Money talks in LAR fee changes
Microsoft's changes to
the fee structure
of its Enterprise Agreements (EA) appear pretty tough. On the surface, large account resellers (LARs) are losing around two-thirds of their existing fees for sales to clients on its major accounts list. As a consequence, the best they can hope to get back, over a three year period for a EA deal worth over $20m will be $192,000 (just under 1%). If the LAR assumes the risk for credit and payment collection, it will generate another 1%, taking the total to $392,000.
But when you look at the amount that can be gained for selling EAs into clients that are not on Microsoft's major accounts list (it can be as high as 8%) you can get a good idea of how the vendor is trying to use financial incentives to direct LARs' selling activity. Take a $6m deal, for instance. Under the new regime, an EA with a business on the major accounts list will get a LAR a total of $60,000 over three years ($120,000 if they take on more risk). If that deal was to client not on the list and it qualified for 8% fees, the pay back could be as high as $480,000. That's probably an extreme example but you can see the huge differential that could apply.
Some LARs are probably in the happy position of already selling into that space. For the others, it may well become a case of "follow the money".
This was first published in February 2011