Office Rebates Cheer System Builders

Through a program expected to be available broadly by Sept. 1, Microsoft plans to hand over a rebate to customers who buy Office 2003 through system builders, said Kurt Kolb, general manager of Microsoft's system builder channel. The Redmond, Wash.-based software giant will offer end users a rebate of $20 on PCs preloaded with Office 2003 Basic and $40 on systems bundled with Office 2003 Professional or Small Business Edition through March 31, 2005.

The rebate is an incentive for system builders to preload Office 2003 on their PCs; they must use Office 2003 with Service Pack 1, released last month. Microsoft said it has no plan to offer an end-user rebate on Dell and HP PCs.

"When we're selling to SMBs, we can be very competitive on hardware until [tier-one OEMs] throw in Office Small Business Edition and we can't compete on price," said Steve Bohman, vice president of operations at Columbus Micro Systems, Columbus, Ohio. "If there's a $150 price delta on Office in a proposal, suddenly price looks important to the customer. So narrowing that pricing gap or offering a rebate could level that playing field and give us a chance to discuss the benefits of buying from a smaller system builder."

The rebate, especially on Office 2003 Professional and Small Business Edition, will improve the run rate of Office 2003 through the channel, one distribution executive predicted. The attach rate of Office through the channel now averages 33 percent, which is roughly 10 percent higher than last year but low relative to historical attach rates of Office through system builders, he said.

"If the rebate were $10 or $20, then it would not be meaningful enough for a system builder to promote [Office 2003], but $40 is pretty significant," said Mike Schwab, vice president of purchasing at D&H Distributing, Harrisburg, Pa.

The Microsoft offering follows an incentive program from Corel, under which the Ottawa-based vendor is offering solution providers rebates of up to 10 percent on WordPerfect Office purchases made from authorized distributors between May 1 and Nov. 30, 2004.

Dexter Lai, president of Able Computer, Kirkland, Wash., said Dell in some instances offers systems in which the Office software bundled with the system is priced at $129.

"Our cost, buying from an authorized distributor, was $155 or so. That's $26 lower than our cost," Lai said, hopeful the rebate could help close that gap. Still, other system builders say a full-fledged price cut is the only way to level the playing field. "Can anybody tell what Dell buys for?" asked Richard Allen, a partner with Professional Computer Resources, Mulino, Ore. "You can't play the price game with somebody who sells something at 100,000 units at a clip."