Microsoft Reaches Out To SMB Partners

The action comes as the company seeks a replacement for Rosa Garcia, its former channel chief who stepped down to accept a position as general manager of Microsoft's Spain division effective Aug. 1.

The mailings, sent out in April, and last week's apology were both signed by Bob Clough, Microsoft's vice president of U.S. small business and broad channel sales and marketing. The timing of the mailings upset many resellers that are anxious for an uptick in business as the July 31 deadline to sign up for Microsoft's Licensing 6.0 approaches. The letters, which went out on Microsoft letterhead, urged SMBs to buy Office XP Professional and Windows XP Professional licenses from direct marketers CDW and PC Connection. Microsoft has acknowledged it also sent out co-marketing mailings with Compaq Computer, Dell Computer and IBM.

>> 'we wish to express our apologies if these mailings created confusion with you, our community of independent resellers, or with your customers. . . . We are immediately re-evaluating how co-marketing engagements are communicated to customers to [avoid any appearance of favoritism towards certain resellers.' -- Bob Clough, vice president of U.S. Small Business and Broad Channel, Microsoft

"While joint campaigns are a routine practice in our industry, we wish to express our apologies," Clough wrote in a letter sent out to resellers. "In reality, the campaign was three-part. [The first part was a letter to those customers with existing Open License agreements urging them to contact their local reseller by name."

Clough, who is responsible for SMB customers and all U.S. channel partners in the SMB market, said the mailings were sent to all customers of Open License, Microsoft's licensing option for small businesses. "The annuity licensing campaign specifically lent itself to direct marketers' messaging," Clough said in an interview with CRN last week. "I'm not going to say we'll never do it again, but the sensitivity is increased."

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Clough also said Microsoft is negotiating with distributors to give resellers access to its 7.9 percent financing rate for Open License 6.0, now available only through select VARs and whatznew.com, an online license fulfillment house. "We're working with distributors [such as Ingram Micro and Tech Data, but it'll take a little more time," he said.

Solution providers said disputes are inevitable as Microsoft and its partners move deeper into the SMB space to generate growth. According to Standard and Poor's, growth of Office XP limped to 1 percent and Windows XP slowed to 9 percent last quarter, evidence of the economic downturn and software saturation. In the past, Microsoft has typically registered quarterly growth rates of more than 30 percent.

Although Microsoft took Enterprise Agreement licensing business direct, Enterprise Software Agents (ESAs) are being steered by Microsoft to serve smaller customers, resellers said.

"Microsoft is trying to get us to push our expertise into the midmarket," said Michael McCarthy, general manager of software, North America at Corporate Software, Norwood, Mass. "Microsoft is getting flak from smaller resellers. I do see their point of view, which is that [the SMB market is theirs and now Microsoft is bringing the big guns and big marketing dollars to it," he said. "But it was inevitable. The market dynamics are pushing all vendors downmarket."