Dumpster Diving for Microsoft Software

Disclic Ltd, a software reseller based in Staffordshire, England, last week began selling secondhand Microsoft Corp. software licenses in the British Isles and its description of itself on its Web site says it all: “The lowest-cost legal supplier of Microsoft Licensing.”

Given this unexpected development, Microsoft’s U.S. Partners are wondering if it could happen here.

According to Disclic’s Web site, the company says it can offer Microsoft software at 20 to 50 percent discounts by taking advantage of clauses in Microsoft volume license agreements that allow ownership to change hands.

Disclic said it obtains software licenses from insolvent and bankrupt or downsizing companies.

In the past, the process has rarely been tried because of the difficulty of retaining and maintaining the documentation that must accompany software licenses, sources said. Disclic says that it arranges all certifications. The company then uses Microsoft’s own transfer forms to facilitate the arrangement, the site said.

Microsoft Corp., did not comment on the development, but Paul DeGroot, an analyst with Directions on Microsoft, confirmed that the practice is legal and even practiced in the United States, albeit rarely.

“Microsoft’s own Licensing site used to describe how to go about the transfer and people certainly do it on a small scale, but I don’t know that it’s ever been tried commercially,” he said. “From Microsoft’s perspective, you have to wonder how much money they’ve made selling new software, when perfectly good software has ended up in the landfill.”

Click here to read more about Microsoft’s plan to push software to the SMB market through Certified Public Accountants.

Microsoft partners contacted for this story said they were largely unconcerned about the prospect of competing with secondhand license sellers.

“We haven’t been making money on [software sales] margins for some time,” said Richard Lake, president of DMB Associates Inc. of Whitehouse Station, N.J., a Microsoft Small Business Specialist. “We make our money on the services side, and that’s the trend in the business.”

“Only the largest players, like CDW and SHI, would be affected by something like this,” said Jeff Fusich, president of Advantek System Solutions LLC of Phoenix. “You have to sell a lot of the stuff for this to make a difference to you.”

It’s not unusual, partners said, for Microsoft providers to direct customers to a retailer to purchase software.

Representatives of CDW and SHI declined to comment on the subject.

One unintended consequence of the development, DeGroot said, would be the option for resellers to reverse the trend of decreasing margins.

“You might not be making any margin selling the software new,” he said, “but imagine the prospect of buying it at 20 cents on the dollar, from your clients or others you know, and selling it to other customers for 60 cents on the dollar. That’s a serious margin.”