Microsoft’s Open Value Payment Program Opens Up Business Possibilities for Smaller Companies

REDMOND, Wash., Sept. 10, 2003 — Almost any small-business owner will tell you cash flow is critical to the company’s success. So when it comes to buying software, owners are willing to open their wallets but hesitant to spend too much. This means they sometimes don’t buy the technology they really want or need.

It makes David MacDonald, president of Toronto-based Softchoice, especially happy to explain Microsoft’s Open Value payment program to small-business customers, who make up about 60 percent of his client base. Launched this spring, Open Value is a software-license payment program designed for small and midmarket businesses (SMB) with as few as five desktops.

In part, it offers the advantages of Software Assurance, which includes access to the most current Microsoft software during the three-year term of the agreement and the ability to spread licensing payments annually. The company-wide option offers additional savings opportunities and a single price per desktop for organizations that want to standardize all their desktops on one or more Microsoft enterprise-quality products.

“Open Value has allowed us to put together a powerful and provocative offering to go back to the SMB market with, and this time they don’t have to pay as much money up front, they are able to budget longer term for their technology expenses, and we are developing relationships that are going to generate revenue for us every year,”
MacDonald says.

Softchoice has been a large-account reseller for Microsoft since 1994 and has sold licenses through the Open Value payment program since it began in March. In the last six months, Microsoft reports that its partners have sold more than US$5 million in revenue through the program.

Several of Microsoft’s many Open Value partners echo MacDonald’s sentiments and speak highly of the licensing payment program, which they say helps eliminate some of the headaches associated with traditional licensing options through improved channel processes.

Licensing Made Easier With Web-Based Tools

Licensing, says Chris Wagner, supervisor of the corporate software licensing team for CDW, another Microsoft reseller, is a complex issue, one that most small and midmarket businesses have difficulty deciphering. Wagner says customers he works with often assume they have to buy shrink-wrapped boxes of Microsoft Office or other products because they don’t realize volume licensing can save them money. Even if customers are aware of licensing rules and requirements, he says, licensing management is a low priority for many IT managers at smaller firms, where keeping company computers up and running monopolizes their time.

“We have a team of software licensing specialists that can help businesses navigate the licensing labyrinth, and now we also have a license purchase plan we can sell that puts people at ease with Web-based tracking and management tools, which make it easier to administer licenses,”
Wagner says.
“Open Value helps us concentrate on services and new business, rather than licensing administration.”

Open Value Increases Cash Flow For Customers

Nancy Goldman, director of product marketing for the software licensing group at Tech Data, a Microsoft wholesale distribution partner, was instrumental in providing input and helping Microsoft create the Open Value program. She says the goal was to enable customers who are not using current technology, or who have difficulty managing their Microsoft software assets, to do so.

“We really feel that by offering an extended payment program, more customers will be able to purchase and run genuine and current software,”
Goldman says.
“We believe Open Value will help our customers effectively manage their software assets.”

Open Value can help customers save even more if they take advantage of various discounts for volume purchases that range from 10 to 22 percent. Employee discounts and home-use rights offered through Open Value also have the potential to make for great workforce perks and retention tools, industry partners say

“These discounts, combined with the Software Assurance program, are really helping customers who don’t have a lot of revenue or high-tech savvy,”
says Vince Allison, Microsoft product manager for Softmart, another Microsoft reseller.

Software Assurance for Open Value now includes much more than just new version rights. It provides resources such as training, support and deployment and management tools that allow small and midmarket businesses to spend more time focused on their business and less time deploying and maintaining technology.

Partners See New Benefits

Although the program has only been around since the spring, Microsoft partners who sell Open Value say they are experiencing an increase in small-business and midmarket customers, and expect the numbers will continue to grow. Customer response has been positive, and partners are offering seminars on the Web, conducting direct mailings and engaging in other promotional activities to spread the word.

“Open Value gives small- and medium-size businesses almost all of the benefits of an enterprise agreement,”
says Brent Swank, director of merchandising software for Zones, Inc., a Microsoft reseller.
“Where before, our small and midmarket customers have shied away from Open Value due to cash-flow constraints, we can now show them how it makes sense. We try to get the customer to look into the future, and so far, when we bring it up, they’re looking right with us.”

