Orders Flowing Under New Microsoft License Program

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Distributors last week began taking orders through Microsoft's Open License Value program, an alternative SMB licensing option that has raised some concern among channel partners.

The program, first reported by CRN last November, gives customers with five to 250 seats an alternative to Licensing 6.0, allowing them to pay for a companywide license or select software licenses in three annual installments. Participating distributors, designated by Microsoft as authorized license providers, deliver the licenses to end users and handle billing activities. Participating VARs are cast in the role of software advisors and receive a 10 percent commission for influencing a Microsoft software sale but never take title to the product. These solution providers are paid commissions on an annuity basis in alignment with the end users' billing over three years.

Participating distributors include ASI, Ingram Micro, Tech Data, Synnex Information Technologies and D&H Distributing, as well as Hewlett-Packard.

"[Vendors of] accounting packages have used this method for years. Accounting consultants recommend Peachtree or Great Plains or whatever and get a commission," said Jodi Honore, vice president of North American vendor management at Ingram Micro. "It's nice for the end customer because it gives them budget predictability."

Lion's Head Office Services plans to sell Microsoft software through Open License Value. Previously, the consultancy didn't resell products because it didn't want the overhead, said Lee Feldman, technology consultant at the San Pedro, Calif.-based company.

"Prior to this program, I would make a recommendation to my customers, and they would have to find their own source for purchasing those items," Feldman said. "Now we can make a recommendation [and] get a quote out with minimal paperwork and impact on our overhead."

Many resellers are taking a wait-and-see approach to the Open License Value program. Others, however, are resisting the agent model associated with it, saying it will hurt their margins and erode their control of customer accounts.

"Before, I sold the product to customers, they paid me, and my cut was up to me. Given general street prices, my cut was around 17 percent," said Walter Horowitz, president of Mardovar Networking, a reseller in Saundersville, R.I. "Under the agent model, I sell customers the product and then have to explain they are really buying it from a third party. This creates a serious problem when dealing with a government agency," he said. "The only pro to the agent model is that you do not have to have the capital or credit to cover the cost of the sale. If I have any option, I will avoid the agent sales model."

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