Microsoft distorting schools market, claim UK PC builders
Smaller local assemblers say Technology Access Programme is freezing them out of education market and restricting customer choice
Microsoft has come under fire from local PC builders for "skewing" the education market with its Technology Access Programme (TAP).
CRN gathers that some UK assemblers have sought legal advice over the adverse impact the subsidised licensing scheme has had on their business while others, including NS Optimum and VeryPC, have stepped forward to publicly speak out over the issue.
Under a recent overhaul to TAP - which until earlier this year went by the name of Shape the Future - Microsoft slashed the price of Windows to OEMs involved to a nominal $1. Criteria for qualification were also loosened.
The move was widely viewed as an attempt by Microsoft to re-assert its dominance in a UK schools market increasingly gravitating towards Apple and Android devices.
But although the threshold for entry among OEMs was lowered from 10,000 to 3,000 units, besides multinational firms such as HP and Lenovo only "named" UK accounts such as Stone, Viglen, Zoostorm and Novatech can participate.
And to be a named account you must normally be assembling at least 10,000 units a year.
If passed on to the end customer, the TAP discount translates into a subsidy of between £55 and £85. This means a swathe of local PC builders doing fewer than 10,000 units - many of which focus on education - have been virtually locked out of the schools market, at least on entry-level desktops and laptops.
Andy Rutley, managing director of NS Optimum, an education-focused PC assembler currently building about 3,000 units a year, said it is important for smaller system builders to "get together with a single voice".
"At this stage we are just looking to raise awareness," he said. "It's an artificial skew of the market and it's excluding those system builders that supply education from supplying education."
Andrew Hopton, managing director of VeryPC, an education-focused PC builder assembling about 5,000 units a year, said that TAP has dented the Sheffield-based firm's growth this year. He also argued TAP is limiting choice for education customers.
"We are all for the scheme and the benefit it brings to the education sector but its delivery could be improved to maximise accessibility to Microsoft partners and schools," Hopton said. "It's pushing smaller integrators away from the Windows operating system, which is counter-intuitive."
Hopton said TAP is one of a growing number of Microsoft subsidised licensing schemes that penalise smaller system integrators. In April, Microsoft announced it was making Windows free of charge to manufacturers of tablets and smartphones with screens smaller than 9in, a programme Hopton said is also open only to named accounts.
"We want to work with Microsoft and we are a Microsoft house, but the more of these schemes that come out, the more we have to question our future in providing these devices," he said.
"If we can't compete on Microsoft, maybe we should look at Android, or Linux, or Chrome. At least we can compete on a level playing field on those OSes."
Microsoft has advised those who don't meet the volume requirements to partner with Zoostorm - a channel-focused UK system builder that does. But Hopton said outsourcing production would be unthinkable for any firm billing itself as an assembler. In any case, Microsoft has also made clear that any units achieved this way would not count towards the system builder's official unit tally with Microsoft.
"We are trying to identify a mechanism where we can work with Microsoft that is not detrimental to our business model, but whether this is achievable is questionable," Hopton said.
He added: "All the system builders that sell into education need to club together and say this scheme is having an impact on their business to help find a solution."
OEMs participating in TAP have a price advantage of roughly £55 or £85 on the OS, depending on whether or not the school has a Volume Licence Agreement in place with Microsoft. With margins on entry-level desktops typically about £60, assemblers not qualifying for the TAP effectively cannot win any business without trashing their margins.
Devices bought through TAP, whose first iteration was launched in 2012 with backing from Intel, must be at least 50 per cent publicly funded.
Rutley accepted that Microsoft must consequently keep a tight handle on auditing units sold through the scheme but suggested local system builders could explore the possibility of clubbing together to satisfy Microsoft's reporting procedures.
Under the changes made in February, multinational OEMs such as HP, Lenovo and Toshiba can now participate in TAP directly and are granted a letter of eligibility which then allows them to sell TAP SKUs through selected resellers.
Unlike local named accounts who offer a build-to-order model through the scheme, most of the international OEMs are offering only a limited number of SKUs through TAP. Hopton said this means TAP tends to favour larger UK assemblers over both international OEMs and small local players that don't reach the 10,000-unit criterion.
Rutley stressed that his qualms about the programme relate purely to the imbalance it has created between large and small domestic PC assemblers.
"The larger [international] OEMs are doing a good job of enabling the marketplace so they can provide their products to STF [TAP] customers," he said. "The scheme is a good idea in principle - it's long overdue - but the delivery doesn't seem to be right."
Shaune Parsons, managing director of Computer World Wales, which is among Lenovo's reseller partners for TAP and has similar partnerships with Dell and HP in the offing, praised the programme.
"Windows devices in education are a must," he said. "Lots of people buy Apple devices and then realise they can't do much with them and Microsoft has dropped the price of its OS significantly to help people get more of their devices into schools.
"The [international] manufacturers are giving away as much discount as they possibly can so it's the schools that are the winners in this."
A Microsoft representative said in a statement: "We are looking at the Technology Access Programme but have nothing to share at this time."