Microsoft's Upgrade Discount Program Spells Channel Services Dollars

By Carolyn April  |  Print this article Print

Too often, solution providers flinch when they hear about end-user discounts on licenses, fearing a bite out of profit margins or worse: customers simply going direct. But not if you recognize the services upside.

As promised, Microsoft has made deep discounting a critical piece of its full-court press to spark an upgrade cycle for Windows 7 and the forthcoming Office 2010. And partners, for the most part, couldn’t be happier.

Microsoft’s latest move, expanding the half-off new licenses deal in its Up-to-Date (UTD) Discount program to an even broader set of end customers, is welcome news to partners who see services dollar signs shining in their eyes.

"We are a services-focused company, so if a customer can buy licenses cheaper from anywhere, it doesn’t matter to us as long as we can do the labor," said Joe Foos, director of sales and marketing at LanLogic, a Livermore, Calif., solution provider and Microsoft small business specialist.

Too often, business partners flinch when they hear about end-user discounts on licenses, fearing a bite out of profit margins or worse: customers simply going direct. But the way the new program from Microsoft is structured, neither situation is the case and, at any rate, the services upside trumps any potential cut in license revenue.

This week on its SMB Community Blog for its channel partners, Microsoft unveiled details of the expanded discount offer. Boiled down, the program now extends its offer of 50 percent off the first year’s Open Value Licensing payment for a Microsoft Windows 7 Professional Upgrade or Microsoft Office Professional to current holders of Windows XP Professional and Office XP. Previously, this offer was only extended to holders of licenses one version older than the new software.

What’s important to note is that this offer is only available if the customer either already buys licenses in the Open Value Licensing program or starts to participate, according to Eric Ligman, global partner experience lead for Microsoft’s Worldwide Partner Group. Open Value Licensing is more expensive than some more basic licensing programs from Microsoft, but does include Software Assurance benefits. From a partner perspective, Open Value licenses are not sold direct by Microsoft and must go either through a VAR, distributor or retail.

Dave Sobel, CEO of Evolve Technologies in Fairfax, Va., said any incentive to get his customers to upgrade is worth its weight in services dollars. And he sees the logic on Microsoft’s side.

"This is a very realistic approach," Sobel said. "It recognizes that Vista didn’t have the penetration they had hoped. I’m focused on services revenues—so for me, this is a good thing, offering more ways to help customers upgrade. The discount is on Open [Value], so they need a VAR of some kind to make it happen."

Ligman said Microsoft’s message to partners is that customers have a finite IT spending budget in many cases, so whatever money they can save on software licenses they free up to spend elsewhere.

"This opens up budgets at the end of the day," he said. "Our partners make their money through integration and customization and other services. Now they can upsell and there’s money there."

Some partners would love to see Microsoft take it even further than a half-off discount.

"I am thrilled with this because we are out to get the best possible deal for our clients, and any money they save on software they will have available for services," said Kevin MacDonald. "I would be even happier if they gave away the software."


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