Microsoft to cut EA fees for LARs by more than two thirds


Microsoft to cut EA fees for LARs by more than two thirds

Microscope contributor

The feast of fees that Microsoft's larger LAR partners gorged on will turn to a relative famine from 11 September when sweeping changes to Enterprise Agreements (EA) are initiated.

The partner community was given a top-line view of the changes last year, affording them enough time to digest the implications for their business model, but the software linchpin has now clarified the planned overhaul.

"Basically, Microsoft is going to pay a lot, lot less on the major global accounts where it already has good coverage, a high penetration of EAs and drives the customer engagement directly," said one UK LAR.

The new system will be broken down into five levels with a fixed fee paid each year for the three-year life of the EA.

A fee of $62,000 (£38,500) will be paid for deals worth over $20m (£12.4m); $43,000 for EAs valued up to $20m, $20,000 on contracts up to $6m, $6,500 up to $1m, $1,750 for contracts up to $400,000 and $600 on those up to $50,000.

Estimates from the community are that the fees are likely to be at least two thirds lower than the current levels.

"Its peanuts compared to what we earn now," said another local LAR.

However, if the LAR assumes the risks on the deal - credit and payment collection - they will also get a further 1% of the total revenue. Any deals signed before September 11 will be based on the existing terms for the contracts' lives.

There is a defined list of around 90 major accounts including the likes of Vodafone, Barclays, HSBC, Royal Mail, BT, Standard Life, Axa, Tesco and a handful of public sector customers, such as HMRC and the MoD.

On the flip side, Microsoft LAR fees in the corporate space - clients that are not on Microsoft's major accounts list which have 250 seats and above - will rise 8% if they can generate a lead, close it, manage the customer and ensure the technology being used is under license.

"Microsoft needs help in the corporate and mid-markets, it doesn't have coverage and is happy to pay for EAs in that environment, some will do well out of this because this is where they already specialise," said a third UK LAR.

This is the second time in as many years that Microsoft has cut LAR fees to re-shape their market focus.

Other sources in the LAR community warned that if fees are cut, the other potential option was to raise prices, but whether this threat translates into a commercial reality is not certain as competition is so fierce.

In a standard statement sent to MicroScope, Microsoft said: "The LAR programme is continually evolving and as we make changes we discuss these with the relevant channel partners.

"The exact terms of our arrangement Large Account Resellers are confidential between us and them," it added.

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