REDMOND, Wash., May 6, 1996 — Microsoft Corp. today expanded its efforts in electronic software distribution (ESD), announcing a set of requirements for distributors and resellers interested in distributing and downloading Microsoft®
software to end users via the Internet. The requirements will be presented May 8 in San Francisco at an industry conference on ESD attended by numerous software publishers, tools developers, resellers and distributors.
Developed as part of a pilot project in conjunction with resellers to test the enabling technologies and business models necessary to facilitate ESD, the requirements create a framework for the ESD process, from order placement to delivery and installation of the software on the user’s computer.
“Microsoft wants to be where our customers want to shop,”
said Johan Liedgren, director of channel policies at Microsoft.
“Today, that includes the Internet as well as our traditional channels; therefore, we are making our products available to channel partners who want to distribute and download software to end users directly from their World Wide Web sites. The open framework for ESD represents an agreement between Microsoft, technology providers and the channel partners for how we work out issues relating to reporting, accountability and returns.”
With the increasing interest in the Internet as a vehicle for electronic commerce, software has become one of the initial focal points of consumer interest. Because software already consists of electronic bits, it can be both demonstrated interactively on the Internet and downloaded on demand. A recent Yahoo! and Jupiter study of Internet users found that software is the best-selling category on the Web; 14 percent of those queried had purchased software online.
“It’s clear that customers see the potential in the Internet as a shopping environment for software,”
Liedgren said.
“Some customers will want to be able to download the software, not just call an 800 number or drive to a retail store. We want to give them that option.”
Microsoft is currently making the requirements available to resellers and distributors, to more precisely define the
“best practices”
in facilitating the ESD process.
“If every vendor and reseller chose a proprietary way of handling reporting and returns, it would take us years before we found efficiencies with ESD,”
Liedgren said. The following are among the topics covered in the requirements:
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Customer rights, including customer privacy. Users should be presented with options relative to how their information is used, if at all, by vendors, distributors and resellers.
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Transaction security, specifying a separate process for downloading the software and the appropriate decryption key.
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Proof of purchase, including not only purchase data but also contact names for both reseller and distributor. This would be used for reinstallation, such as after a hard-drive crash, and for return purposes.
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Returns, which Microsoft will allow up to 30 days after the customer obtains the software, under the standard Microsoft Satisfaction Guarantee. This also includes a mechanism for verifying that the customer has uninstalled the product.
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Transaction and sales reporting, to verify that a sale has taken place and that all parties in the sale – vendor, distributor and reseller – are compensated.
Liedgren emphasized that the pilot project confirmed Microsoft’s initial perspective that Microsoft’s existing distribution model involving distributors and resellers is appropriate for ESD. The value of the channel extends beyond merely fulfilling customer demand.
“Much of the value provided by distributors and resellers is present regardless of whether the product is delivered physically or electronically,”
he said.
”
We also hope the channel will go beyond just adding ESD to the sales mix, and use ESD as a platform for creating innovative services not possible in the packaged-product paradigm, such as loyalty programs, electronic coupons, virtual bundles, pay-per-view and subscription programs.
“Focusing on open channel requirements spurs the creation of an infrastructure that can be used by all vendors,”
Liedgren added.
“Distributors and resellers will be able to make their own technology implementation and integration choices for front-end and back-end solutions and be able to develop technology over time to take advantage of the latest innovations. Our requirements focus on ensuring customer satisfaction and on providing a consistent means of tracking and reporting sales, just as in the packaged-product environment.”
Strategy Validated
Microsoft’s open approach to ESD has been validated by industry analysts. Allen Weiner, director and principal analyst of online strategies for Dataquest, said a channel-centric approach is the right one for ESD.
“The Internet, with electronic software distribution, is an extension of the channel’s current selling avenues rather than a replacement,”
Weiner commented.
“Microsoft clearly understands that the channel adds key elements to the sales mix, including marketing, credit and collection, technical support and a virtual sales force that Microsoft could not hope to duplicate.”
Liedgren added that issues surround ESD that limit its current application as a distribution environment. The two most critical are bandwidth for data delivery and perceived security concerns for credit-card transactions over the Internet.
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Data Delivery. Today, with a 28.8 Kbps modem, it takes nearly 90 minutes to download Word for the Windows®
95 operating system. With integrated services digital network (ISDN) technology, that time is reduced to 32 minutes. Other emerging technologies, such as cable modems or satellites, will reduce downloading time even more (to approximately 12 seconds for the former configuration and six seconds for the latter). All these technologies are still in the early phases of deployment and testing, however, so it will be some time before any of them achieve significant levels of penetration into the home. -
Transaction security. While Microsoft’s experience in the pilot project indicated that ESD customers were comfortable with electronic transactions, Liedgren acknowledged that broader public perception regarding credit-card security is mixed.
“It’s an issue that everyone in the industry, not just Microsoft, is concerned about,”
he said.
“We believe that current credit-card security measures are actually quite good, and that the industry’s effort to create a single secure exchange transaction (SET) standard will be further evidence that electronic credit-card transactions will actually be more secure than current paper-based or live telephone transactions.”
Availability and Pricing
The requirement documentation for resellers and distributors is now available from Microsoft. The process of testing and validating resellers’ ESD implementations will vary, but resellers are expected to be online within 30 days. Pricing for the electronic versions of Microsoft products, as with packaged products, are set by individual resellers; Liedgren said the cost savings resulting from the elimination of packaging and documentation for ESD versions are not expected to be significant, so prices are unlikely to differ greatly.
The initial products to be offered via ESD will include Microsoft Office for Windows 95, Word for Windows 95, Microsoft Excel for Windows 95, the PowerPoint®
presentation graphics program for Windows 95 and Microsoft Works for Windows. Additional Microsoft products will be made available as soon as ESD versions are complete for sales and support tracking needs.
Founded in 1975, Microsoft (NASDAQ
“MSFT”
) is the worldwide leader in software for personal computers. The company offers a wide range of products and services for business and personal use, each designed with the mission of making it easier and more enjoyable for people to take advantage of the full power of personal computing every day.
Microsoft, Windows and PowerPoint are either registered trademarks or trademarks of Microsoft Corp. in the United States and/or other countries.
