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Sources: Microsoft Wants To Boost Retail Store Profitability, Will Push Volume Licensing Plans Through Stores

Microsoft is planning to get more aggressive about closing volume licensing opportunities that come in through its retail stores, but partners that sell licensing say this could take a bite out of their revenue.

Microsoft's retail stores are great places to check out the latest software and hardware from the vendor and its OEM partners, including Windows 8 tablets and the stunning Surface 3 tablet-PC hybrid.

Sometime in the coming months, Microsoft stores also could become places where people can buy volume licensing plans for Windows, Office, SQL Server and other products, sources familiar with Microsoft's plans told CRN, speaking on condition of anonymity.

Microsoft is in the midst of a major expansion to its retail store footprint. It currently has 101 stores in the U.S. and Canada with 13 more recently announced as coming soon. On Wednesday, the New York Daily News reported that Microsoft is in talks to open a store on Fifth Avenue in New York City, which would be its first in the Big Apple.

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About 50 of these stores have what Microsoft calls "business development specialists," who are reps that handle business-related inquiries at the stores.

Currently, when a customer comes to a Microsoft store with a volume licensing inquiry, the specialist gathers their information and passes them on to a distributor, which gives them a quote. In some cases, the specialist passes leads on to Microsoft partners.

But sometime in Microsoft's fiscal 2015 year, and possibly as early as this quarter, the Microsoft specialists will be handling volume licensing requests directly in stores and providing customers with quotes on the spot, according to sources familiar with the Redmond, Wash.-based vendor's plans.

Microsoft informed its store managers of its plan earlier this week and said the goal is to make its retail stores more profitable, sources said. Microsoft has never shared revenue figures for its stores since the first one opened in 2009.

A Microsoft spokesperson declined to comment when CRN called to ask about the changes and determine when or if they will be rolled out, citing the company's policy of not responding to "rumors or speculation."

Microsoft's specialists will sell products available under Open License, a volume licensing plan for deals of up to 250 seats that are exclusively sold by Microsoft channel partners, sources said.

Office, Office 365, Windows client access licenses, SQL Server and Windows Server are examples of products that partners commonly sell through Open License.

Microsoft only permits a small group of its largest partners -- which it calls Licensing Solution Providers -- to transact volume licensing deals larger than 250 seats.

Having Microsoft specialists handle volume licensing deals would have a major impact on Microsoft's channel, as nearly all of its small- and midsize-business-focused partners make money from selling Microsoft software licenses. It also would show that Microsoft's ambitions for its stores extend beyond the consumer market.

Microsoft partners have lots of questions about how this is going to play out. Some Microsoft stores have been passing business leads off to partners for years, but sources told CRN this would probably end if the software giant goes through with its plan.

"Today, partners get around 10 to 15 percent off of MSRP to play with when they sell volume licensing. Will the stores sell at MSRP, or will their reps have leeway to bend to win deals?" one partner said.

NEXT: Microsoft Partners Say Volume Licensing Through Retail Has Ominous Potential


Microsoft COO Kevin Turner, who oversees the retail stores, has said that partners should bring their customers into Microsoft stores to check out Surface and other products. Some partners have followed his advice and have staged joint events at Microsoft stores.

It's unclear if that would continue, though, if Microsoft starts selling volume licensing plans through its stores, sources told CRN.

Paul DeGroot, principal analyst at Pica Communications, a Camano Island, Wash.-based Microsoft licensing consultancy, told CRN he thinks this will mainly affect small partners that sell through Open License and Open Value, and whose customers are more likely to be retail software customers.

Steve Tutino, president of Ipanema Solutions, an Ann Arbor, Mich.-based Microsoft partner, said while small-business customers might be interested in buying volume licensing plans from Microsoft stores, this wouldn't be an option for larger customers.

"What will happen is the small business partner will have to charge more for their services and forget completely about product and license margin," Tutino told CRN. "Hopefully, Microsoft can figure things out and make it work."

PUBLISHED AUG. 7, 2014

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