Another great benefit to Open Value is the opportunity it gives partners to solidify their relationships with customers. Partners have at least three years to nurture a relationship with the Open Value customer, and potentially more when they offer new solutions and technology, Swank says.
“We’re excited about the incremental sales opportunities. The end customers may not have purchased as often or spent as much money before Open Value. We think that’s fantastic.”

The payment plan also means that many partners can avoid having to finance the products for customers themselves, freeing up their own cash flow. In addition, many partners are reporting great excitement and enthusiasm within their own sales forces as they offer customers Open Value.

“We expect Open Value will help us hold on to our sales people. They’re all pretty excited about it, and if they’re successful, they’re going to sell a lot of Open Value,”
says Gertrud Pillay, director of product management for PC Mall, a Microsoft reseller.
“Why would they want to walk away from a steady and predictable revenue stream? Open Value makes sense in so many ways.”

Partner Comment on Open License Value Program

Microsoft industry partners comment on the Open License Value payment program:

“Microsoft Open Value program enables Ingram Micro and our solution providers to extend licensing to new customer sets that may choose other finance options when purchasing their licenses and Software Assurance. Companies of all sizes are keeping a watchful eye on IT spending and budgets in general, yet demand for productivity and ROI continues to increase. Microsoft’s Open Value program makes it easier for our solution providers and customers to deliver compelling software solutions and close sales deals that may have otherwise been left on the table. It also allows our solution provider customers to focus on services rather than mire in the complexities of software license administration.”

  • Sandy May, Vice President, Business Operations, Ingram Micro U.S.

“In this economy, people are more cautious about spending than ever, so we’re very happy that Open Value gives us another chance to help our customers fulfill their software needs and sell them the best solutions. For instance, one of our SMB customers with about 40 PCs came to us for help. Open Value offered them the opportunity to stay on the cutting edge of technology and remain current. Offering Open Value makes us look good too, and that translates into more sales.”

  • Bill Wyckoff, Microsoft Alliance Manager, SHI

“One of our first customers to ever place an Open Value order with us had about 10 to 20 machines. After talking to them about the program, they were convinced they needed to buy Windows XP and standardize on one platform. They bought it with Software Assurance, and that gives them the option to upgrade at their own pace. It also got us some other servicing purchases as well. Our sales rep was able to accomplish more than just selling them the licensing, and the business got a great deal, much more than they thought possible, given their budget. It worked out for everybody.”

  • Scott Cropper, Rite2u Manager, D & H

“The ability to spread payments out annually is by far the biggest benefit we see for our customers. We could do that before by giving them a line of credit, but oftentimes, credit for small-and medium-businesses is challenging. With Open Value, the customer’s paying annually; we’re paying annually. There’s very little risk, and the low buy in requirements and new discounting are great too. If customers had $15,000 budgeted for the year, acquiring Office alone could eat up that budget. But now they are able to afford more software on the same budget. We like the domino effect.”

  • John Byrne, Licensing Manager, SoftwarePlus

“Open Value allows our smaller customers the ability to standardize on a platform, which saves time and resources. Instead of spending those resources and dollars on trying to figure out who owns what and what version, our customers can allocate those resources and dollars to properly deploy the software.”

  • Jennifer Clark, Microsoft Software and Services Manager, Amherst Technologies

“Open Value allows our customers to continuously upgrade their software to the latest Microsoft products in order to drive the fundamentals of their business. License management tools help ease the administrative task of tracking licenses. These benefits are essential for small businesses that lack dedicated on-site IT staff.”

  • Mohamed El Telawi, Microsoft Vendor Specialist, Micro Warehouse

“It has simplified licensing and the sales math. Open Value means fewer headaches, less training for our clients who aren’t necessarily tech-savvy and is easier deployment of Microsoft licenses. When it comes to less, let me tell you about one recent customer. We explained to him that Windows 2000 Server goes for about $1,000. Windows Server 2003 goes for about $1,000. Open Value goes for about $1,400. Wouldn’t you spend $1,400 to get $2,000 worth of product and spread the payment over three years — interest free?”

  • Ronnie Parisella, Chief Technology Officer, Primary Support Solutions Inc.

Additional partners currently participating in the Open Value payment program include ASI, Hewlett-Packard, Insight, PC Connection, and Synnex. A detailed listing of Microsoft partners that can assist companies in acquiring Open License Value can also be found at:

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