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LARs feel the pinch of Microsoft fee changes

Microscope contributor

Despite making massive reductions in fees paid to LARs on Software Assurance deals, Microsoft has insisted the total level of back-end funding will not shrink under long awaited changes to the system due 1 May.

As revealed by MicroScope last year, partners had been expecting an overhaul of the services fees structure in July but managed to convince the vendor to postpone the implementation until the start of October and then 1 January.

This gave partners time to move resources to stand a greater chance of meeting the sales objectives.

Microsoft business partner manager Simon Aldous, confirmed the scheme has taken longer to execute than he expected.

"We are realigning the incentives to reward partners for providing revenue growth that is strategically critical to us," he said.

Under the changes, Microsoft will cut from 2% to 0.25% the fees paid on Software Assurance deals to band C and D customers - 6,000 seats and over - while LARs selling to mid-sized corporate firms termed as A and B levels users, will see the payments drop from 2% to 0.5%.

On the flip side, Microsoft will give partners in the first year of a net new Enterprise Agreements (EA) an extra 2% rebate, and an additional 2% for selling additional products including SharePoint, Biz Talk, UC and security.

However, Aldous insisted the overall level of funding to partners would remain unchanged: "Fundamentally the pot stays the same but we want to drive greater adoption of EA and additional products."

The changes have been received with much scepticism by partners, who believe that Microsoft will claw back hundreds of millions of dollars worldwide by introducing the changes to fees.

"Regardless of what anyone at Microsoft says, there has been an overall cut in fees and in order to get back to an equity point we'd need to invest more than is possible in the current climate," said one LAR.

Another said it would need to sell three times as many additional products as it currently does and quadruple the number of new EA deals done but both EAs and more complex additional product categories are tougher to sell.

EAs give Microsoft annuity streams by locking customers into a three year commitment which can often unsettle the IT manager but on the flip side they include free upgrades and lower administration costs.

LARs often added services such as SAM audits included in Software Assurance deals and these would need to be revisited under the planned changes said a source. "Some customer services could suffer as a result," he added.


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