Microsoft curbs reseller undercutting

Software giant to take over role of largest resellers

Software giant Microsoft's shake-up of volume licensing agreements will lead to changes in the way it deals with its largest channel partners.

Due to take effect from October, and aimed at the enterprise sector, the new fee-based model will see Microsoft take over negotiation, billing and payment collection for copies of Office XP, duties which have previously been carried out by its large account resellers (Lars).

The term Lar will also be scrapped, with the firm's 20 UK partners being renamed as Enterprise Software Agents.

Microsoft has admitted that some of its customers will suffer. "There will be winners and losers," said Stephen Uden, channel marketing manager at Microsoft. Up to 20 per cent of the company's enterprise customers could end up paying more. Microsoft said the scheme will apply to future releases of other products.

The firm's partners have welcomed the scheme, Uden claimed, saying that it has been in negotiations with its Lars since last October. "Rather than negotiating software prices with their resellers, customers will pay us and we will pay a set fee to the resellers, ensuring a constant stream of revenue," he said.

The move will not take any power away from Lars, claimed Edward Hyde, Microsoft's Lar sales manager, but will end the price battle in the channel.

"There has been a lot of competition in enterprise licensing, with some resellers undercutting others, but this model will stop that," he said. "There will still be the value-add potential for partners."

Adrian Tatum, director of Microsoft alliance at systems and services reseller Computacenter, agreed that the model will end competitive pricing in the Lar arena.

"In the past the larger resellers have invested a lot of money, and the smaller ones have come along and taken the customers by offering a lower price," Tatum said. "But this won't be able to happen any more, which is a good thing."

Microsoft caused controversy in the channel with changes to its Select Volume Licensing programme, which caused some of its smaller resellers to complain that it made it harder for them to trade.