Search
Homepage Rankings and Research Companies Channelcast Marketing Matters CRNtv Events WOTC Jobs Cisco Partner Summit Digital 2020 Lenovo Tech World Newsroom Dell Technologies World Digital Experience 2020 HPE Zone Masergy Zenith Partner Program Newsroom Intel Partner Connect Digital Newsroom Dell Technologies Newsroom Fortinet Secure Network Hub IBM Newsroom Juniper Newsroom The IoT Integrator Lenovo Channel-First NetApp Data Fabric Intel Tech Provider Zone

Sources: SoftwareONE Is In Talks To Acquire Zones' Licensing Business

Zones could be the latest solution provider to get out of the licensing game as Microsoft tightens the requirements around its top partner program.

Zones could be the latest solution provider to get out of the licensing game as Microsoft tightens the requirements around its top partner program.

SoftwareONE, a $3.3 billion solution provider based in Waukesha, Wis., is in advanced talks to acquire the licensing business of Auburn, Wash.-based Zones, No. 30 on the 2015 CRN Solution Provider 500, sources familiar the company's plans told CRN on Wednesday. Talks are "very serious" and a deal is "imminent," according to one of the sources.

Another source, who has ties with SoftwareONE, agreed that the company is attempting to close on another licensing business deal. The source said they were curious how SoftwareONE, No. 14 on the CRN SP 500, is financing the deal given that it would be the company's second licensing-related acquisition in five months.

[Related: Microsoft No Drag On En Pointe's Surging Sales, Profits]

The solution provider bought the Microsoft software licensing business, contract management and software portfolio services of $2.2 billion Dallas system integrator CompuCom in March.

A Zones spokeswoman said the company doesn't comment on rumors or speculation. SoftwareONE and Microsoft didn't return requests for comment.

There has been massive consolidation in recent months among the 15 or so Licensing Solution Providers (LSPs), the only Microsoft solution providers authorized to handle software volume licensing transactions. SoftwareONE, Zones and CompuCom are all Microsoft LSPs.

Sources told CRN in November that the Redmond, Wash.-based vendor was looking to reduce its number of U.S. LSPs from 15 to 6 by Tuesday -- the end of Microsoft's fiscal year -- as the company puts a greater emphasis on cloud, mobility and services sales.

A different source concurred, saying Wednesday that he expects the number of Microsoft LSPs to drop considerably over the next several years as a result of mergers and acquisitions.

"Microsoft is making a lot less money on the enterprise licenses," he said. "In two years, I don't think you'll see Microsoft selling any shrink-wrapped software. It will all be subscription-based."

Microsoft has been putting the squeeze on LSPs, with CRN reporting in November that the vendor was considering revoking CompuCom's LSP status because the solution provider wasn't meeting revenue targets or investing enough in technical certifications. That portion of the business was sold to SoftwareONE four months later.


A source within Zones told CRN previously that Zones was among the list of LSPs that would struggle significantly to meet new Microsoft revenue targets, as the target was too big and the company faced too short of a time frame to meet it organically. The company had previous discussed a partnership arrangement with SoftwareONE around its licensing business, the source said.

A deal between SoftwareONE and Zones would definitely send a message to the remaining LSPs, a different source told CRN. The number of enterprise licensing agreements being sold by many solution providers is down as much as 50 percent in the past several years, that source said.

Despite all of this, Zones had doubled down on its software business in recent months, bringing in a standalone vice president for the unit in February. Software and cloud used to be overseen by a single vice president, but Zones split those into separate roles to help drive growth in what the solution provider considered to be key technology areas.

Todd Leeson, who came over from Absolute Software to lead Zones' software unit, told CRN in February that managing the Microsoft relationship would be one of his top initial responsibilities. He said at the time that Zones was focused on making big investments in Office 365 and Azure to increase end user consumption and deployments.

"From a customer perspective, Microsoft is so pervasive," Leeson said in February. Zones has 14 brand managers and other employees working in the software group, according to Leeson.

Similarly, Zones had been looking to develop complementary solutions and services around Microsoft's cloud offerings, Jon Allen, Zones' vice president of cloud, told CRN in February.

Microsoft's LSP ranks were further culled in March when El Segundo, Calif.-based PCM, No. 29 on the 2015 CRN SP 500, agreed to purchase fellow LSP En Pointe of Gardena, Calif., for $15 million upfront, 22.5 percent of future adjusted gross profit and 10 percent of certain service revenue for the following three years.

LSPs have become increasingly vulnerable in recent years, partners told CRN in January, as Microsoft has consistently been cutting their fees. Additionally, LSPs that grew used to having the volume licensing market to themselves now find themselves competing against members of Microsoft's Cloud Solution Provider program on cloud software sales and other items.

Steven Burke, Sarah Kuranda and Kevin McLaughlin contributed to this story.

PUBLISHED JULY 1, 2015

Back to Top

Video

 

trending stories

sponsored resources