NEWS ANALYSIS: Microsoft prices leave Lars in lurch

Microsoft?s pricing errors on Select have highlighted dealers? fears of powerlessness. Microsoft is making the mistakes but dealers are having to pay for them.

During the past two months, Microsoft has caused its direct Lars aggravation by issuing price lists with over 270 errors. Some products were 50 per cent cheaper than they should have been and some product codes, such as Windows NT Server, were left off altogether. By the time Microsoft alerted dealers, it was too late for many as they had already sent out customised lists to corporates and made quotes using the wrong prices.

In the short term, dealers are worried about making a loss on contracts. But several have said they prefer to take the loss rather than risk losing their credibility with the customer.

One direct Lar highlighted the competitive pressures. ?We are obliged to give our customers 30 days? notice, so we have decided to accept the losses. Big customers get very cross if they are not given enough time. In the past, we have won contracts from other Lars on the basis of them not giving their customers enough notice of price changes, so we can?t risk it.? Even Microsoft realised the incident caused a ?credibility shock? for its dealers. As one Lar said: ?The customers blame you, they don?t see it as Microsoft?s fault, understandably.?

But there is a long-term problem as well. The episode has highlighted direct Lars? concerns about the equitability of the relationship with Microsoft. Lars are now checking prices on a monthly, rather than quarterly, basis to make sure there are no more Microsoft errors. At the same time, they have to avoid making their own mistakes because of Microsoft?s ?three strikes and you?re out? rule, enforced before Christmas, which means Lars that make three reporting errors lose their status.

One direct Lar was upset, saying: ?Microsoft is so powerful that we?ve found it awkward arguing with them. We do our bit by paying on the nail. Microsoft, in turn, is meant to report back to us within 45 days but has never managed to do that. We can?t say anything because it can shove us off the direct Lar list so easily.?

During the past eight months, Microsoft?s demands on the channel have increased while its help has become increasingly limited. There is no longer a reseller council. There is no longer account management for most dealers and recently Microsoft stated that its partner businesses services helpline would close half an hour earlier. In the next six weeks, Microsoft plans to hold a Lar briefing to hear the channel?s grievances. Dealers will not be short of things to say.