Last week, Microsoft revealed its most comprehensive channel program changes since before Windows 95 shipped. The overhaul, which mainly affects Microsoft’s 800,000 reseller, system builder, software developer and system integrator partners, will roll out in stages, starting in January and going for about 18 months. Microsoft is doing this, in part, to ease the transition process. That’s a smart move and shows Microsoft learned lessons from Licensing 6, which blindsided many customers and initially was planned to roll out too quickly for many of them.
I won’t go into the program’s logistics at this time. The important point is this: Microsoft has good reason to want to improve relations with partners. These partners aren’t just supplying Microsoft software to businesses, but competing wares, too. That includes Linux.
In chatting casually with resellers and system integrators, most say they have more customers asking for Linux and open-source alternatives to Microsoft products. Some are concerned with what they perceive to be increasing costs for acquiring Microsoft software; other customers are looking to work around static IT budgets--and free looks pretty cheap to them; others worry about Windows security.
Whether Linux or open-source software really is cheaper than commercial software from Microsoft or any other software developer remains a hotly debated topic. Analysts certainly disagree on this one, particularly when factoring in the cost of switching software against what businesses pay for upgrades. Free isn’t always cheap, some analysts contend.
The arguments grow murkier in the small- and medium-business market (companies with less than 1,000 employees) where fragmentation and smaller company size make switching to Linux from, say, Windows NT 4 or Windows 2000 a potentially less-painless task.
These arguments aside, it’s not in Microsoft’s best interest to have its partners recommending Linux or open-source alternatives to Office, Windows or Windows Server. Anything the company can do to increase partner loyalty--through incentives, better training and other means--might make partners more likely to recommend against Linux and open-source software when customers ask about alternatives.
Already, Microsoft kicks back a 10 percent incentive to some partners selling Open Value volume licensing to SMBs. Ten points in margin is a helluva incentive to sell SMBs Open Value licenses for Office and other products. Resellers or system integrators might think twice about recommending OpenOffice, even when the customer asks for it, when there is such a fat margin to be made on Open Value Office 2003 license. Businesses that pick up that license and Software Assurance upgrade protection also are less likely to switch to competing software. Customers pay up front for Software Assurance, annually over the life of the contract. For Open Value, that's three years.