sept. 30. Financing can be used for software-only or solutions-oriented deals.

Doug Roux, reseller business development manager at Software Plus, a Microsoft large-account reseller in St. Louis, said the flexibility of Microsoft Financing's terms enabled his company along with another VAR to close a $300,000 Select agreement deal in June that will be paid in monthly installments over three years. "[Microsoft] made it very simple for me, and the end user was able to go ahead and get the software they needed," Roux said.