Microsoft distie rebate cuts force price hikes

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Microsoft distie rebate cuts force price hikes

Microscope contributor

Microsoft has today removed the retrospective fee it pays to distributors serving tier one reseller accounts and will instead pay them to develop smaller unmanaged dealers.

The changes, which have resulted in a price rise to the 30 largest resellers in the UK, are part of Redmond's plans to carve a greater niche in the SME space where Google and open source rivals are gradually making some headway. 

"We have been instructed of changes to our rebate scheme and therefore will be making sure that our price list reflects the activities that Microsoft wants us to undertake," said Westcoast sales and marketing director Alex Tatham.

James Reed, general manager for software at Computer 2000, agreed: "There will have to be a price change [for tier one accounts] as Microsoft will no longer pay us at the back-end to do business with them."

The compensation paid to wholesalers for helping to develop small resellers is rising but distributors have yet to complete the financial modelling and were unable to comment on whether they would be better or worse off, or detail the price rises.

The strategy being pursued by Microsoft was first pioneered by HP but has since been aped across other parts of the industry.

Ed Bateman, Bell Microproducts director of the commercial business EMEA, said the move was logical.

"We are not particularly worried, part of our job as a distributor is to grow the market, some distributors that rely on the big accounts will find it challenging," he told MicroScope.

The restructure should at least hinder the sub-distribution market that existed under the previous model, claimed reseller sources.

Microsoft did not agree to a telephone interview but issued a statement: "The number one objective behind these changes is to improve the distributor's business. Agreement between Microsoft and its distributors are exclusive.

"We do not disclose details with anyone but the distribution partners with whom we have those agreements," it added.

Microsoft's fourth volume distributor Ingram Micro was unavailable to comment at the time of going to press.


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