Exclusive: Microsoft LARs hit out at fee changes

Microsoft large account resellers (LARs) are worried that upcoming changes to the software giant’s Enterprise Agreement fee structure will leave them with less money in their pockets.

LARs have complained the fees they get for selling Enterprise Agreements to larger firms will be effectively cut by up to a third when Microsoft rejigs its discount structure on 1 May.

Neil Murphy, managing director of Bytes Technology Group – which claims to be the UK’s largest LAR – said the move would hurt partners’ bottom lines.

“Each year Microsoft finds a way to reduce the fees it pays. All the LARs are pretty annoyed about this as it is going to impact their profitability at a time when profits are already under pressure,” he said.

According to Murphy, Microsoft will slash fees for Enterprise Agreements for Band C and D customers – which generally have more than 6,000 heads.

While he said there would be opportunity to make extra margin from Enterprise Agreements with smaller midmarket customers, the net result is that “Microsoft is paying its LARs much less than it used to”.

Another LAR told CRN: “The change will have a material impact on partners’ profitability.”

However, one onlooker familiar with the situation said modelling completed with three of the LARs showed that the changes would have a positive impact on their cash flow and would earn them more money.

“But very few LARs touch large enterprises as there are just a handful of big contracts. Partners can earn more money on the customers they touch the most,” the onlooker said.

The changes apply to existing as well as new agreements and some LARs said they may be forced them to downgrade the level of service they provide customers for the second and third year of contracts.

Microsoft was unavailable for comment.