Sign Of The Times: SoftwareONE Acquires CompuCom's Software Licensing Business

Two of Microsoft's oldest and biggest partners are hooking up in a deal that could be the latest sign of how cloud computing is forcing tough business decisions.

SoftwareONE, a $3.3 billion solution provider based in Milwaukee, informed employees Friday that it has acquired the software business of Compucom, a $2.2 billion solution provider based in Dallas, sources familiar with the matter told CRN.

It's not clear how much SoftwareOne paid in the deal, which is expected to be announced this week, the sources said.

[Related: Insight Expects Multimillion-Dollar Hit From Microsoft Partner Program Changes]

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CRN reported in January that Dallas-based CompuCom was shopping its Microsoft licensing business, and SoftwareONE was said to be interested. But SoftwareONE has bought CompuCom's entire software management business unit, not just the Microsoft portion, the sources said.

SoftwareONE, based in Milwaukee, will assume responsibility for all of CompuCom's contract management and software portfolio services effective April 1, according to the sources.

The sources also said SoftwareONE plans to continue running CompuCom's sales and operations offices in Dallas, Canada and Mexico, which collectively have around 120 employees.

SoftwareONE and CompuCom were not available for immediate comment.

Both SoftwareONE and CompuCom are what Microsoft calls licensing solution providers, or LSPs, which are the only partners permitted to sell enterprise volume licensing agreements. There are around 15 LSPs in the U.S.

Being an LSP used to be lucrative due to the lack of competition for big enterprise licensing deals. But Microsoft is leveling the playing field with its Cloud Solution Provider program, which opens the door for more partners to sell and provision subscriptions to customers.

Microsoft LSPs can take part in the Cloud Solution Provider program, too, and some are investing in services to go after these opportunities, in some cases competing with smaller Microsoft partners in the process.

It's not clear why CompuCom decided to sell off its software business, but the company has apparently been having problems meeting Microsoft's partner requirements.

In November, sources told CRN Microsoft was thinking about revoking CompuCom's LSP status because it was missing revenue targets and hadn't invested enough in technical certifications.

Microsoft has also changed the amount of fees and rebates that partners get from selling enterprise licensing agreements and other products, which has taken a bite out of LSP revenue. In its quarterly earnings last month, Insight Enterprises said Microsoft’s partner program changes cut its gross profit by $11 million to $14 million in its fiscal 2014.

SoftwareONE, founded in 1985, and CompuCom, founded in 1987, are two of the oldest Microsoft partners out there. By acquiring CompuCom's software licensing business, SoftwareONE is showing that despite the changes happening at Microsoft and other software vendors in the shift to cloud computing, it thinks this party is still in full swing.