The majority of Microsoft resellers are facing further competitive disadvantage following the vendor's decision to slash discounts on products available under the Microsoft Open Licence Programme (Molp).
The software giant has cut the discount on lower end volume purchases from about 25 per cent to 15 per cent. At the same time, it has halved the number of units customers would have to buy to qualify for the programme from 20 points to 10.
One user copy of Windows 98 or MS Office is worth two points, a copy of MS Word is worth one.
Unlike Microsoft Lars and distributors, regular resellers do not receive rebates on Molp sales. One dealer said: 'As soon as a product becomes price driven, it is critical that targets are hit. If you don't get your rebate you don't make any money out of the products.'
Peter Crane, marketing manager at Microsoft reseller PSM Micro, complained: 'We are at the sharp end of this decision - and we are the ones getting squeezed. The price rise will have to be passed on to the consumer.'
Another reseller said rebates are so important that distributors are engaging in quarterly price wars to ensure targets are met.
'It's becoming like an auction, with all the distributors queuing up to get our orders and dropping their prices so that they can guarantee their rebates,' one dealer commented.
Resellers are also having to compete with mail-order companies which are selling Molp software below cost price, often as a loss-leader bundled with another product. One dealer, who asked not to be named, said: 'We don't have the option of selling below cost because we can't recoup our losses through rebates.'
Jonathan Downes, UK licensing manager at Microsoft, defended the price changes.
He said: 'We want to make Molp more broadly available so we have lowered the entry level. As a result, we have had to raise the price slightly.'
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