MS' ESD policy spurns disties

The software giant intends to use third-party clearing houses forelectronic software distribution

Distributors have accused Microsoft of cutting them out of its electronic software distribution (ESD) strategy after the vendor admitted it is looking outside the channel for third-party clearing houses.

Microsoft is expected to sign two firms to act as clearing houses across Europe next year. Accountancy firms, such as one of the big six, like Touche Ross, which have experience in auditing are tipped to take the role.

Paul Cook, sales director at Frontline, said: 'It's a bone of contention with me. If Microsoft deems it fit to involve a third-party clearing house, then they're saying they don't trust distribution. How much margin are they going to leave in the transaction for the distributor if they put in another check and balance? This will just complicate the transaction and add cost.'

CHS Electronics MD Garry Boon said: 'Our first reaction was, hang on, we've put all our energy into licensing, we've got more than enough administration skills to do this. We are getting cut out of an opportunity, but there is some rationale to it because they want someone independent. It's better than the US model which is nonsense.'

A Microsoft representative defended the move. 'It's not that we don't trust distributors - we're just protecting the reseller by keeping customer names secure from the distributor and from ourselves.'

The strategy marks a departure from Microsoft's US model, which is understood to have run into channel conflict after giving reseller Cybersource responsibility over its rivals.

ESD involves users accessing a reseller's Web site and downloading encoded software. The reseller calls a distributor for the download code, which then tells the clearing house to send the code so the software becomes usable. The clearing house then reports to Microsoft. Cybersource earns 75 cents per transaction.