MS resellers forced into illegal actions

Software Uncertainty over targets exposes Lars to legal risks.

Microsoft large account resellers (Lars) are risking legal action by holding back on billing because of uncertainty caused by the vendor's change in customer focus and its delay in setting sales targets for the forthcoming year.

The vendor's Lar contracts had to be returned by 26 June for the start of the financial year on 1 July. But sales targets and rebate details may not be negotiated until August or September.

Lars said that uncertainty about targets for the Microsoft Open Licensing Programme (Molp) was the main reason for delays in billing customers.

Previously, targets were set only for the larger volume Select products (PC Dealer, 17 June).

One reseller said: 'Microsoft's reasoning is that the 5,000-plus seats market is pretty much sewn up. It wants us to focus on penetrating businesses with between 200 and 3,000 users.'

Shaun Frohlich, managing director of Microsoft Lar Bytes Technology Group, said resellers facing uncertainty about Molp targets might react by sandbagging customer orders. He added: 'We always try to bill customers at the earliest opportunity.'

Another reseller, who justified the practice, said: 'It's a ridiculous system because we don't know how much stock we have to shift when we sign the annual contract. If you know how to take advantage of the system you might as well bill customers when the target is applicable. We are not breaking any rules.'

But Steve Beswick, licensing manager at Microsoft, said: 'We require resellers to report sales figures on a monthly basis and would be very worried if we thought they were holding anything back. This is specified in the contracts and affects the legality of the software from a licensing standpoint.'

Uncertainty has been exacerbated by reports that Microsoft is set to dump 'four or five' more of its direct resellers during the next quarter.

Matlock-based Servo has declined to confirm reports that it was the one Lar canned last month for failing to hit sales targets.

According to industry sources, the software giant will ditch at least four resellers even if they hit individual targets. Defaulting on payment schedules and failing to address customer needs were cited as the most likely reasons.